Marico share price opened lower on July 6, after the company said in its Q1 FY24 update that consolidated revenue declined in low-single digits on a year-on-year basis.
During the quarter, Marico's domestic business was affected by significant trade destocking in Saffola edible oils in reaction to sharply falling vegetable oil prices.
"The business was also affected by channel inventory adjustments in core portfolios triggered by the last leg of trade scheme rationalisation for correction of the historical Q1 revenue skew," the company said in an exchange filing.
At 9:40 am, the Marico stock was quoting at Rs 534 on the NSE, down 0.84 percent from the previous close.
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While topline is expected to dip 2-3 percent, analysts are cheering management commentary on margin expansion. Marico has said that its gross margin is expected to expand materially on a year-on-year as well as on a sequential basis.
This is because copra (dried coconut, essential for its hair oil business) prices stayed in a favourable zone and edible oil prices declined sharply, while crude derivatives remained firm.
Macquarie has assigned an "outperform" rating to Marico's stock with a target price of Rs 620 a share. "Commentary on double-digit bottomline growth is better than expected. We upgrade earnings per share (EPS) estimates for FY24, FY25, and FY26 by 4 percent on back of this," its analysts said.
Morgan Stanley, too, has "overweight" rating with a target price of Rs 611 a share. Management expects volume pickup in Q2, which is a positive, the foreign broking firm said.
For the quarter ended June 2023, Marico's domestic volumes grew in low-single digits, with a minor volume drop in Parachute coconut oil, low double-digit volume growth in Saffola oils and flattish quarter for value added hair oils.
Among the newer portfolios, foods continued its strong run, while premium personal care (including digital-first portfolio) remained steady, the company said.
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