HUL sees demand recovery as rural, urban traction improves; Q3 volumes rise 4%

Hindustan Unilever Limited (HUL) has reported a year-on-year sales volume growth of 4% for the December quarter, marking a significant recovery after a stagnant prior quarter. This positive trend reflects increased demand across both rural and urban markets. However, the company's operating margin experienced a slight contraction of 70 basis points, settling at 23.3%, primarily due to costs associated with new labor code provisions. Despite this, HUL's margins remain within the company's guidance range, indicating resilience against rising operational expenses. The company is optimistic about the second half of the current fiscal year, anticipating improved performance driven by strategic changes in its portfolio and channels, along with favorable macroeconomic conditions and enhanced consumer sentiment. HUL's net profit saw a 30% decline year-on-year mainly due to a one-off impact from labor regulations, although excluding this factor, the profit only grew modestly by 1%. The company’s recent acquisitions, including Minimalist and the remaining stake in Zywie Ventures, signal a robust inorganic growth strategy aimed at capitalizing on emerging consumer trends, particularly in the premium skincare segment, which has shown impressive revenue growth and increasing market share within HUL’s overall performance.