Hindustan Unilever sees Beauty and Nutrition recovery despite home-care margin pressure

Investment View and Valuation

Prabhudas Lilladher’s July 28, 2026 result update on Hindustan Unilever retains an Accumulate rating but reduces its DCF-based target price to Rs 2,320 from Rs 2,454. At the report’s CMP of Rs 2,023, the stock traded at 39.6 times FY28E EPS. The broker expects some bottom fishing at this level.

Demand is expected to remain steady, supported by HUL’s focus on new channels, premium products and innovation across categories. PL expects the company to deliver a sales CAGR of 9 per cent and a PAT CAGR of 8.7 per cent over FY26-FY28.

Q1 FY27 Financial Performance

HUL reported Q1 FY27 consolidated volume growth of 5 per cent, while standalone volume grew around 4 per cent. Consolidated revenue increased 9.8 per cent year-on-year to Rs 16,657 crore, below PL’s estimate of Rs 17,126 crore. Gross margin contracted 104 basis points year-on-year to 48.4 per cent, versus the broker’s 49.0 per cent estimate.

EBITDA grew 8.3 per cent year-on-year to Rs 3,768 crore, marginally below PL’s estimate of Rs 3,819 crore, while the EBITDA margin was 22.6 per cent. Advertising and promotion expenditure rose only 0.6 per cent to Rs 1,507 crore and declined 80 basis points year-on-year as a proportion of sales. Adjusted PAT rose 9 per cent to Rs 2,682 crore, broadly in line with PL’s estimate of Rs 2,689 crore.

Segment Performance

Home Care

Home Care revenue grew 13.4 per cent year-on-year, supported by high-single-digit fabric-care volume growth. The liquids portfolio continued to deliver double-digit growth, with Vim liquid leading household care with double-digit growth. However, Home Care EBIT declined 0.4 per cent and its EBIT margin fell 230 basis points to 16.6 per cent. PL expects competitive pressure in Home Care and toilet soaps to persist over the coming quarters.

Personal Care

Personal Care revenue grew 3.3 per cent, with EBIT up 8.7 per cent and margin expanding 98 basis points to 19.5 per cent. Premium bars supported mid-single-digit skin-cleansing growth, body wash maintained double-digit growth, and oral care recorded mid-single-digit growth aided by Closeup and Pepsodent innovation.

Beauty and Wellbeing

Beauty and Wellbeing revenue increased 11.1 per cent, EBIT grew 14.3 per cent and margin expanded 85 basis points to 30.0 per cent. Hair care posted double-digit sales growth and strengthened market leadership, while premium skin care drove high-single-digit skin-care and cosmetics growth. Minimalist delivered double-digit growth, whereas Oziva faced pressure from distribution realignment.

Foods and Refreshment

Foods and Refreshment revenue grew 6.8 per cent, with EBIT up 13.6 per cent and margin expanding 120 basis points to 19.9 per cent. Coffee and lifestyle nutrition achieved double-digit growth, packaged foods grew at a high-single-digit rate, and tea volumes grew at a low-single-digit rate.

Management Commentary and Growth Drivers

• Management highlighted opportunities in health supplements, including Horlicks protein launches.
• Lifestyle nutrition has delivered five quarters of strong growth, with Boost reaching Rs 1,000 crore in annualised revenue.
• HUL reported new market-share highs in laundry and hair care.
• Premium personal care is growing at strong double-digit rates, while two years of inflation have affected the mass personal-care segment.
• Rural and urban markets have both shown healthy growth, with urban demand stepping up.
• Quick commerce is evolving rapidly and growing at 30-40 per cent.

Earnings Estimates

PL cut FY27E and FY28E EPS by 1.9 per cent and 1.2 per cent, respectively. The revisions reflect lower-than-expected volume growth, input-cost pressure in soaps and tea, competition and crude-led Home Care margin pressure, and an anticipated recovery in advertising spend.

Margin Outlook and Key Risks

Risks to margins include 8-10 per cent raw-material inflation, crude-price volatility and potentially higher palm-oil prices linked to El Nino. Management indicated that it can maintain its guided EBITDA-margin band if Brent crude remains within the US$75-US$100 range. The company plans calibrated price increases aligned with inflation.

The principal near-term pressures identified by PL are competitive intensity in Home Care and toilet soaps, input-cost pressure in soaps and tea, crude-led Home Care margin pressure and the potential recovery in advertising expenditure.