(Reuters) -Shares in Hindustan Unilever fell 7% on Thursday, tracking their worst day in nine months, after reporting quarterly earnings below estimates due to an urban slowdown, with analysts expecting the pain to continue in the near term.
For the consumer goods industry, growth in urban pockets – which accounts for two-thirds of Hindustan Unilever’s revenue – has lagged that in rural areas over the last three quarters.
Analysts do not expect a swift change in fortunes for large consumer goods makers such as Nestle India and Hindustan Unilever.
Axis Securities expects “short term pain” for Hindustan Unilever, analyst Preeyam Tolia said, adding that the brokerage anticipates 5%-6% revenue growth for the rest of this fiscal, versus a historical average of 10%.
Consumer goods majors also face stiff competition from smaller brands stepping up their product launches and expanding deeper into rural India.
“Competition has increased … The regional players have become bigger,” Tolia said.
For the second quarter, the Dove soap-maker reported a near-4% fall in profit to 26.12 billion rupees ($310.8 million), missing estimates of 26.88 billion rupees, according to data compiled by LSEG.
“A visible recovery remains elusive … We are disappointed,” Antique Stock Broking said in a note.
Among peers, Nestle India reported a drop in profit, while soft drink makers Dabur India and Varun Beverages posted downbeat India numbers
Hindustan Unilever’s shares, which have been largely flat this year and are rated “buy”, on average, were down 7.1% at 2,470 rupees. The stock is the second-biggest loser on the benchmark Nifty 50 index.
Other consumer stocks including Nestle India, Britannia Industries and Dabur India were down 1.5%-3%.
(Reporting by Praveen Paramasivam and Ashna Teresa Britto; Editing by Janane Venkatraman and Sonia Cheema)
