HINDUNILVR

Q2 Outlook: Short-Term GST Disruption Amidst Long-Term Gain 📉

(HUL) views the recent GST rate rationalization as a "positive step to drive consumption." The revised rates have lowered the GST on approximately 40% of HUL’s product portfolio—including personal care items like soaps, shampoos, and toothpaste, and various food products—from 12% or 18% down to just 5%. Immediate Benefit Transfer: HUL began passing on these tax benefits to consumers starting September 22 by implementing price reductions and value enhancements across its product range. The company expects these reforms to boost disposable income, which should drive long-term demand across its product categories. Short-Term Business Disruption: Despite the long-term benefit, the immediate transition has caused a temporary disruption. Distributors and retailers are actively clearing old, high-GST inventory before stocking new products with revised prices. This has led to a temporary dampening of orders across channels, with consumers also deferring purchases in anticipation of lower prices. Flat to Low-Single Digit Q2 Growth: As a result of this inventory clearance and deferred demand, HUL anticipates its consolidated business growth for the September quarter (Q2 FY26) will be near flat to low-single digit. Expected Recovery Timeline: HUL emphasized that this is a "one-off, transitory impact." The company expects the disruption to continue into October but anticipates a full recovery and stabilization starting from November, once the market adjusts to the new pricing and the increase in disposable income begins to fuel consumption. Portfolio transformation actions are expected to further support this recovery momentum.