Marico share price falls over 4% on lower consolidated revenue, single digit volume growth in Q2 amid rural pain

Marico share price declined over 4% in early trade on Thursday after the company reported low-single digit volume growth in its business updates for the quarter ended September 2023. Marico shares fell as much as 4.22% to ₹546.40 apiece on the BSE.

Marico said that during the second quarter of FY24, domestic volumes grew in low-single digits on a year-on-year basis, with low single digit volume growth in Parachute Coconut Oil and Saffola Edible Oils, and low single-digit value growth in Value Added Hair Oils. 

“During the quarter, demand trends largely mirrored the trends observed in the preceding quarter. Instances of rising food prices and below-normal rainfall distribution in some regions seemed to impede the anticipated recovery in rural demand. Consumption trends, particularly in rural, are expected to improve in H2 owing to retail inflation levels staying within RBI’s target range, hike in MSPs, healthy sowing season, easing liquidity pressures and government spending,” Marico said in a regulatory filing.

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The International business delivered double-digit constant currency growth, thereby exhibiting sustained resilience amidst a volatile global operating environment, it added.

On a consolidated basis, the company’s revenue was marginally lower on a YoY basis in Q2FY24, dragged by pricing corrections in key domestic portfolios over the last 12 months and currency depreciation in some of the overseas markets which had an adverse effect on the reported INR growth in the international business.

Among key inputs, copra and edible oil prices stayed in a favourable range, although the latter continued to exhibit some volatility. Crude derivatives remained firm with an upward bias.

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“Consequently, we expect robust gross margin expansion on a year-on-year basis. While A&P spends were also significantly ramped up towards strategic brand building of its core and new categories, we expect healthy operating profit margin expansion leading to low double-digit operating profit growth,” Marico said.

The company expects to maintain an improving trend across key performance parameters in H2, supported by a gradual pickup in volume and topline growth in the domestic business and healthy momentum in the international business, while the full-year margin guidance remains intact.

“The Company maintains its aspiration of delivering sustainable and profitable volume-led growth over the medium term, enabled by the strengthening brand equity of its core franchises and scale up of new engines of growth,” it added.

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Brokerage firm Motilal Oswal Financial Services maintained a ‘Buy’ rating on Marico with a target price of ₹690 per share amid attractive valuations and a healthy return on equity.

“Marico has clocked a 9.1% earning CAGR over FY18-23 and is expected to achieve similar growth over FY24-25E and RoE of ~35%, led by volume growth, improvement in brand image of core franchises, higher growth in the food portfolio and premium personal care segment,” the brokerage said.

At 10:00 am, Marico share price was trading 3.98% lower at ₹547.80 apiece on the BSE.

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