Marico Limited - Quarterly Update: Q1 FY24

Demand trends in the sector remained stable during the quarter, although signs of improvement on a sequential basis were not clearly visible. While urban markets were steady, the anticipated pickup in rural demand remained elusive. Moderating headline inflation, hike in MSPs, easing liquidity pressures and forecast of a near-normal monsoon continue to fuel hopes of a gradual recovery in rural demand in the course of the year.

During the quarter, the performance of the domestic business was affected by significant trade destocking in Saffola Edible Oils in reaction to sharply falling vegetable oil prices and channel inventory adjustments in core portfolios triggered by the last leg of trade scheme rationalization 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 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.

While primary volume growth was marred by one-time internal and external factors mentioned above, we expect a visible pickup from the coming quarter given the sustained healthy trends in offtakes, market share and penetration across our key franchises.

The International business maintained its healthy growth momentum as it delivered high single-digit constant currency growth during the quarter, with most geographies exhibiting resilience in a volatile global operating environment.

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 ~30% YoY) during the quarter.

Among key inputs, copra prices stayed in a favourable zone and edible oil prices declined sharply, while crude derivatives remained firm. As a result, gross margin is expected to expand materially on a year-on-year as well as on a sequential basis. A&P spends continued to trend upwards in line with the Company's focus on 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.

The Company maintains its aspiration of delivering sustainable and profitable volume-led growth over the medium term, enabled by the strengthening brand equity of its core franchises and scale up of new engines of growth.

This update seeks to provide an overall summary of the operating performance and demand trends witnessed during the quarter ended 30th June, 2023. A detailed Information Update will follow this once the Board approves the financial results for Q1 FY24.

Shares of Marico Limited was last trading in BSE at Rs. 538.85 as compared to the previous close of Rs. 526.60. The total number of shares traded during the day was 57830 in over 2957 trades.

The stock hit an intraday high of Rs. 539.90 and intraday low of 523.25. The net turnover during the day was Rs. 30918730.00.

Source : Equity Bulls

Keywords

Marico INE196A01026 Q1FY24 BusinessUpdate