Marico share price falls after muted Q2 results; should you buy the stock?

Marico share price traded marginally lower on Tuesday morning after the company reported its financial results for the second quarter of FY24 with a fall in revenue amid muted domestic business. Marico shares fell as much as 1.87% to ₹522.10 apiece on the BSE.

The Parachute Coconut oil-maker reported a consolidated net profit of ₹360 crore for the quarter ended September 2023, registering a growth of 17.3% as compared to ₹307 crore reported in the year-ago period.

The company's revenue from operations in Q2FY24 dipped marginally to ₹2,476 crore from ₹2,496 crore, YoY, dragged by domestic price cuts and currency headwinds in the overseas business. The company reported a 3% YoY growth in volumes in the same period.

Read here: Marico Q2 results: Net profit up 17% at ₹360 crore, revenue dips marginally

Marico's EBITDA increased by 14.8% YoY to ₹497 crore, while EBITDA margin improved by 280 bps to 20.1%.

Most analysts maintained their positive view on Marico shares after Q2 results and expected the company to perform well going ahead.

Here’s what brokerages said on Marico Q2 results and Marico stock:

Motilal Oswal Financial Services

There is no material change to Motilal Oswal Financial Services’ FY24 EPS estimates, but it cut FY25 EPS estimates by 7.2% owing to the management’s commentary on volatility and its expectation of lower EBITDA in FY25 versus FY24.  

Marico’s core portfolio has performed well, and the company is working hard to accomplish its medium-term growth objectives. Its earnings growth prospects are healthy, with expectations of a ~10-11% CAGR over FY 23-25 and RoE of over 35%. The much-needed diversification is gathering momentum in the Foods and digital-first brands. If sustained, this can lead to higher multiples for Marico compared to the past,” said the brokerage firm.

It reiterated a ‘Buy’ rating on the stock and reduced the target price to ₹640 per share.

(Exciting news! Mint is now on WhatsApp Channels Subscribe today by clicking the link and stay updated with the latest financial insights! Click here!)

Nuvama Institutional Equities

Marico’s Q2FY24 revenue dip of 1% YoY and EBITDA and PAT growth of 15% and 17% YoY were broadly in line with Nuvama Institutional Equities’ estimates, but slightly below Street’s estimates.

“Domestic business volumes grew 3% YoY; however, domestic value dipped by 3% YoY due to price corrections in key portfolio over the last 12 months. We await sustained volume recovery, and are trimming FY25E and FY26E EPS estimates by 0.5% and 0.5%,” Nuvama Institutional Equities said.

The brokerage retained ‘Hold’ rating on the stock and cut the target price to ₹602 per share from ₹606 earlier.

Catch L&T Q2 Results Live Updates here

JM Financial

Marico’s September quarter earnings were 2-3% better versus what analysts at JM Financial were expecting.

Topline performance was mostly inline. GPM recovery was again much better, and drove the beat in earnings. Volume trajectory remained soft, though – a sector-wide issue at present, and was due to rural weakness given erratic rainfall patterns in the country, increased competitive activities from smaller players, and inventories being lowered in the general trade channel, JM Financial said.

“Newer businesses are growing well and there is a sharp focus on profitability here. We expect the stock to do better here onwards - price corrections-led drag on topline would be lower going forward, which, along with continued RM-cost benefits, provides some comfort on earnings visibility,” JM Financial said.

The brokerage maintained a ‘Buy’ call with a target price of ₹600 per share.

Also Read: Fine Organic share price drops 3% after Q2; here's why Motilal Oswal downgrades the stock

Sharekhan

Marico aims to improve domestic volume growth, strengthen its market share across categories, and sustain growth momentum in the international business to drive growth in the medium term. Margin expansion will be driven by easing raw material prices, aggressive cost management, and a favourable mix, Sharekhan noted.

The stock has corrected by 10% from its recent high and is currently trading at 44x/38x its FY2024E/FY2025E earnings. 

The brokerage retained a ‘Buy’ rating on the stock with an unchanged price target of ₹645 per share.

Marico share price has fallen more than 5% in the last three months, while the stock is up just over 4% year-to-date (YTD).

Catch Live Market Updates here 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.