Why HUL Share Price is Falling

The FMCG sector in India is witnessing steady growth. As consumers disposable income increases, demand for daily essentials and premium products continues to rise.

This growth is driven by urbanisation, rising middle-class spending, and rural market penetration. Companies within the FMCG space are expanding their portfolios and enhancing distribution channels to cater to this demand.

Hindustan Unilever (HUL) is a name that resonates in almost every Indian household. From popular brands like Lux, Surf Excel, Dove, and Lipton, HUL has established itself as a household favourite. The company's wide range of personal care, home care, and food products has made it a dominant player in the Indian market.

The FMCG giant operates with a focus on providing everyday products to millions of consumers across India. It has a well-established distribution network and holds strong brand equity.

Lately, the company's share price has been in the spotlight following its quarterly earnings for the second quarter of FY25. The stock price has slipped after the company reported its earnings.

Let's take a deep dive into the company's quarterly results to understand why HUL share price is falling.

Disappointing Quarterly Results

HUL share price dropped over 5% on 24 October 2024, following the release of its Q2FY25 results, which failed to meet market expectations.

The company reported a 4% decline in standalone net profit, which stood at Rs 26.1 billion (bn). This is down from Rs 27.2 bn in the same quarter last year. The drop in profit can be attributed to moderate demand in urban markets, affecting overall profitability.

Revenue from operations increased slightly by 2% year-on-year (YoY), reaching Rs 153.2 bn compared to Rs 150.3 bn in the previous year. Although the revenue growth was marginal, the company saw a volume growth of 3%. However, the increase in revenue was not enough to offset higher costs, which impacted profitability.

Earnings before interest, tax, and depreciation (EBITDA) for the quarter decreased by 1.3% to Rs 36.5 bn, compared to Rs 36.9 bn a year earlier. The EBITDA margin also shrank by 80 basis points, standing at 23.8%.

In addition, HUL's board has decided to spin off its ice cream business by December 2024.

When asked about the decision to separate the business, HUL said that ice cream is a high growth, but equally high investment and low margin business.

The ice cream business currently contributes approximately 3% to HUL's turnover.

Note that this decision follows the announcement made earlier this year by HUL's parent entity, Unilever PLC, about its intention to separate its global ice cream business across jurisdictions.

Now, HUL's ice cream business, which includes brands such as Kwality Walls, Cornetto, and Magnum, will be separated.

In a gist, the gradual recovery in rural demand, coupled with moderating growth in urban areas, impacted HUL's overall performance in Q2. These factors contributed to the decline in HUL share price after the quarterly results announcement.

What Next?

HUL's future strategy focuses on navigating market challenges while driving competitive growth. The company plans to continue transforming its product portfolio to focus on high-growth areas, with an emphasis on rural market penetration.

To manage rising input costs, HUL will take calibrated price increases, ensuring that it maintains a balance between protecting margins and offering value to consumers.

In addition, HUL aims to drive operational efficiency through its productivity program, which will help mitigate the impact of fluctuating commodity prices. The company will continue to invest in strengthening its brands and expanding its distribution network to further deepen market reach.

HUL is also focused on enhancing its digital capabilities, aiming to strengthen its e-commerce presence as more consumers shift online. The company plans to drive innovation by launching new products in high-demand segments, such as personal care and home care.

Furthermore, HUL is committed to sustainability initiatives, which will play a key role in future growth, as consumers increasingly seek environmentally conscious brands.

HUL also remains vigilant in monitoring macroeconomic factors such as rural wage growth, inflation, and consumer demand. The company expects stable demand trends but will remain flexible in its approach, adjusting strategies based on market conditions.

How HUL Share Price has Performed Recently

In the past five days, HUL share price has tumbled 7.3%. In the last month, it is down 15.1%.

In 2024, so far it is down 5.7% and it is up 1.1% in the past one year.

The stock touched its 52-week high of Rs 3,034.5 on 23 September 2024 and a 52-week low of Rs 2,170.3 on 16 April 2024.

About HUL

HUL is India's leading Fast Moving Consumer Goods (FMCG) company with a diverse product portfolio including soaps and detergents, personal care products, and food and beverages.

HUL was established in 1931 as Hindustan Vanaspati Manufacturing. Following a merger of constituent groups in 1956, it was renamed Hindustan Lever. The company was renamed again in June 2007 as Hindustan Unilever.

For more details about the company, you can have a look at HUL factsheet and its latest quarterly results on our website.

For a sector overview, read our FMCG sector report.

You can also compare HUL with its peers.

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