Marico Q1 Preview: Volume growth in low single digits, rural recovery eyed

Marico is likely to report a revenue growth of 7.6 percent on-year at Rs 2,666 crore.

Parachute Oil maker Marico is gearing up to share its earnings report for the first quarter of the current fiscal year on August 5. The heatwave along with higher copra prices are expected to result in the FMCG major seeing high single-digit earnings.

According to a Moneycontrol poll of nine brokerages, Marico is likely to report revenue growth of 7.6 percent on-year at Rs 2,666 crore, up from 2,477 crores in the June quarter of the previous fiscal. Net profit is likely to come in at Rs 463 crore from Rs 427 crore in the corresponding quarter last year.

Earnings estimates of analysts polled by Moneycontrol are in a narrow range, so any positive or negative surprises may elicit a sharp reaction in the stock. The most optimistic estimate sees Marico’s net profit jumping over 12 percent in the year.

Marico is expected to witness a gradual uptick in demand led by domestic volume growth and higher realisations due to a favourable pricing cycle in key domestic portfolios, noted Prabhudas Lilladher.

Rural demand: According to brokerages, the improvement in the rural market will drive the domestic performance going ahead. However, for the quarter gone by, rural demand remained weak. Volume growth is expected to rise by about four percent.

Segment performance: Emkay Global expects three percent domestic business growth with 5 percent growth in Parachute, seeing a sales decline of 4 percent for a value-added hair oil (VAHO), and an 11 percent decline in edible oils.

Foods & Digital-First brands continue strong momentum whereas parachute coconut oil & saffola oils to deliver low to mid-single-digit volume growth. VAHO has had a soft start to the year while mid and premium segments performed relatively better, said Prabhudas Lilladher.

Margins: The gross margin is expected to expand between 100-110 basis points to around 51 percent. However, the higher brand investments and increased A&P spending will impact the EBITDA margin.

Analysts will closely monitor demand in metro areas and tier-3 towns. They will also pay attention to raw material prices and their effect on EBITDA margins, as well as the growing competitive pressure from unorganized players and new entrants in the hair oil segment.