Consumer staples player Marico expects a double-digit revenue growth for the year, on improving rural demand and pricing actions. Brokerages reiterated their optimism on the Parachute Hair Oil maker, saying the recently posted business update for the September quarter was "better than expected" and that improvement was visible.
Marico has improved its realisation in the domestic business with a mid-single digit volume growth in September quarter. The firm's consolidated revenue growth remained in high single digits, as higher realisations in the domestic business was offset by incremental currency headwinds in some overseas markets.
At 9.15 am, Marico shares were up 2.6 percent on the NSE at Rs 711.9 each despite a sour market sentiment.
Marico said it expects gross margin to moderate on a year-on-year basis owing to partial absorption of higher input costs, as the firm prioritized expanding its consumer franchise in the current demand environment.
"Consequently, we expect a moderate lag in operating profit growth vis-à-vis revenue growth on a year-on-year basis," the business update added.
Also Read | Marico sees single-digit volume growth on rural demand; crude oil a 'potential uncertainty'
In the update, Marico shared that it took another round of price hikes at the end of the quarter, as copra prices have risen higher than the company’s expectation.
"We believe this bodes well for both volume and value growth in the coming quarters as competition from unorganised players will come down in an inflationary environment, which is a bigger concern currently," said Nomura.
Marico continues to report sequential improvement in its volume growth trajectory and is able to manage competition from unorganised players well. "We also see price hikes making a comeback in its core portfolio", added Nomura. As a result, the brokerage maintained its 'buy' rating, with a price target of Rs 780 per share.
Given the improving demand setting, thrust on enhancing distribution, emerging moderate inflation in core (coconut oil, edible oil), and healthy growth in the new engine, Emkay Global expects better growth and earnings delivery ahead. As a result, the brokerage bumped up its rating on Marico to 'add', from 'reduce'. The target price has also been adjusted to Rs 775 apiece, up from Rs 700 earlier.
International brokerage Morgan Stanley reiterated its equal-weight call, with its fair value assumption set at Rs 625. The sales growth in high single-digits for the quarter is in-line with the brokerage's estimate.
After a weak update from Dabur, Marico’s update reassured investors. The numbers are largely in line with our estimates, said Nuvama Institutional Equities, maintaining its 'buy' rating and price target of Rs 780 apiece.
Over the past 12 months, Marico shares have risen 20 percent, underperforming the consumer staples index Nifty FMCG, which has risen 28 percent during the same time period.
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