Hindustan Unilever (HUL), a leading player in the Fast-Moving Consumer Goods (FMCG) sector, is shifting its focus from profit margins to sales expansion in the fiscal year 2026. This strategic pivot reflects the company’s optimistic outlook on urban demand recovery, spurred by recent government fiscal stimulus initiatives. During a recent analyst briefing, HUL adjusted its earnings before interest, tax, depreciation, and amortization (EBITDA) margin forecast to 22-23%, a decrease from the earlier 23-24% range, as the company ramps up investments in marketing, sales promotions, and brand enhancement across various segments.

Emphasizing Growth Over Margins

HUL’s decision to prioritize sales growth has garnered positive reactions from major brokerage firms, including Jefferies, Goldman Sachs, JP Morgan, and Nuvama. These analysts view this approach as beneficial for consumers, despite potential short-term setbacks. Following this announcement, HUL’s stock price remained stable at ₹2,331.60 on the Bombay Stock Exchange, despite experiencing a 4% drop the previous day.

• Key Highlights:
  • Adjusted EBITDA margin guidance: 22-23%
  • Current share price: ₹2,331.60
  • Recent stock drop: 4%

Positive Market Indicators

CEO Rohit Jawa expressed confidence in the company’s direction, citing several macroeconomic factors that are trending positively. These include shifts in monetary policy, tax benefits, stable crude oil prices, and a favorable monsoon forecast, all of which contribute to a robust market demand. Jawa emphasized, “We aim to invest in our core business to drive growth and prioritize sales volume over immediate EBITDA gains.” He predicts that price growth will likely stabilize in the low single digits throughout FY26.

Market Reactions and Future Expectations

Brokerages such as Jefferies have highlighted that HUL’s strategic adjustment, although it may cause temporary margin constraints, positions the company for long-term success. They maintain a ‘buy’ rating for HUL, setting a target price of ₹2,950.

Nuvama echoed similar sentiments, forecasting that HUL will offer enhanced consumer value through increased investments in flagship brands like Lifebuoy, Glow & Lovely, and Nutrition Drinks. They anticipate HUL achieving 4-5% volume growth in the coming year.

JP Morgan also noted optimistic revenue growth prospects for HUL, attributing this to strategic portfolio adjustments and favorable macroeconomic conditions. They highlighted a 3% sales growth in Q1 of FY25, driven primarily by volume increases.

Mixed Insights from Analysts

While many analysts remain bullish, Emkay Global pointed out that HUL has yet to fully capitalize on the recovering demand in rural markets. They maintained an ‘add’ rating with a target price of ₹2,400.

• Performance Overview:
  • Beauty and personal care segments showed improvement.
  • Home care and food sectors exhibited weaker performance.
  • Revised margin guidance indicates HUL’s commitment to stimulating growth, particularly in beauty and wellness categories.

As HUL navigates this transformative phase, it sets the stage for a renewed focus on consumer value and sustainable growth, aligning its strategies with the evolving market landscape.