Hindustan Unilever Ltd, an Indian fast-moving consumer goods company, in its Q4 earnings call highlighted a growth-first strategy, adjusting EBITDA margin guidance to 22–23% for the next 2-3 quarters to fund increased investments across P&L lines, particularly in beauty and wellbeing, future core, and market maker segments, amid improving macro conditions like strong agricultural output, tax relief, and lower food inflation. Management signaled optimism about gradual demand recovery over the next six months, driven by rural demand and macro tailwinds. Company detailed plans to revitalize Horlicks through modernized offerings and expand the underpenetrated sunscreen category with consumer education. The company also addressed that Quick commerce, at 2% of business, is growing fast but not impacting margins, while the OZiva acquisition has scaled from INR100 crore to INR400 crore ARR, boosting profitability.
Hindustan Unilever reported a mixed Q4 FY25 performance, with consolidated net profit dropping 3.7% year-on-year to INR2,475 crore, driven by exceptional losses, deflation, softening commodity prices, and macroeconomic challenges like weak urban demand and inflation. Revenue showed 3% growth, fueled by 2% underlying volume growth, though negative price growth and a subdued winter portfolio offset gains. EBITDA margins contracted to 23.5% due to rising raw material costs and higher expenses, particularly in packaged foods and affordable personal care. Strategically, HUL acquired a 90.5% stake in Jaipur-based Minimalist for INR2,955 crore to boost its digital-first beauty portfolio, demerged its low-profit ice cream business (Kwality Walls) into a separate listed entity, and divested its Pureit water purifier business to streamline operations. Additionally, HUL acquired Vishwatej Oil Industries’ palm oil undertaking to enhance supply chain efficiency and support its palm localization strategy.
Continue Reading: Unearth the Vital Insights from Hindustan Unilever Ltd.’s Earnings Call!
Financial/Operational Metrics:
- Revenue: INR15,979 crores, up 3% YoY.
- Net Income: INR2,475 crores, down 3% YoY.
- EPS: INR10.48, down 4% YoY.
- EBITDA Margin: 23.1%, down 30bps.
Outlook:
- Growth Expectations: Anticipate gradual improvement in FY26, with 1H26 expected to outperform 2H25.
- Price Growth: Projected to be in the low single-digit range.
- Gross Margin: Expected to moderate further due to commodity inflation.
- EBITDA Margin: Planned to be maintained in the 22–23% range.
Analyst Crossfire:
- EBITDA Margin Guidance and Investment Strategy (Avi Mehta – Macquarie)? The shift to a 22–23% EBITDA range is not primarily due to price-cost adjustments but a strategic decision to increase investments across all P&L lines, including trade channels, product quality, advertising, and innovation, to capitalize on improving macroeconomic conditions and portfolio transformation. Company emphasized that this is broad-based but slightly more focused on beauty and wellbeing, explicitly stating that home care pricing or price-based competition (e.g., in laundry) is not a factor in this guidance (Ritesh Tiwari – CFO).
- Macro Environment and Demand Outlook (Arnab Mitra – Goldman Sachs)? The demand improvement is anticipated for the near to midterm (June and September quarters of FY26), driven by positive macro signals like no new headwinds, strong agricultural output, tax relief, lower food inflation, and commodity deflation in crude oil. It’s also noted these are “here and now” signals, not distant projections, and internal portfolio transformation efforts further bolster confidence in improved growth momentum (Rohit Jawa – CEO).
- Nutrition Drinks and Sunscreen Strategy (Avneesh Roy – Nuvama)? Nutrition drinks’ margins are not a concern, as the category is highly profitable, but the focus is on driving consumption through modernizing Horlicks, expanding adult nutrition, and leveraging Boost’s equity in new formats and regions. On sunscreens, it was highlighted the category’s high growth (30–40% annually) and low urban penetration (3%), noting HUL’s leadership and efforts to educate consumers on SPF credibility, with a consumer awareness campaign backed by gold-standard testing, despite a sub judice dispute with a D2C player (Rohit Jawa – CEO).
- Quick Commerce Impact and Strategy (Kunal Vora – BNP Paribas)? Quick commerce, currently about 2% of HUL’s business, does not drive the 22–23% EBITDA margin guidance, as organized trade (including quick commerce) offers better margins than general trade due to a premium portfolio mix. Quick commerce is a fast-growing channel (part of the 7–8% e-commerce contribution), requiring a differentiated assortment and doubled assortment investments to meet omni-channel consumer needs, with growth expected across all e-commerce platforms (Ritesh Tiwari – CFO, Rohit Jawa – CEO).
- Growth Strategy and Success Metrics (Sheela Rathi – Morgan Stanley)? HUL’s focus is on volume-led competitive growth, noting that absolute unit volume growth has increased over the last four quarters, contributing to four years of competitive turnover-weighted market share growth. It was emphasized leveraging improving macro conditions and internal portfolio strength to sustain this momentum, with investments in new products and innovations aimed at driving volume growth in the next one to two quarters (Rohit Jawa – CEO).
