HUL declares interim dividend of Rs 14/share; stock falls despite 8% jump in Q2 net profit

Hindustan Unilever Ltd share price fell over 2 per cent to Rs 2,133 apiece in intraday deals on BSE even as the company reported an 8.6 per cent on-year rise in net profit at Rs 2,009 crore in the July-September quarter. The company had posted a profit of Rs 1,848 crore in the corresponding period of the preceding year. Sequentially, the company’s profit grew by 6.8 per cent. Total sales (revenue) of the company increased 16 per cent during the quarter to Rs 11,442 crore, against Rs 9,852 crore in the year-ago period; while underlying domestic consumer business sales (excluding the impact of business combinations) grew 3 per cent on-year in the September quarter.

Analysts at YES Securities expect the stock to react positively post this performance and a gradual re-rating towards 50x FY23 earnings from 44x currently driving a 12-13% upside from current levels. “HUL remains our top pick in the staples space in addition to Dabur India, Nestle India and Tata Consumer,” Himanshu Nayyar, Lead Analyst – Institutional Equities, YES Securities. A strong set of numbers were led by better than expected growth in the foods and beverages business coupled with margin expansion despite commodity headwinds.

Dividend

Besides, the board of the company declared an interim dividend of Rs 14 per share of face value of Re 1 each for the period ended September 30, 2020. The record date for the purpose of determining the entitlement for payment of interim dividend is fixed as October 29, 2020. HUL’s earnings before interest, tax, depreciation and amortisation (EBITDA) for the quarter came at Rs 2,869 crore, which registered a 17 per cent on-year growth. The margin improved by 30 bps as compared to September quarter 2019. The company informed that its health, hygiene and nutrition which forms 80 per cent of its portfolio grew in double digits. 

Sanjiv Mehta, Chairman, and Managing Director said that in the context of a challenging economic environment, HUL’s growth has been competitive and profitable. The company has expanded its portfolio with consumer-relevant innovations and have invested strongly behind its brands. “Our operations and service levels are now back to pre-Covid levels and we have accelerated the pace of digitizing our operations under the ‘Re-imagine HUL’ agenda,” Mehta added.

Rural markets have been resilient but the demand in urban India especially in metropolitan cities has been muted. “We believe that the worst is behind us and we are cautiously optimistic on-demand recovery,” Mehta said.

HUL shares finished 0.20 per cent down at Rs 2,174.35 apiece,, as compared to a 0.28 per cent rise in S&P BSE Sensex.