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HUL Q3 results disappointing, but not pessimistic on stock: Sagarika Mukherjee, SBI Cap Securities

ET Now Jan 22, 2013, 05.14PM IST

In an interview with ET Now, Sagarika Mukherjee, Research Analyst, SBI Cap Securities, shares her views on HUL results. Excerpts:

ET Now: Disappointing both on volume growth front as well as on the royalty increase.

Sagarika Mukherjee: Yes, one expected somewhere close to 8% to 9% volume growth and 8% to 9% of blended price hikes. But you saw more of price hikes this quarter because top line grew by 13.5% and then you saw 5% volume growth only.

If you see the segmental results, you will see that the personal products segment actually grew only by 8-9%. It is a segment that has grown more than 15% to 17% at least every quarter. So there is some muted performance there and S&D has surprised on the front that growth was kind of accelerated.

I guess most of the growth was price led or increase in realisation. However on the margins front you saw that S&D lost like somewhere close to 230 bps and personal products actually gained somewhere close to 230 bps. So we feel that results were not exactly what we thought and were disappointing on many-many fronts in terms of growth and margins.

ET Now: What is the call on the stock now then?

Sagarika Mukherjee: We feel it is a hold because we feel it could just be one quarter phenomenon in the sense that they recently increased some prices and hence we feel that the volumes could be muted in this segment in this quarter.

Going forward again if you tick up, there is no structural reason to believe that the volumes will slow down drastically to like mid single digits or something like that. So we still remain not very optimistic, but we are definitely not pessimistic on the stuff.

ET Now: Just wondering, just for this quarter itself what is the bigger disappointment -- the volume growth or the talk about the royalty burden increasing as well, it is dated thing.

Sagarika Mukherjee: No, the royalty part is not much of an issue because if you see we had done an analysis of what would happen if the royalty actually went up to an extent that it did in the other Asian markets. So we thought the maximum hit that you to take is just by 5 odd per cent to the bottom line.

So it is not much that you are looking at. Somewhere close to 5 odd per cent, but the bigger concern is whether this sort of slowdown or sort of muted performance in personal products is something that is going to stay or we can expect some sort of acceleration going forward.

ET Now: You attribute the entire weakness today purely to the volume growth?

Sagarika Mukherjee: Yes, definitely.