Hindunilvr vs Britannia Q2 FY25

HUL reported a muted quarter with 2% underlying sales growth (3% volume growth) in a sluggish FMCG environment. Revenue stood at INR 15,319 crore, while EBITDA margin remained healthy at 23.8%. PAT before exceptional items declined 2% due to a one-off tax credit in the base. Home care and beauty & wellbeing delivered high single-digit growth, but personal care declined 5% and foods & refreshment was subdued. Management highlighted early signs of recovery in soaps post-Stratos technology launch and expects low single-digit price growth in the near term. The ice cream business is being separated to sharpen focus. Risks include persistent commodity inflation (palm oil, tea) and muted urban demand. The company maintains its margin guidance and expects stable demand trends.

Guidance read

Low single-digit price growth expected in near term: Management expects low single-digit price growth in the coming quarters due to commodity inflation, while maintaining competitive price-value equation. EBITDA margin to be maintained at current healthy levels: Management aims to keep EBITDA margin at current ~23.8% levels, with some basis points fluctuation, through productivity savings and calibrated pricing. Ice cream business separation by end of FY25: Board approved separation of ice cream business; mode (sale or demerger) to be decided by end of the year, with listing expected. Full-year effective tax rate marginally above 26%: ETR for H1 was 26.1%; full-year ETR expected to be marginally above 26%.

Risk read

Key risks include Commodity inflation pressure — Crude palm oil and tea prices rose 10% and 25% YoY respectively, impacting gross margins. Management is taking calibrated price increases but full pass-through may not be possible.; Muted urban demand and slow rural recovery — Urban growth moderated, while rural recovery is gradual. Management noted no further acceleration in FMCG growth, which could pressure volume growth.; Personal care segment decline persists — Personal care declined 5% with low single-digit volume decline. Despite formulation changes and innovation, recovery may take a couple more quarters.; Tea downgradation trend may not reverse quickly — Despite 25% tea inflation, downgradation to loose tea persisted in Q2. Management expects reversal but timing is uncertain..

Promise ledger

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

Britannia reported Q2 FY25 revenue of INR 4,566 crore, up 4.5% YoY, with volume growth of 8%. EBITDA came in at INR 707 crore, down 12% YoY due to high raw material inflation (palm oil +45% QoQ, wheat, cocoa). Management highlighted a tough demand environment, especially in metros, driven by housing cost inflation and wage stagnation for non-salaried workers. The company plans 4-5% price increases over the next two quarters to offset cost pressures, while doubling down on cost efficiency programs. Route-to-Market 2.0 pilots in 25 cities show promise, with full rollout expected in 12-15 months. Innovation contributes 2% of revenue. Key risk: sustained inflation could compress margins further if price hikes are not fully absorbed by consumers.

Guidance read

Price increase of 4-5% over next two quarters: Management plans to implement 4-5% price hikes across the portfolio, primarily in large SKUs, to offset raw material inflation. Route-to-Market 2.0 full rollout in 12-15 months: Pilot in 25 cities covering 44 distributors and 50,000 outlets showing encouraging results; full implementation expected to cover 100 cities and 4.5 lakh outlets. Cost efficiency programs to overachieve targets: Management is doubling down on cost efficiency and value engineering projects to mitigate inflation impact.

Risk read

Key risks include Sustained raw material inflation — Palm oil, wheat, and cocoa prices remain elevated; import duties on palm oil may persist, pressuring margins.; Volume impact from price increases — Analyst raised concern that 4-5% price hikes could dampen volume growth; management acknowledged balancing act but no specific elasticity provided.; Urban demand weakness in metros — Metro slowdown attributed to housing cost inflation and wage stagnation for non-salaried workers; management hypothesis but no quantified impact on sales.; Competitive intensity from regional players — Smaller players expanding territories with aggressive pricing; management expects cleanup but near-term share pressure possible..

Promise ledger

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