Giving details about its Q3 performance, Marico said “Parachute coconut oil posted low single-digit volume growth after a visible recovery in December as consumer pricing stabilised with copra prices firming up in the off-season. Going forward, we expect the brand to deliver growth in line with medium term aspiration.”
It said that it expects modest growth in operating profit. However, it expects growth in operating and gross profit margins as key input costs and consumer prices across key franchises saw some stability.
While the urban and premium categories maintained a steady pace of growth, “recovery in rural demand was not as discernible as retail inflation stayed at elevated levels,” the FMCG major said.
What did Sharekhan say?
Commenting about Marico’s updates for the latest quarter, analysts at Sharekhan said that there is a glimpse of sequential improvement in the operating performance, led by a recovery in volume growth and margin improvement on a quarter-on-quarter (QoQ) and year-on-year (YoY) basis.
It said that steady growth in the premium and urban categories and a likely recovery in the rural demand will improve Marico’s growth trajectory in the coming quarters.
Sharekhan said that Marico is banking on 4Ds (Diversification, Distribution, Digital, and Diversity) to drive consistent double-digit earnings growth in the medium to long term. The company is gaining market share in the core domestic portfolio through new launches, scaling up the foods business, and improving growth prospects in Bangladesh and Vietnam These are some of the key catalysts for growth in the medium to long term.
The brokerage further said that attractive valuations and better growth visibility compared to close peers make it a better pick in the mid-to-large consumer goods companies.
Sharekhan reiterated a ‘buy’ rating on Marico’s shares with a target price of ₹ 645.00. This translates to an upside of 29.26% as compared to its share price of ₹ 499.00 apiece at 12:10 PM on Wednesday.
Marico’s shares reached a 52-week high of ₹ 554.05 apiece on September 23, 2022. If its share price increases beyond this price towards the brokerage’s target, it will record a fresh 52-week high.
With a market capitalization of ₹ 65,877 crores, Marico is a large-cap company in the FMCG sector (Fast Moving Consumer Goods). It provides a wide range of products under brands including Parachute, Saffola, Hair & Care, Nihar, Livon, Kaya Youth, and Coco Soul.
The company has an excellent return on equity of 37.19% and an ideal debt-to-equity ratio of 0.14. Its revenue and profit show an increasing trend over a period of five years. Its shares were trading at a price-to-earnings ratio (P/E) of 53.53, which is significantly higher than the industry P/E of 20.18, indicating that it is overvalued as compared to its peers. This could also mean that investors are willing to pay a higher price for the company’s future earnings.
Written by Simran Bafna
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