Hindustan Unilever and Bajaj Auto; Good growth, but input costs spike

On 22 July, two long-term wealth creators and defensive bets; Bajaj Auto and Hindustan Unilever announced their quarterly results for the Jun-21 quarter. Here is a quick look at some unique points to ponder over.

Hindustan Unilever reported 12.83% sales growth YoY at Rs.11,915 crore while the net profit was up 9.6% at Rs.2,061 crore. The profits and sales were down compared to the Mar-21 quarter due to COVID 2.0 impact. Among key business segments; the homecare segment grew 12% YoY, beauty & personal care grew 13%, while the food & refreshments business grew 12%. Beauty and personal care contributed most to EBITDA followed by home care and foods.

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Strategically, Hindustan Unilever focused on investing in brands and portfolios with future fit as well as to manage cost inflation, which has been a real challenge. Cost controls helped HUL mitigate the spike in input costs. Let us turn to Bajaj Auto.

Bajaj Auto reported 140% growth in total sales yoy at Rs.7,386 crore while the net profits in the Jun-21 quarter grew 196% at Rs.1,170 crore. Like in the case of Hindustan Unilever, Bajaj Auto also saw a sequential fall in sales and profits due to COVID 2.0 impact. In a tough quarter, Bajaj reported vehicle volumes of over 1 million with 65% coming from exports.

If you look at Bajaj Auto, the big story is the growth driven by exports. Global markets were hardly impacted by COVID 2.0. Hence, weaker domestic demand was partially offset by the non-cyclical exports business. For the Jun-21 quarter, exports accounted for 65% of total sales of Bajaj Auto. 

Like in the case of Hindustan Unilever, Bajaj also saw input cost pressures with higher raw material costs wiping out 220 bps from EBITDA margins.