Chai and sanitiser may save the quarter⁠ for Hindustan Unilever

HUL
  • According to Axis Securities, brands like Lifebuoy alcohol-based sanitizer, Domex, Surf excel are expected to see heavy sales growth.
  • HUL shares have gained over 23% even in the volatile market since March 23, when the lockdown started.
  • Analysts think with the rise in the packaged food holding on to the tea business will be beneficial for HUL.
Hindustan Unilever (HUL) became India’s first fast-moving consumer goods (FMCG) company with a market cap above $5 trillion after the merger with GlaxoSmithKline (GSK).

Analysts at Edelweiss Securities described as a match ‘made in heaven’. The first quarter earnings of India’s largest consumer products maker HUL may prove if it was the right call.

Investors are, however, hoping for the best. The stock has surged 8% in the last two weeks before the earnings on July 21.

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Hope floats that the GSK merger gave HUL the capabilities in clinical research, product development, stronger portfolio at the pharmacy channel and a direct connect with doctors and experts, according to Edelweiss. This was the time when consumer demand fell overall but there was a mad scramble for sanitisers and disinfectants. According to Axis Securities, brands like Lifebuoy alcohol-based sanitizer, Domex, Surf excel are expected to see strong sales growth.

According to various analysts reports, HUL is projected to see a revenue dip of nearly 2% but will see a healthy rise in its profit.

BrokerageRevenueNet Profit
ICICI Securities2.40%7.90%
Edelweiss Securities2%2.80%
Nirmal Bang2.30%2.30%

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Even packaged food is likely to see a spike in sales

In January, HUL and its parent company Unilever were debating whether to hold on to its tea business in India and Indonesia, according to a Bloomberg report. The business stayed on and for good. Tea and food refreshments— which account for 19% of the company’s FY20 revenue— could also clock decent growth between April and June.

Analysts think with the rise in the packaged food holding on to the tea business will be beneficial for HUL. According to the company’s financial reports, tea and food refreshment business account for 19% of the company’s total revenues for the financial year 2020.

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The company saw the opportunity and spent money on capitalising on it. It’s ‘Dooriyan Banakar Bhi Apnapan Dikha Sakte Hain’ campaign for Brooke Bond Red Label tea targeted people who were missing the short tea breaks with colleagues and friends during the lockdown. According to the BARC report, HUL continued to be the top advertiser of its products during the pandemic.

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