Brokerages including Centrum and Nuvama note that the first half of Q3 was impacted by GST rate rationalisation, which affected roughly 40% of HUL’s portfolio. However, channel normalisation after November 10 and winter season demand are expected to provide some support in the latter half.
This will be the first full quarter where reported numbers exclude the ice cream business, making like-to-like comparisons critical. On a standalone, like-for-like basis, most brokerages expect volume growth of 2% to 3% YoY, reflecting gradual recovery after GST-led channel disruptions in the early part of the quarter.
On a like-to-like basis, revenue growth is estimated at 3% to 4% YoY, driven by 2% volume growth and low single-digit pricing. Categories such as soaps and tea are expected to see relatively better traction due to a favourable base. Beauty and personal care could outperform home care, where price cuts may offset volume gains.
Margins present a mixed picture. The reported EBITDA margin is expected in the 23% to 23.5% range, supported by the demerger of the lower-margin ice cream business, which provides a 50 to 60 bps tailwind. However, on a pure like-to-like basis, margins are seen largely flat or slightly lower YoY due to weak operating leverage, higher royalty and promotional spends, and GST-related channel adjustments.
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“We estimate 50 bps YoY expansion on a reported basis in gross margins to 51.2%, due to favourable raw material trends, particularly crude, and exclusion of ice creams. We estimate EBITDA margin at 23.2%, up 25 bps on a reported basis, with a 40 to 50 bps tailwind due to the ice cream demerger,” said Kotak Equities.Analysts see raw material trends remaining balanced. Palm oil continues to be inflationary YoY, while tea and some other commodities are showing deflationary trends. PAT growth may appear stronger in reported numbers due to fair value gains linked to the ice cream demerger, but recurring PAT is expected to be largely flat to marginally down in some estimates.
Overall, Q3 is likely to show stabilisation rather than acceleration. Investors will focus less on the headline growth and more on management commentary around rural recovery, pricing power and margin guidance.
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