Hindustan Unilever Ltd (HUL) set the tone for sunny days ahead while announcing its June quarter results (Q1FY26) on Thursday. The results broadly met expectations and also showed better sequential growth on some crucial parameters.
The management’s overall demand commentary has largely been positive. The fast-moving consumer goods (FMCG) giant expects growth in the first half of FY26 (H1FY26) to be better than H2FY25. It expects gross margin to be better sequentially aided by narrowing the price-cost gap and favourable mix. HUL said it would stay focused on competitive volume-led growth in the near-term.
The company said consumption would be aided by favourable macro-indicators such as repo rate cut of 100 basis points so far in 2025, retail inflation at six-year low levels, recent income tax relief measures and an above normal monsoon forecast.
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Analysts are not complaining, with some even raising their valuation multiples and target prices for the stock, which is up around 5% since Q1 results are out. Emkay Global Financial Services has increased its target price for June 2026 by 12% to ₹2,700 as it raised the price-to-earnings multiple to 52x from 47x earlier, factoring in better growth and expected improvement in execution under the new leadership.
Similarly, Nomura Financial Advisory and Securities (India) now values HUL at 55x (50x previously) in-line with its 10-year average price-to-earnings multiple, as the improvement in demand/outlook is becoming evident, according to the broking firm.
HUL’s standalone volume increased by 3% in Q1, marking the second consecutive quarter of growth in the measure. The company has also mentioned its consolidated volume growth this time, which stood at 4%. Standalone total operating revenue increased 3.9% to ₹15,931 crore. “Pricing growth was 0.8% year-on-year, and we expect it to remain low for FY26,” said the Nomura report dated 1 August.
The company’s gross margin contracted by 222 basis points (bps) to 49.2% as input costs rose at a faster pace. However, Ebitda margin drop was comparatively lower at 117 bps to 22.3%, primarily because advertising and promotion expenses declined by 5%.
On a standalone basis, home care business revenue was up almost 2% year-on-year to ₹5,783 crore, led by volume growth. Pricing was negative as HUL maintained competitive price-value equation and continued to pass on commodity price benefits to consumers.
Beauty and wellness (B&W) revenue was up 4.7% year-on-year to ₹3,349 crore, with low-single-digit volume growth led by brands such as Dove and Tresemme. However, B&W Ebit (earnings before interest and tax) margin contracted sharply by 227 bps to 29.2%. The management believes that as long as B&W growth is ahead of overall business growth, the segment will remain accretive despite some margin dilution.
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HUL’s personal care revenue increased 6.5% to ₹2,541 crore driven by calibrated pricing actions taken due to commodity inflation. However, volume dropped in the low single digits. The foods segment revenue was up 4% to ₹4,016 crore, while Ebit margin contracted 288 bps to 16.2%.
Overall, HUL noted that the recovery in consumption is being led by rural demand, with urban areas starting to gradually pick up.
“Q1 performance hints at the beginning of a much better volume print delivery in the coming quarters,” said Motilal Oswal Financial Services. “We believe the new CEO can further capitalize on the volume drive with her understanding of Indian consumers and the company’s execution playbook,” it added. HUL’s new CEO Priya Nair is set to take charge from 1 August.
For now, it looks like the worst is behind HUL, but investors will closely watch if the better growth trajectory shown in Q1, sustains. The stock trades at 46 times FY26 estimated earnings, showed Bloomberg data, suggesting investors are adequately factoring in the brighter immediate future.
