HUL reports better-than-expected volume growth, raises prices 2-5% amid margin pressure

ET Intelligence Group: HUL reported marginally better-than-expected volume growth in the March 2026 quarter, led by sustained momentum in the home care and beauty segments. However, margins came under pressure as rising input costs led by higher crude oil and crude-linked derivatives' prices offset the benefits from the demerger of the low-margin ice-cream business. The stock ended 2.7% lower at ₹2,250.6 on the BSE on Thursday as the company's decision to raise product prices by 2-5% to partially cover the higher input costs stoked concerns whether such a move would affect sales volume.

In an analyst call after declaring quarterly numbers, the FMCG major stated that price increases would be calibrated to protect volumes. The company believes its core portfolio has relatively low-price elasticity, which may limit the impact of higher prices on sales volume. The company is likely to continue the buoyancy in execution in FY27 helped by premiumisation and improving traction in quick commerce where turnover doubled in FY26.

It has retained the guidance for operating margin before depreciation and amortisation (Ebitda margin) for FY27 at 22.5-23.5% after reporting 23.6% margin in FY26. However, it would be a difficult task to maintain the margin in a tight band as the company has flagged input cost inflation of 8-10% amid the West Asian conflict, which has resulted in over 73% jump in Brent crude prices over the past four months.

In FY26, material costs rose to 32.9% of revenue compared with 31.4% in FY25, underscoring the pressure from crude-linked inputs. The company's volume growth rebounded to about 6% in the March quarter, returning to the levels last seen in June 2023. To sustain growth and strengthen its premium mix, HUL has planned a ₹2,000-crore capital expenditure spread over the next few quarters, focused largely on beauty, personal care and home care segments.

In personal care, body wash and premium skin-cleansing bars delivered double-digit growth, with body wash gaining 400 basis points of market share in FY26. In home care, the liquids portfolio has grown in double-digits for the past three to four years, crossing ₹4,000 crore in FY26 from well over ₹3,000 crore in FY25, reinforcing a structural shift away to premium products. The company's premium thrust is also visible in beauty, where its digital-first brand Minimalist scaled up to an annual revenue of about ₹850 crore, up from around ₹500 crore last year, highlighting the rapid traction of high-value, online-led propositions.