HUL Q2 preview: Margins pressures loom as raw material prices continue to rise

Hindustan Unilever Ltd may post a 3.35% increase in net profit and 9.47% higher revenue for the second quarter of FY27 in the wake of rising raw material prices, according to analyst estimates.

Investors will watch how margins emerge for the company, widely seen as a barometer of the Indian consumer sector, after HUL implemented a calibrated 5% price hike across its portfolio in the first quarter and signalled further price increases if inflation persists.
According to 12 analysts who track the company, Bloomberg estimates revenue to be at ₹17,582.4 crore in the July-September period compared with ₹16,061 crore a year earlier. An estimate of nine analysts pegs net profit at ₹2,784.4 crore in Q2 compared with ₹2,694 crore a year earlier.

HUL’s revenue rose 10% to ₹17,341 crore in the April-June period, led by price increases. Consolidated profit fell 2% to ₹2,680 crore as input costs rose at the maker of Dove, Lux and Lifebuoy soaps, Pepsodent toothpaste, Brooke Bond tea and Kissan jams.

The company is scheduled to announce its Q2 earnings on Wednesday.

The tug of war between volumes and prices could continue in the second quarter. HUL’s Ebitda margin stood at 23% in Q1. The Ebitda margin had contracted by 90 basis points to 23.2% in Q2 of FY26. HUL had widened its medium-term Ebitda margin guidance range to 22%-24% (up from the previous 22.5%-23.5% range) in September.

Volumes grew 5% in the April-June quarter, a dip from the Q4 FY26 growth of 6%, which was a 15-quarter high. The industry will watch how the price hikes affected volumes for HUL. The underlying volume growth in Q2 of FY26 remained unchanged for HUL, reflecting subdued consumer offtake after widespread monsoon disruptions and ahead of the goods and services tax rate transitions that came into effect on 22 September 2026.

Raw materials

Brent crude oil prices were up 40% from a year ago in Q2 of FY27. This increased the costs of raw materials such as linear alkyl benzene (LAB) used in Surf Excel detergents and plastic for packaging, which are derived from crude oil.

“While higher LAB and crude prices could put some pressure, HUL has taken a 5% price hike in 1Q, which will help cushion the impact, in our view, and maintain margins in a narrow band,” analysts at Nomura said in a 28 September report.

Palm oil prices had risen about 21% year-on-year in the period. However, the government cut the basic customs duty on crude palm oil from 10% to 5% on 24 September, lowering the landed cost of palm oil and potentially providing some relief to edible oil prices. Nomura said this could ease the impact on HUL’s gross profit margin. Coffee prices are down while tea prices are up 9% year-on-year.

“With mid-to-high single-digit price hikes taken across categories, pricing has largely negated GST-2.0 benefits,” analysts at Motilal Oswal said about the consumer staples sector in an 8 October report. “On the margin front, gross margin is likely to remain under pressure YoY as companies absorb higher-cost crude and palm oil inventory and agri inflation, partly offset by pricing.”

Mass consumption could take a hit as inflation accelerates. India's retail inflation was at 5.54% in September, a 22-month high, compared with 4.83% in August. The Reserve Bank of India raised its benchmark repo rate by 25 basis points to 5.50% on 7 October, marking its first interest rate hike since February 2023, as inflation pressures loomed.

Rural consumption

Rural demand is also keenly watched as crop production could take a hit. India’s southwest monsoon ended 13% below the long-period average amid concerns over El Niño’s warming effects. Maharashtra, Karnataka, Andhra Pradesh, Telangana and Rajasthan have declared that hundreds of talukas are facing drought-like conditions.

HUL said in July that rural growth had accelerated in recent quarters.

“In the last few quarters, we have seen a step-up in our rural growth and therefore, that's been the big change and driver for us over the last few quarters,” chief executive officer Priya Nair said on 28 July.

The management’s outlook on commodity prices could trigger share price reactions after the results are announced. Investors will check if the company was able to continue volume growth and its expectations for the coming months.

HUL shares have declined 23.7% so far this year, while the Nifty FMCG index has fallen 20.6%.