Why are HUL shares falling despite 2.2x jump in Q3 FY26 PAT? Explained

Hindustan Unilever Ltd (HUL) shares declined 4.55 per cent, falling 112.10 points from the previous close of Rs 2,462.45 to an intraday low of Rs 2,350.35, even though the company reported a 121 per cent rise in reported profit after tax for the December quarter of FY26.

The fall in the stock came after investors looked beyond the headline profit growth and focused on the underlying performance.

Revenue growth steady, margin under pressure

Add Zee Business as a Preferred Source

HUL reported consolidated turnover of Rs 16,235 crore for the December quarter, up 6 per cent from Rs 15,353 crore a year ago. EBITDA rose 3 per cent to Rs 3,788 crore from Rs 3,689 crore. However, EBITDA margin declined 70 basis points to 23.3 per cent from 24 per cent in the corresponding quarter last year.

Profit after tax before exceptional items from continuing operations rose just 1 per cent to Rs 2,562 crore from Rs 2,543 crore a year ago. This indicates that core profit growth remained largely flat.

One-time ice cream demerger boosted profit

The sharp 121 per cent rise in reported profit to Rs 6,603 crore was mainly due to a one-time accounting impact from the demerger of the ice cream business. The company recognised an exceptional gain of Rs 4,611 crore due to the difference between the fair value and carrying amount of the net assets of the ice cream undertaking.

When such one-time gains are excluded, the performance appears more muted. In fact, profit after tax from continuing operations declined 30 per cent to Rs 2,118 crore from Rs 3,027 crore a year earlier.

The company also reported an exceptional loss of Rs 576 crore during the quarter, compared with an exceptional gain of Rs 538 crore in the same period last year. Exceptional items included the fair valuation impact of financial liabilities related to acquisitions, restructuring expenses, acquisition and disposal-related costs, and profit from the sale of property.

This mix of lower margin, modest core profit growth, and decline in continuing operations profit may have weighed on investor sentiment.

Segment performance and other developments

Operationally, HUL reported 5 per cent underlying sales growth, led by 4 per cent underlying volume growth. Segment-wise, Home Care grew 3 per cent, while Beauty and Wellbeing, Personal Care and Foods each reported 6 per cent underlying sales growth.

While the company indicated early signs of demand recovery, the growth remained moderate.

In addition, the company disclosed that changes under the newly notified Labour Codes resulted in an increase in gratuity and compensated absences liability of Rs 113 crore as at December 31, 2025. Though this did not materially impact the quarter’s profit, it added to cost-related disclosures.

HUL also announced the acquisition of the remaining 49 per cent stake in Zywie Ventures (OZiva) for Rs 824 crore and the divestment of its 19.8 per cent stake in Nutritionalab for Rs 307 crore. These transactions are expected to close by March 2026 and had no impact on the December quarter results.

Focus on earnings quality weighs on stock

Market participants appeared to focus on the quality of earnings rather than the headline number. The 121 per cent jump in profit was largely driven by the one-time demerger gain, while core profitability showed limited growth and margins contracted.

Shares of Hindustan Unilever Ltd are currently trading at Rs 2,419.20, down Rs 43.25 or 1.76 per cent at the time of writing this report.