Hindustan Unilever Shares Pare Losses on Demand Recovery Hopes

Hindustan Unilever pared losses to 0.2% as investors expect demand recovery after consumption tax reform. The company reported a temporary sales hit in September due to inventory clearance, but expects a recovery in November as prices stabilize. Jefferies and BofA Securities are optimistic about Hindustan Unilever's growth, projecting a better third-quarter and restocking activity driving growth in the second half of the financial year.

Hindustan Unilever (HUL), India's largest consumer goods company, saw its shares fall by 0.2% on Monday, as investors awaited the recovery in demand following recent consumption tax reforms. The company reported a temporary sales hit in September due to inventory clearance, but expects a recovery in November as prices stabilize. Analysts from Jefferies and BofA Securities are optimistic about HUL's growth prospects, projecting a better third-quarter and restocking activity driving growth in the second half of the financial year.

HUL warned on Friday that the recent goods and services tax (GST) rate cuts had caused a temporary sales hit in September, which may persist into October. The company attributed this to distributors and retailers clearing existing inventories with old prices before the GST changes took effect. HUL expects a recovery in demand starting November as prices stabilize, underpinned by rising disposable incomes and the company's ongoing portfolio transformation actions HUL warns of near-flat Q2 as GST changes bite^[1].

The GST rate cuts, which were rolled out on September 22, lowered taxes on daily essentials such as soaps, shampoos, toothpaste, and food items from 12% or 18% to 5%. HUL stated that these reforms support long-term consumption, but have caused a transitory impact on sales due to inventory disruptions HUL warns of near-flat Q2 as GST changes bite^[1].

Investors sought comfort from the expected recovery in demand, and HUL's shares, rated "buy" by an average of 39 analysts, rose about 8% so far this year. The company's shares were down 0.2% at 2,506.50 rupees as of 12:32 IST on Monday, while the benchmark Nifty 50 was flat Hindustan Unilever pares losses on hopes demand will recover as prices stabilise^[2].

Jefferies expects a better third-quarter for HUL, projecting that restocking activity combined with a business recovery could drive growth in the second half of the financial year. BofA Securities echoed this optimism, estimating consolidated business growth to remain flat to low single digits for the September quarter Hindustan Unilever shares down 2.7% on sales impact forecast^[3].

HUL's leadership reshuffle, led by new CEO Priya Nair, aims to boost growth in India by streamlining decision-making and empowering Nair to focus on high-margin beauty and wellbeing segments. The company continues to operate under the leadership of its managing director and chief executive, with Unilever serving as a majority shareholder Hindustan Unilever's Priya Nair takes charge: Major leadership restructure aims for growth in India's market^[4].

In conclusion, while HUL faced a temporary sales hit in September due to GST rate cuts, investors remain optimistic about the company's growth prospects in the coming quarters. The company expects a recovery in demand starting November, supported by rising disposable incomes and ongoing portfolio transformation actions.