HUL Q3 Results: Demerger Shadow, GST Woes Cloud Modest Growth

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AuthorRiya Kapoor|Published at:
HUL Q3 Results: Demerger Shadow, GST Woes Cloud Modest Growth
Overview

Hindustan Unilever is set to report its Q3FY26 results on February 12, 2026, with analysts anticipating a slight uptick in net profit and revenue. However, the performance is projected to be nuanced, reflecting the complexities of the recently demerged ice cream business and the residual effects of GST disruptions on October sales. Underlying volume growth is expected to remain subdued, while competitive pressures and evolving consumer preferences present ongoing challenges. Brokerage sentiment remains cautiously optimistic, with a 'Buy' consensus and an average price target suggesting modest upside potential.

THE SEAMLESS LINK
Hindustan Unilever's upcoming third-quarter fiscal year 2026 (Q3FY26) earnings announcement on February 12, 2026, arrives amidst a dynamic operational environment. While headline figures are expected to signal incremental growth, the true story lies in navigating the after-effects of its ice cream business demerger and overcoming lingering GST-induced disruptions. The market will be scrutinizing the 'like-for-like' performance against reported numbers, seeking clarity on the company's strategic direction and its ability to drive sustainable volume growth in a competitive landscape.

The Core Catalyst: Navigating Demerger and Demand

Brokerage consensus points towards a modest year-on-year increase in net profit, estimated to average around ₹2,568.5 crore, a marginal 1% rise from the previous year. Revenue is projected to climb approximately 4% to ₹16,022.28 crore. This growth is attributed to a gradual recovery in demand following GST rate rationalisation, which had disrupted sales in October. Analysts anticipate underlying volume growth to hover between 2% and 3%, a key metric indicating organic demand. The separation of the ice cream business into Kwality Wall's India Ltd (KWIL), with listing expected in February 2026, will significantly influence reported figures, potentially masking underlying segment performance. For instance, Emkay Global expects reported revenue growth to be impacted by this separation, while like-for-like revenue, adjusted for the demerger, is projected at 4% [cite:sourced input]. The stock, trading around ₹2435 as of February 9, 2026, will likely react to the nuances between reported and adjusted performance metrics.

The Analytical Deep Dive: Unpacking Value and Competition

The strategic demerger of the ice cream business, which contributed about 2.7% to HUL's total revenue and operated on lower margins, is intended to sharpen HUL's focus on its core segments like Home Care, Beauty & Personal Care, and Foods & Refreshments. This move aligns with Unilever's global strategy to streamline operations and concentrate on higher-margin, faster-growing areas. However, the lingering impact of GST disruptions, particularly in October, means that underlying volume growth may remain under pressure. Kotak Institutional Equities anticipates a 3.4% like-for-like revenue growth, driven by 2% underlying volume growth, with varied segment performance: home care expected at 1.5% growth (price cuts offsetting volume), beauty and personal care at 3.8%, and food and refreshments (excluding ice creams) at 6% [cite:sourced input].

Competitors like Dabur India and Marico have shown more robust sequential improvements in their December quarter results, with Dabur posting 6.20% revenue growth and Marico achieving 26.59% revenue growth. Britannia Industries, another peer, expects an 18% rise in net profit for its Q3FY26 results. The broader Indian FMCG sector, however, is projected to sustain high single-digit volume growth in 2026, buoyed by stabilising input costs and easing commodity inflation, according to recent analyses. The Union Budget 2026-27's focus on agri-infrastructure, rural demand, and growth in Tier-2 and Tier-3 cities is expected to provide tailwinds for the sector by bolstering consumer spending. Historically, HUL's stock has reacted negatively to Q3 results, with shares slipping 3.5-4% post Q3FY25 earnings and 3.6% after Q3FY24 due to flat volume growth and moderating demand.

⚠️ THE FORENSIC BEAR CASE

Despite the demerger's potential to streamline operations, several risks persist. The expected modest volume growth of 2-3% highlights continued demand softness, particularly as consumers may be trading down to smaller pack sizes or opting for more affordable alternatives amidst persistent inflationary pressures on essential goods. HUL faces intense competition not only from established peers like ITC and Godrej Consumer Products but also from agile direct-to-consumer (D2C) brands and private labels, which are increasingly capturing market share in niche segments. While the company aims to leverage its extensive distribution network, the effectiveness of its premiumization strategy, especially in the beauty segment following the Minimalist acquisition, remains to be seen. Furthermore, while input cost moderation is anticipated to support margins, any resurgence in commodity prices or increased advertising spend to counter competitive intensity could pressure profitability. Past results, such as Q3FY24, showed that price cuts taken to reflect commodity deflation also impacted revenue growth and margins. The company has historically seen its stock price react negatively to results where volume growth was flat or below expectations.

The Future Outlook

Analyst sentiment towards HUL remains largely positive, with a consensus 'Buy' rating. The average 12-month price target from 29 analysts stands around ₹2,826, suggesting a potential upside of approximately 16% from current levels. Forecasts for the next quarter's sales hover around ₹160.60 billion. However, the actual market reaction will hinge on the clarity provided regarding the post-demerger operational strategy, the sustainability of volume recovery, and management's outlook on navigating the ongoing competitive and demand-side challenges.
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