Hindustan Unilever (HUVR) 3QFY21 result was below our estimates due to higher than expected raw material cost pressure, said IDBI Capital.Overall business, on comparable basis, grew 7%YoY (+4%YoY volume growth) driven by continued double-digit growth momentum in health, hygiene and nutrition portfolio. Revenue from discretionary portfolio moderately declined by 1%YoY while revenue from out-of-home portfolio recovered strongly compared to previous two quarters. Gross margin declined 24bp YoY to 54% due to inflationary raw material cost.

EBITDA margin contracted 87bp to 24.1% due to higher other expense (+28%YoY, +72bp YoY as % of revenue). Adjusted PAT grew 14%YoY to Rs 20 billion. During the quarter HUVR reported Rs 420 million restructuring expense related to nutrition business.

Commenting on the result review, the broking firm said, "Revenue from rural India grew at double digit while from urban remained in positive territory. Inflationary raw material led to decline in gross margin while higher other expenses contributed towards decline in EBITDA margins. We have cut our EPS estimate for FY21E by 8% factoring-in the impact of higher than expected raw material cost pressure. We maintain our Accumulate rating on the stock with a revised TP of Rs 2,606."

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