> ## Content Index > Fetch the complete content index at: https://www.moatmarginresearch.com/llms.txt > Use this file to discover other available public pages before exploring further. # HUL's September Quarter: Customers Stayed, the Margin Gave 140 bps, and Ad Spend Fell - URL: https://www.moatmarginresearch.com/hul-q2-price-volume-margin-ap-cut/ - Published: 2026-10-29T02:40:44.000Z - Updated: 2026-10-29T02:40:43.000Z - Description: HUL's Q2 FY27 underlying sales grew 15% on 7% volume, yet EBITDA margin fell 140 bps to 22.6%. What the filings say about price, cost and the A&P cut. - Author: A K Karthikeyan - Tags: Moat Insights **Hindustan Unilever's underlying sales grew 15% in July–September 2026 on underlying volume growth of 7%, the company's highest underlying sales growth in 14 quarters, and its EBITDA margin still fell 140 bps, to 22.6%. The shortfall was not larger because advertising and promotion spend fell in rupees, by 9.3% (our arithmetic), while sales rose 14.8% (our arithmetic). The filings show customers staying through a price-led quarter. They do not say how much price was taken, and they do not say whether the advertising cut is lasting efficiency or a deferral.** MoatSCORE: 5.30 (read live on the Moat Screener on 29 Oct 2026, where it is labelled deep dive). Our deep dive on the company is on its [moat page](https://www.moatmarginresearch.com/hindustan-unilever-moat/); our earlier piece on its pricing doctrine is [here](https://www.moatmarginresearch.com/hul-pricing-power/). ## The idea in one sentence Pricing power has two tests that can disagree: customers still buy after the price moves (volume), and the price move pays for the cost that caused it (margin), and this quarter's filings pass the first test openly and leave the second half-answered. ## The fact that breaks the assumption "Underlying Sales Growth 15%, Underlying Volume Growth 7%", the press release headline reads (\[IP\], press release). EBITDA, though, grew only 8%, to ₹4,089 crore, and the release says "EBITDA Margin at 22.6% was within the guided range". Note 2 to the results puts the base at ₹3,785 crore and says the margin "declined by 140 bps" (\[RS\], consolidated note 2). The margin loss is the number the headline leaves out. Two checks on the comparison. First, the comparative quarter in these statements is continuing operations only: the base-quarter statement carries a separate "DISCONTINUED OPERATIONS" block, with segment revenue of ₹322 crore and a ₹97 crore loss for the base quarter, and nothing in this quarter (\[RS\], consolidated statement and segment note). The filings do not name that business. Our EBITDA and margin comparisons therefore use continuing operations on both sides, as the company's note does. Second, exceptional items: the net credit was ₹2 crore this quarter against ₹219 crore in the base, and the base included, in the company's words, "one-off tax related gains of ₹ 273 crores" (\[IP\], press release), net of restructuring costs of ₹51 crore and acquisition and disposal costs of ₹3 crore (\[RS\], consolidated note 4; our arithmetic: 273 − 51 − 3 = 219). That is why reported profit after tax, ₹2,796 crore against ₹2,791 crore, is flat while profit after tax before exceptional items rose 9% to ₹2,795 crore from ₹2,553 crore (\[RS\], notes 5–6). The flat reported profit is a base effect. The margin fall is not: it sits above the exceptional line. ## One concrete thing, followed: the Home Care row Home Care is where price and volume are clearest. The press release says Home Care "delivered 22% USG, led by double-digit UVG", and that "Focused market development and calibrated pricing actions boosted penetration and supported volume resilience" (\[IP\], press release). The segment note gives revenue of ₹6,878 crore against ₹5,664 crore, up 21.4% (our arithmetic), and a segment result of ₹1,111 crore against ₹1,083 crore, up 2.6% (our arithmetic) (\[RS\], consolidated segment note). Revenue up by more than a fifth, volume growth in double digits, and segment profit up by ₹28 crore. Segment margin went to 16.2% from 19.1% (our arithmetic; the deck rounds it to "16% Margin", slide 12). Home Care is 37.7% of segment revenue and supplied ₹28 crore of the ₹263 crore rise in total segment results, about 11% (our arithmetic). ## The mechanism: price covers part of cost, advertising covers the rest **What the company says it did.** Slide 11 of the deck is titled "FH FY'27: Delivering volume-led profit growth" and names three levers under "Executing with discipline": "Calibrated pricing actions", "Accelerated savings" and "A&P spends productivity", with the line "Focused on protecting consumer franchise" beneath them (\[IP\], slide 11). The operating context on slide 4 is "Elevated commodity prices" and the outlook on slide 16 says "Commodity inflation expected to continue in the short-term" and that EBITDA margin is expected "to be within the current guided range of 22-24%". **What the statements show.** Rebuilt from the consolidated results as percentages of turnover (our arithmetic; turnover is sale of products plus sale of services, ₹18,071 crore against ₹15,742 crore): | % of turnover (consolidated) | Q2 FY27 | Q2 FY26 | Change | | -------------------------------------------------------------------------------- | ------- | ------- | -------- | | Material cost (materials consumed + stock-in-trade purchased + inventory change) | 52.9 | 49.0 | +387 bps | | Employee benefits | 4.7 | 4.6 | +11 bps | | Advertising and promotion | 8.2 | 10.4 | −217 bps | | Other expenses | 12.4 | 13.1 | −66 bps | | Other operating revenue | 0.9 | 1.1 | −27 bps | | EBITDA margin (company-reported 22.6% and 24.0%, derived) | 22.6 | 24.0 | −140 bps | Material cost rose 23.9% (our arithmetic) against turnover up 14.8% (our arithmetic). Materials took 387 bps of margin; advertising gave back 217 bps; other lines nearly cancelled. **A rough price-versus-cost reading (our arithmetic).** The company defines underlying volume growth as "volume growth including the impact of mix of turnover realisation of products sold" (\[IP\], footnote), so 7% is volume and mix together. On rounded inputs, 15% sales growth over 7% volume-and-mix growth leaves about 7.5% for price (1.15 ÷ 1.07 − 1). Material cost grew 23.9% on the same volume, which is about 16% per unit of volume-and-mix (1.239 ÷ 1.07 − 1). Price, on this crude arithmetic, covered about half of the unit cost increase. This is our estimate, not a company figure; the filings give no price number. **Where in the cost line.** Materials consumed were 35.5% of turnover against 35.8%; the increase came from purchases of stock-in-trade, 20.2% of turnover against 14.3%, partly offset by a larger inventory build (changes in inventories −2.8% of turnover against −1.1%) (our arithmetic). Purchases of stock-in-trade rose from ₹2,257 crore to ₹3,654 crore, and the filings do not say why. If more of what HUL sells is bought in as finished goods, the ratio rises without any commodity move, because a supplier's margin sits inside the purchase (our reading). The 387 bps cannot be read as pure commodity inflation. **The segment split.** Segment results are the cleaner place to see where price covered cost and where it did not (consolidated, our arithmetic from the segment note): | Segment | Revenue growth | Segment result growth | Margin Q2 FY27 | Margin Q2 FY26 | Change | | ------------------ | -------------- | --------------------- | -------------- | -------------- | -------- | | Home Care | +21.4% | +2.6% | 16.2% | 19.1% | −297 bps | | Beauty & Wellbeing | +15.7% | +16.4% | 28.6% | 28.4% | +16 bps | | Personal Care | +7.9% | −8.7% | 17.2% | 20.3% | −313 bps | | Foods | +8.5% | +15.7% | 21.7% | 20.3% | +134 bps | | Total segments | +14.5% | +7.6% | 20.4% | 21.8% | −131 bps | The margin loss sits mainly in two segments. Personal Care is the sharpest: the deck gives it "UVG: Flat" and says Skin Cleansing "Delivered double-digit growth, driven by pricing actions in an inflationary environment" (\[IP\], slide 14). Revenue up 7.9%, segment result down 8.7% (our arithmetic), is, in our reading, what a price rise that only partly covers cost looks like. Beauty & Wellbeing and Foods, where the company reports double-digit or low-single-digit volume growth and, in Foods, that "Inflation moderated performance in Tea", widened their margins (\[IP\], slides 13, 15). **The advertising line.** Advertising and promotion was ₹1,481 crore against ₹1,632 crore, down 9.3% (our arithmetic) while turnover grew 14.8%. At last year's ratio of 10.4% of turnover it would have been about ₹1,873 crore, ₹392 crore more (our arithmetic). Put back, and holding everything else, the EBITDA margin would have been near 20.5% rather than 22.6% (our arithmetic; an illustration of scale, not a company figure and not a prediction of what would have happened). For the half-year, advertising was ₹3,138 crore against ₹3,230 crore, down 2.8%, on turnover up 12.6% (our arithmetic; \[RS\]). Sequentially, advertising was 9.6% of turnover in Q1 FY27 and 8.2% in Q2, and material cost 50.9% and 52.9% (our arithmetic from the June-quarter column): material cost up 193 bps while advertising fell 144 bps. Our reading: HUL answered input-cost inflation with three things at once. It took price (the filings name pricing actions in Home Care and in Skin Cleansing), it held volume through that, and it spent less on advertising. The first two are the company's own account of the quarter. The third is in the statements, and slide 11 lists "A&P spends productivity" among its levers, but no document says how much of the cut is efficiency and how much is lower spend. ## What the filings say about quality and standing The auditors' review reports are unmodified: the consolidated report gives the standard negative assurance ("nothing has come to our attention"), and its only added paragraph says Unilever Nepal Limited was reviewed by another auditor, with "Our conclusion is not modified" on that reliance (\[RS\], review reports). Note 9 says "The statutory auditors have issued an unmodified report on the above results." The standalone results, filed alongside, show the same direction: standalone EBITDA margin 22.8%, "declined by 120 bps" (\[RS\], standalone note 2). The Brazilian step-down subsidiary Minimalist Importation and Trade of Cosmetics LTDA was voluntarily liquidated from 8 September 2026; the company says "The closure has no impact on operations", and the entity's revenue from operations in FY26 was nil (\[BR\]). ## Where this breaks - **The price estimate is crude.** About 7.5% price and about 16% unit cost use rounded growth rates and a volume measure that already includes mix. If mix moved toward premium packs (the release names "Premiumisation in powders through Surf excel Easy Wash Rs. 99 pack"), some of what we call price is mix. Treat the half-and-half split as a direction, not a number. - **The material ratio may not be commodity.** See the stock-in-trade line above; the filings do not explain it. - **The margin may have been chosen, and then it is not a weakness.** Our earlier piece \[PP\] argued that HUL's doctrine is to take price in small bites and not to price to the peak of inflation, and that this is pricing power being spent on volume. The company's slide 11 wording, "Calibrated pricing actions", fits that, and the margin is inside the guided 22–24% band. Read that way, a 140 bps give-up for 7% volume growth is the moat doing its job, and this piece's headline overreads one quarter. One quarter cannot tell the two readings apart. - **The advertising cut could be a deferral.** Brand support is the line a company can cut first and pay for later. Advertising fell ₹151 crore (our arithmetic: 1,632 − 1,481) while turnover rose ₹2,329 crore (our arithmetic). The filings do not say whether the "productivity" is lasting. If it is, the brand is cheaper to run; if not, a quarter's margin was borrowed from future brand strength. "Focused on protecting consumer franchise" is the company's assurance, not evidence. - **No peer data.** If commodity inflation hit every consumer-goods company equally, a brand with real price discretion should show a smaller margin fall than weaker rivals, not none. These filings have no rival margins, so they cannot show whether HUL's fall was better or worse than the industry's. - **Review, not audit.** The limited review does not examine why margins moved, and segment margins depend on a cost allocation the filings do not describe. - **Strongest case against our thesis.** The company calls volume growth "strong" and the quarter its best underlying growth in 14 quarters. If price discretion means customers keep buying when price moves, this is a clean pass and the margin is the price of a deliberate choice. We think the quarter passes the volume test and leaves the margin test open. ## Why it costs the reader something A reader who takes "15% underlying sales growth" as proof of pricing power has counted the price and skipped the cost. A reader who takes the 140 bps margin fall as proof the brand has lost pricing power has skipped that volume held, in double digits in Home Care. What the filings support is narrower: HUL took price, kept its customers, and still gave up margin that an advertising cut only partly returned. Segment results grew ₹263 crore on ₹2,307 crore more segment revenue (our arithmetic). Our MoatSCORE on the Moat Screener is 5.30 (read live on the Moat Screener on 29 Oct 2026, where it is labelled deep dive); it was set before this quarter's filings and is not a conclusion about this result. ## What to watch 1. The December quarter's EBITDA margin against the 22–24% guided range, and whether the company says what the commodity move was. 2. Advertising and promotion as a share of turnover: 8.2% in this quarter, 9.6% in Q1 FY27 (our arithmetic). If it returns toward 10% and margin does not widen, price was not covering cost. 3. Home Care and Personal Care segment margins (16.2% and 17.2%), against 19.1% and 20.3% a year ago (our arithmetic). 4. The purchases-of-stock-in-trade line, and any explanation of it, in the call transcript when it is filed. On 28 October the company filed only an intimation that the audio/video recording of the earnings call is on its website (\[CR\]); no transcript had been filed in what we read. ## The concrete thing, again The Home Care row says revenue ₹6,878 crore against ₹5,664 crore, a segment result of ₹1,111 crore against ₹1,083 crore, and "double-digit UVG". Customers took the volume at a higher price. The margin on that volume was 297 bps lower. Until the company sizes its price, its savings and the advertising cut, the filings prove the first half of that sentence and only outline the second. ## Sources - **\[RS\]** [Hindustan Unilever, results for the quarter and six months ended 30 Sep 2026, notes, review reports, press release and investor presentation](https://nsearchives.nseindia.com/corporate/HINDUNILVR%5F28102026094439%5FSEIntimationOutcomeofBM28102026signed.pdf) (NSE) - **\[IP\]** [Hindustan Unilever, investor presentation and press release, SQ'26 results](https://nsearchives.nseindia.com/corporate/HINDUNILVR%5F28102026094216%5FSEintimationIPSigned.pdf) (NSE) - **\[BR\]** [Hindustan Unilever, Regulation 30 intimation, liquidation of Minimalist Brazil](https://nsearchives.nseindia.com/corporate/HINDUNILVR%5F28102026101021%5FSEIntimationMinimalistsigned.pdf) (NSE) - **\[CR\]** [Hindustan Unilever, intimation of the earnings-call audio/video recording](https://nsearchives.nseindia.com/corporate/HINDUNILVR%5F28102026200309%5FSEIntimationAudioVideo28102026Signed.pdf) (NSE) - **\[PP\]** [HUL Pricing Power: What Six Years of Margins Reveal](https://www.moatmarginresearch.com/hul-pricing-power/) and **\[MP\]** [Hindustan Unilever: Anatomy of a Brand Moat](https://www.moatmarginresearch.com/hindustan-unilever-moat/), with [How MoatSCORE works](https://www.moatmarginresearch.com/moatscore/) --- > Educational research, not investment advice. Every figure above is drawn from Hindustan Unilever's own filings, read from the primary documents on 29 October 2026; derived figures are our arithmetic, labelled as such. MoatSCORE: 5.30 (read live on the Moat Screener on 29 Oct 2026, where it is labelled deep dive). No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.