Marico jumps on strong Q3; what do analysts say?

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Marico jumps on strong Q3; what do analysts say?

Marico shares surged over 6% on Friday after the company reported strong earnings for the third quarter.

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Marico shares surged over 6% on Friday after the company reported strong earnings for the third quarter.

The fast moving consumer goods company reported a 21% year-on-year rise in third quarter net profit at Rs 84.12 crore and revenue was up 29% to Rs 1,058 crore. While the profit was in-line with analysts expectations of Rs 85 crore, revenue was higher than Rs 994 expected by a CNBC-TV18 poll.

Marico had in September last year issued a warning that it would be difficult to meet street expectations for at least couple of quarters as high input costs and accelerating inflation bite margins. So this estimate beating performance in October-December was even more a pleasant surprise.

In the third quarter, what cheered the street most was Marico's volumes, which despite a sharp increase in prices, rose 20%.

"Marico's Q3 net sales were above our estimate (by 4%) primarily on account of 20% YoY volume growth led by handsome growth in its key categories (Parachute - 13%; Saffola - 15%) vindicating the company's focus on volume growth enabling it to expand market share across segments," said a report by Edelweiss Securities.

During the quarter, Marico had hiked price of its Parachute coconut oil and Saffola Oats among other products to offset some of the input cost increases. Its gross margin in the third quarter was at 25.2%, compared with 24.4% in the year ago quarter. PBDIT (profit before depreciation, interest, taxes) margin declined to 12.7% from 13.4%.

Also Read: Parachute, Saffola, Kaya boost domestic growth: Marico

Here are some more analysts views on Marico's Q3 performance:

Edelweiss: We remain enthused by Marico's established brand equity, focus on new growth drivers like mass skin care and foods category, market share gain in value added hair oils, focus on long-term consumer franchise and strong corporate governance. Also, company has taken a price increase of about 8-9% across variants of Saffola in the month of January which would further aid margin. Rating: Buy

IDFC:  Marico has seen arguably the highest commodity pressure but has been able to leverage its strong brand equity and implement price increases to mitigate the impact and register 5 quarters of 20%+ revenue growth. We believe that Marico now has the critical mass which will allow it to compete against the larger players unlike a few years earlier. Rating: Upgrade to Outperformer from Neutral.  Target: Rs 180.

MF Global: Marico reported above estimated growth across segments. Kaya surprised positively with sharp revenue growth of 21% YoY, with same-store growth of 15% YoY. Main revenue drivers being several initiatives that Marico has undertaken since the past few quarters. Rating: Neutral. Target: Rs 150.

Religare: Marico reported strong Q3 results, which were ahead of our estimates driven by strong volume growth across businesses. It remains one of our top picks in the mid-cap FMCG space. Rating: Buy. Target: Rs 180.

At 11:20 hrs, Marico shares were trading at Rs 163.25, up 6.5% on NSE.

Nachiket Kelkar
nachiket.kelkar@network18online.com