Hindustan Unilever Ltd. (HUL), India's largest fast-moving consumer goods (FMCG) company, reported a modest 3.8% year-on-year (YoY) increase in its consolidated net profit for the second quarter of fiscal year 2026. For investors looking for clear signs of a demand recovery, the results were underwhelming. The profit figure was boosted by a one-off exceptional gain, masking an otherwise subdued operational performance characterised by flat volume growth and margin pressure.
For the quarter ending 30 September 2025, HUL's net profit stood at Rs. 2,694 crore, beating street estimates, while revenue from operations grew by a tepid 2.1% to Rs. 16,034 crore. The company's performance was significantly impacted by transitory disruptions from GST rate changes and a challenging demand environment.
Table of Contents
- Why HUL's 4% Profit Growth is Misleading
- HUL's Q2 Financial Performance: A Deep Dive
- How Did HUL's Business Segments Perform?
- What Was the Impact of GST Changes and the Demand Environment?
- What is the Outlook for HUL Stock?
- Frequently Asked Questions (FAQs)
HUL's headline profit growth was propped up by a one-off exceptional gain of Rs. 184 crore from the resolution of a prior-year tax dispute between UK and Indian authorities. Excluding this gain, the company's net profit before exceptional items would have declined by approximately 4% YoY, painting a more accurate picture of the quarter's challenges. The underlying volume growth for the quarter was zero, indicating that the modest revenue increase came from price changes rather than selling more products.
The company's financial metrics reflect the tough operating environment, with margin pressure from increased advertising and promotional spending.
Key Financial Highlights for Q2 FY26
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The company's EBITDA margin contracted by 90 basis points to 23.2%, primarily due to higher advertising and promotional spending aimed at driving growth in a soft market.
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The performance across HUL's business segments was mixed.
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Home Care: This segment delivered mid-single-digit volume growth, driven by a strong performance in the fabric wash category.
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Beauty & Wellbeing: The segment recorded a 5% Underlying Sales Growth (USG), led by its skin care portfolio.
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Personal Care: This division saw a flat turnover. The hair care sub-segment, in particular, declined due to the impact of GST-led price reductions and subsequent trade destocking.
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Foods & Refreshment: The segment achieved a 3% USG, with the beverages category (tea and coffee) posting strong double-digit growth.
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A key factor affecting the quarter was the government's decision to cut GST rates on a range of products, which impacted approximately 40% of HUL's portfolio. This led to significant price reductions across 1,200 SKUs, causing a "transitory impact" as distributors and retailers destocked to adjust to the new pricing.
Priya Nair, CEO and Managing Director of HUL, stated that the company expects normal trading conditions to resume from early November, which should pave the way for a gradual market recovery. The performance was also affected by a prolonged monsoon in parts of the country and a still-recovering rural demand.
Following the results, analysts have expressed cautious optimism.
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Goldman Sachs reiterated a 'Buy' rating but lowered its target price to Rs. 2,850, noting that while a recovery is expected, its pace may be slower than previously anticipated.
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Other brokerages see the quarter as a temporary blip, setting target prices as high as Rs. 3,240 on the expectation of a recovery in the second half of the fiscal year.
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In a positive for shareholders, the board declared an interim dividend of Rs. 19 per share.
For investors, HUL's Q2 results highlight a tough quarter masked by a one-off gain. The focus should be on the expected recovery in the second half of the year. While the stock may face near-term pressure, HUL's fundamental strengths and market leadership remain intact, making it a "hold" with an eye on accumulating on dips for a long-term portfolio.
Want to understand how HUL began FY26 on a stronger note before this quarter’s slowdown? Read the detailed HUL Q1 FY26 Results analysis highlighting its volume-led growth and profit momentum.
1. What was HUL's net profit in Q2 FY26?
HUL reported a consolidated net profit of Rs. 2,694 crore, a 3.8% increase year-on-year. However, this was boosted by a one-off exceptional gain.
2. Why was HUL's profit growth misleading?
The 3.8% profit growth included a one-off gain of Rs. 184 crore. Excluding this, the profit before exceptional items actually declined by about 4%, and the company's underlying sales volume growth was flat (0%).
3. How did the GST rate cut impact HUL's performance?
The GST rate reduction on about 40% of its portfolio led to price cuts, causing temporary destocking by distributors and retailers, which impacted reported sales for the quarter.
4. What was HUL's dividend announcement?
The HUL board declared an interim dividend of Rs. 19 per equity share for the financial year 2026.
5. What is the investment recommendation for HUL stock after these results?
Most analysts are cautiously optimistic. While near-term performance may be weak, the long-term outlook is positive. It is generally considered a "hold," with potential for long-term investors to buy on price dips.