Hindunilvr vs Asianpaint Q2 FY24

HUL crossed INR 15,000 crore quarterly turnover for the first time, with underlying sales growth of 4% and UVG of 2.5%. EBITDA margin improved 130 bps to 24.6%, driven by gross margin recovery to pre-inflation levels of 52%. However, PAT growth was muted at 4% due to higher A&P spend (up 420 bps YoY) and adverse tax comparables. Rural demand remains subdued, with two-year volumes still negative, though gradual recovery is expected. Competitive intensity from regional players persists in tea and detergent bars. Management remains cautiously optimistic, guiding for marginally negative price growth if commodities stay stable, and expects volume recovery to be gradual. Key risk: uneven monsoon and volatile global commodity prices could delay rural recovery.

Guidance read

Price growth to be marginally negative if commodities stay: Management expects price growth to turn marginally negative in the near term if current commodity prices hold. EBITDA margin to be maintained in a healthy range: Management aims to keep EBITDA margin in a healthy range while investing in brands and capabilities. Volume recovery expected to be gradual: Management expects volume recovery to continue gradually, supported by moderating inflation and festive season.

Risk read

Key risks include Uneven monsoon impact on rural demand — Uneven monsoon with 6% deficit and lower reservoir levels could affect kharif harvest and rural incomes.; Resurgence of small players in mass segments — Small and regional players are growing faster in tea and detergent bars, pressuring HUL's market share in those pockets.; Sustained inflation in HFD and coffee inputs — High milk and coffee prices continue to pressure volumes in HFD and coffee, with no near-term relief expected.; Global commodity price volatility — Crude oil above $90 and geopolitical tensions could reverse input cost deflation, impacting margins..

Promise ledger

Of 3 tracked promises, management 0 met, 0 close, 3 missed.

Asian Paints reported a muted Q2 FY24 with decorative paint volume growth of 6% YoY but value growth flat, impacted by weak consumer sentiment and erratic monsoons. However, gross margins expanded to 43.9% (up ~770bps YoY on consolidated basis) aided by 4% material deflation. Management attributed the softness to a shift in festive season (Diwali in November vs October last year) and expects a strong H2 recovery led by festive and wedding demand. The company maintained its double-digit volume CAGR trajectory and guided for a good Q3. Key risks include rising crude prices due to geopolitical tensions, which could reverse deflation benefits, and continued weakness in Nepal and Bangladesh operations.

Guidance read

Double-digit volume growth trajectory maintained: Management reiterated commitment to double-digit volume CAGR, expecting Q3 to recover with festive and wedding demand. PBDIT margin band of 18-20%: Management guided that PBDIT margins will remain in the 18-20% range, balancing input cost inflation and pricing actions. Distribution expansion of 8,000-10,000 touchpoints in FY24: Target to add 8,000-10,000 retail touchpoints in FY24, with 5,000 already added in H1. CapEx projects on track: white cement by Dec 2025, VAM/VAE by Q4 2026: White cement project in Fujairah expected by Dec 2025; VAM/VAE project by Q4 2026. Brownfield expansions largely complete.

Risk read

Key risks include Rising crude prices may reverse deflation benefits — Management noted that geopolitical tensions could increase crude and derivative prices, potentially leading to input cost inflation in H2.; Continued weakness in kitchen & bath business — Kitchen and bath segments saw double-digit declines; management cited demand weakness and network challenges, with no clear recovery timeline.; Uncertainty in international markets (Nepal, Bangladesh, Egypt) — AP Global saw degrowth due to currency depreciation in Egypt and weak demand in Nepal/Bangladesh; management expressed uncertainty about recovery.; Potential market share loss to unorganized sector if downtrading persists — Analyst raised concern about downtrading to economy products; management acknowledged shift but claimed organized sector gaining share from unorganized..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 2 missed.