HUL: Profit margin takes a back seat to sales growth

The FMCG company aims to deliver the right price-to-value proposition to consumers

- Pallavi Pengonda

Hindustan Unilever Ltd (HUL) has toned down its profit margin aspirations in the near-to-medium term as it wishes to get a tighter grip on sales growth. This should lead to muted earnings growth for FY26, even as margin is expected to start improving towards the end of the year.

The plan is to step up investments in advertising and promotion, trade channel spends and brand development across segments, especially beauty and wellbeing. The fast-moving consumer goods (FMCG) company aims to deliver the right price-to-value proposition to consumers. As such, it expects Ebitda margin to be in the range of 22-23%, which is 100 basis points (1 percentage point) lower than its earlier guidance. Ebitda is earnings before interest, taxes, depreciation and amortization.

This is a negative surprise, especially with key raw material prices dropping sharply of late, said Mihir Shah, analyst at Nomura Financial Advisory and Securities (India). HUL expects near-to-medium term gross margin to moderate as well.