Marico’s India business volumes grew at mid-single digit in the March quarter, which was an improvement on year-on-year (YoY) basis, thanks to easing of broader commodity inflation that bodes well for overall consumption trends, especially in the rural market.
In an business update for the fourth quarter, the FMCG giant said its international business clocked a mid-teen growth in constant currency terms and that its consolidated revenue for the quarter grew in low-single digits on YoY basis.
Analysts either have a ‘Neutral’ or ‘Buy’ stance on the stock post the update, with their price targets suggesting up to 23 per cent potential upside for the stock ahead.
Nomura India said the low-single digit consolidated revenue growth was slightly below its estimate of 5 per cent, which could predominantly be on account of the currency headwinds faced in international business, as the core business is witnessing subtle improvement.
India business volumes indicated a pickup in the trend and was in line Nomura’s estimate of 5 per cent YoY growth. International business grew in mid-teens, but stronger currency depreciation headwinds in Bangladesh and MENA markets than expectations translated into a weaker than expected performance, it said.
Raw material basket for Marico moderated and the improvement in product mix should aid gross profit margin expansion in Q4, Nomura said as it expected a 100 bps YoY expansion in margin at 45.5 per cent.
“We believe ad spends will step-up in 4Q (to normalise back to pre-Covid levels), as Marico will resume its brand building exercise to support sales and new product launches,” it said while suggesting a target of Rs 565 on the stock.
Shares of Marico have fallen 5.28 per cent year-to-date against a 2.17 per cent rise in the BSE FMCG index during the same period. The consensus view on the stock based on 32 analyst recommendations is ‘Hold’ even as the average price target on the stock, as per Trendlyne, suggests a 20 per cent potential upside ahead.
Nuvama Institutional Equities said the Q4 numbers were in line with its expectations. This brokerage expects the company’s consolidated revenue for the quarter to grow at 3 per cent (against 7.4 per cent YoY) and Ebitda at 11 per cent YoY (against 8.5 per cent YoY).
“Prominent green shoots in rural are eagerly awaited while gross margin should hold steady with an upward bias going ahead. A more sustained recovery is expected in FMCG demand considering improvement in macro factors, but the monsoon under the El-Nino conditions shall be critical for that to materialise,” it said.
Nuvama said Marico aspires to deliver sustainable and profitable volume-led growth over the medium term, but felt the company needs to get much more aggressive on innovation and push its products across channels.
This brokerage has a ‘Hold’ rating with a target of Rs 572.
Meanwhile, Motilal Oswal Securities in its FMCG preview said profit for Marico may rise 11.1 per cent YoY to Rs 277.70 crore on a 3.1 per cent YoY rise in sales at Rs 2,229 crore. Outlook on digital first brands is a key monitorable, it said while suggesting a target of Rs 590 on the stock.
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