Hindustan Lever (HLL) has finally hit the growth charts. After 17 successive quarters of subdued revenue growth, the quarter ending June is set to notch up double-digit growth.
HLL's home and personal care product segment has been the primary driver, growing at almost 20% in value terms, leading to a likely topline surge of around 15% year-on-year, said sources.
Net profit is expected to be flat, or at best, expected to go up marginally. An improved showing by HLL will do much to improve investor confidence in the FMCG sector, say analysts.
The HLL spokesperson declined to comment on the projections. “We can not give any guidance on our quarterly performance,'' he said.
According to sources, shampoo, soap and detergent have fared well, with shampoo notching up as much as 30% growth. Brands such as Clinic All Clear, Sunsilk and Surf Excel have done well. However, foods continue to be drag with no clear turnaround strategy.
“Internal research shows that a perceived improvement in the quality of products is creating a demand which is irrespective of prices increases,” said analysts. Add to this the positive impact of new ad campaigns featuring celebrities like Amitabh Bachchan and Shabana Azmi, which have had a direct bearing on sales.
The HLL stock has moved steadily on the bourses. On Monday, the share price closed at Rs 162.45. A year ago, the stock was quoting at Rs 128.
Analysts, however, are quick to point out that the stock has been moving up due to the overall positive sentiment in the market. In this context, the dominant player's fortunes are directly linked to the growth rate and sentiment of the industry.
In the March quarter, HLL's topline grew 6.5% after a flat '04. HLL had then said that “it was the highest quarterly growth in over two years”. Home and personal care (HPC) sales in the January-March quarter grew 9.6% with volumes growing 6.6%. Investment in brand-building continued with an increase in advertising spends of 12% in HPC.
Replying to shareholders at the company's annual general meeting on June 24, outgoing chairman MS Banga had said, “When you run up a hill fast, you do tend to slow down a bit. We have been re-equipping ourselves for the steeper slope that you see in the market today. Let me assure you, we have no intention of slipping down that hill. We have begun the climb back up.”