Marico shares slip post-Q1 update; here's what FMCG firm said on rural demand

Marico share price NSE, Marico Q1 results update 2023: FMCG major Marico's shares on Thursday slipped in the early morning deals after the company, which owns Saffola, Parachute, and Hair & Care, among other brands, said in its Q1 that the demand trends in the FMCG sector remained "stable" but the anticipated pickup in rural demand remained elusive in the June quarter. The stock opened at Rs 534.5 and slipped as much as 2.5 per cent to touch the day's low of Rs 525.3 from the previous close of Rs 538.55 on NSE. At the time of writing the copy, the stock quoted Rs 536.65 apiece, up by Rs 1.9 or 0.35  per cent on the NSE.

The company said that the urban markets were steady during the April-June period, and it expects that consumer demand from rural India will recover for the rest of the year as inflation is moderating. "Moderating headline inflation, a hike in MSPs, easing liquidity pressures, and the forecast of a near-normal monsoon continue to fuel hopes of a gradual recovery in rural demand in the course of the year," Marico said. 

In the regulatory filing, Marico said the performance of Marico's domestic business was affected as it recorded a low-single-digit volume growth. "Consolidated revenue in the quarter declined in low-single digits on a year-on-year basis, dragged by pricing interventions in key domestic portfolios last year and further pricing drops in Saffola Edible Oils (amounting to a pricing decline of around 30 per cent YoY) during the quarter," Marico said.

This was on account of a "significant trade destocking" in Saffola Edible Oils in reaction to sharply falling vegetable oil prices. Also, there were channel inventory adjustments in core portfolios triggered by the last leg of trade scheme rationalisation for correction of the historical Q1 revenue skew. "In the given context, domestic volumes grew in low-single digits, with a minor volume drop in Parachute Coconut Oil, low double-digit volume growth in Saffola Edible Oils and a flattish quarter for Value Added Hair Oils," it said.

Among the newer portfolios, food continued its strong run while premium personal care (including the digital-first portfolio) remained steady. Marico expects a 'visible pickup' from the coming quarter given the sustained healthy trends in offtakes, market share and penetration across key franchises, it said. During the quarter, the company's international business maintained a healthy growth momentum with a high single-digit constant currency growth. Most of the markets exhibited resilience in a volatile global operating environment.

During the quarter, edible oil prices fell sharply, and key inputs as copra prices stayed in a favourable zone, while crude derivatives remained firm. The spending on Advertising & Promotions (A&P) continued to trend upward in line with the company's focus on the strategic brand building of core and new categories. "Expansion in operating margin is expected to drive double-digit growth in the bottom line... The business has exhibited a healthy margin upside, and as indicated above, the company remains confident of resuming an upward trajectory across key growth parameters from hereon," Marico said.

Furthermore, Marico said it "maintains its aspiration of delivering sustainable and profitable volume-led growth" enabled by the strengthening brand equity of its core franchises and scale-up of new engines of growth.

Marico share price target: Should you buy, sell or hold? 

• Morgan Stanley has maintained an overweight rating on Marico with a target price of Rs 611. 
• Nomura has maintained a neutral call on the counter with a target price of Rs 560. 
• Moreover, Macquarie has continued with outperform and has raised its target to Rs 620 from Rs 580. 

Marico share price history 

Marico's stock has given a positive return of over 7 per cent in the last 12 months (from July 6, 2022). In comparison, the headline index Nifty 50 has rallied nearly 21 per cent. Marico nurtures brands across categories of hair care, male grooming, edible oils, fabric care, skincare and immunity-boosting and healthy foods.

Catch latest minute-by-minute stock market updates here. For all other news related to business, politics, tech, sports and auto, visit Zeebiz.com.