Hindustan Unilever Q1 growth accelerates as margin guidance withstands input-cost pressure

Investment View and Valuation

Anand Rathi Research retained its BUY rating on Hindustan Unilever (HUL) in its July 29, 2026 result update, citing growth stability, portfolio transformation, broader channel execution and maintained EBITDA-margin guidance despite input-cost inflation.

The broker retained its 12-month target price of Rs 2,700, based on 50 times FY28E EPS, compared with its earlier valuation basis of 53 times September 2027E EPS. At the report's CMP of Rs 2,023, HUL traded at 42 times FY27E EPS of Rs 48.8 and 38 times FY28E EPS of Rs 53.9.

Q1 FY27 Financial Performance

HUL delivered broadly in-line Q1 FY27 performance. Underlying sales growth was 10 per cent, its highest in 13 quarters, split equally between 5 per cent volume growth and 5 per cent pricing growth. Volume growth was modestly below consensus expectations of 6-7 per cent.

EBITDA margin declined as gross margin compressed due to higher input prices. Despite this pressure, management maintained its EBITDA-margin guidance for FY27.

Segment Performance

Growth was broad-based but varied by segment:

• Home Care: Revenue grew 13 per cent year-on-year, the strongest growth in three years, supported by high-single-digit volume growth and 14 per cent underlying sales growth. Fabric wash recorded double-digit volume growth across bars, powders and liquids, while Vim Liquid continued to deliver strong double-digit growth.
• Beauty & Wellbeing: Revenue grew 11 per cent year-on-year, with high-single-digit volume growth. Hair care, premium skincare and Minimalist performed well, although Health & Wellbeing was softer during the OZiva portfolio transition.
• Personal Care: Revenue increased 3 per cent year-on-year, with pricing helping to offset palm-oil inflation. Dove and Pears delivered double-digit volume growth, while soaps remained soft due to affordability pressure.
• Foods & Refreshments: Revenue rose 7 per cent year-on-year, supported by mid-single-digit volume growth, double-digit coffee growth and continued momentum in Horlicks and Boost. Boost crossed Rs 10,000 million in annual turnover, becoming HUL's 21st Rs 10,000 million brand.

Growth Strategy and Channel Execution

Management said rural and urban demand remained robust and that inflation had not affected consumer demand. HUL's growth strategy centres on underpenetrated high-growth Power Move categories, market development, specialist route-to-market capabilities, wider distribution and deeper assortments across general trade, modern trade and quick commerce.

• Quick commerce is growing 40-50 per cent for HUL. Management views it as a structural opportunity for consumer segmentation, premiumisation and portfolio architecture.
• Minimalist and OZiva are intended to increase exposure to faster-growing demand spaces.
• Global Unilever brands, innovation and selective bolt-on acquisitions remain additional growth levers.
• HUL is applying AI in manufacturing, distribution and logistics, including through a digital-first distribution centre in Vijayawada.

Margin Outlook and Earnings Estimates

Management reiterated that FY27 should be better than FY26 and maintained EBITDA-margin guidance of 22.5-23.5 per cent. The guidance is supported by calibrated price increases, procurement efficiencies, structural savings, productivity initiatives, portfolio transformation and premiumisation.

Anand Rathi expects revenue to grow at about 9 per cent CAGR over FY26-FY28E and EBITDA margin to expand 30 basis points over the period.

The estimate changes reflect pricing actions and crude-linked input costs.

Key Risks

• Unsuccessful brand launches.
• Unwarranted or expensive bolt-on acquisitions.
• Stricter nutrition-based healthcare regulations.
• A sharp rise in input costs.
• Price-led competition causing market-share loss.