Analysts said the near-term weakness is largely transitory, with the company likely to recover in the coming quarters once the GST impact normalises.
GST disruption drags growth
Brokerages expect nearly 40% of HUL’s product portfolio—including soaps, shampoos, detergents, toothpaste, and packaged foods—to have been impacted by the GST transition from 18% to 5%, leading to short-term channel de-stocking and inventory realignment.Kotak Equities said HUL’s business is expected to be near-flat to low single-digit, with de-stocking across multiple product categories impacting overall revenue growth. “We build in 0.5% underlying volume and sales growth due to the transitory impact of the GST rate cut,” the brokerage noted, estimating a 7.6% drop in PAT due to lower other income and weaker operating leverage.
Nuvama also flagged temporary disruptions due to the GST shift, estimating flat underlying volumes and a 1% revenue growth for Q2FY26. The brokerage expects EBITDA to decline 5% YoY as gross margins drop 159 basis points to around 50%, driven by lower prices passed on to consumers.
Margin pressures persist
Margins are likely to remain under pressure as HUL adjusts pricing and spends more on promotions to clear older inventory. Kotak expects EBITDA margin to fall by 140 bps YoY to 22.1%, while Nuvama pegs it at 22.4%, consistent with the company’s guidance range of 22–23%.Raw material trends remain mixed — palm oil and crude-based inputs have shown volatility, while tea prices have softened and coffee remains near 52-week highs. “Lower input costs in select categories will be partly offset by higher brand investments,” said JM Financial, adding that extended rains impacted skin care and seasonal products.
Weak demand, but recovery ahead
Overall demand trends remain weaker than the previous quarter. Nuvama said categories like skin creams and sunscreens saw slower sales due to the delayed monsoon, while tea, salt, and health food drinks could see modest gains. Motilal Oswal expects 2% revenue growth led by 2.5% volume expansion, but sees 90 bps fall in gross margins as competitive intensity rises.
HSBC said the GST-led disruptions and trade incentives would limit near-term realizations, but maintained a stable margin outlook of around 22%. It expects EBITDA at Rs 3,450 crore, down 6% YoY, and a 6% decline in PAT.
Despite a weak Q2, analysts remain positive on HUL’s medium-term prospects, citing structural demand recovery, softer input costs, and the GST-driven price rationalization that could boost affordability in the coming quarters.
“The fiscal and monetary environment remains supportive, and HUL’s pricing power and portfolio strength position it well for a recovery in FY26,” Nuvama said.
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