Overall weakness in all key segments (Parachute coconut oil, Value added hair oils, and Saffola) is underwhelming and expected to persist for one more quarter, in our view. However, by H2, the impact of price deflation on the overall portfolio is likely to subside, leading to potential positive revenue growth. Unlike its peers, Marico does not show clear signs of rural recovery sequentially, with general trade (GT) continuing to underperform, experiencing a revenue decline of approximately 6%. Nevertheless, we appreciate the company’s continued execution-driven outperformance in the food and premium personal care segments, which may likely contribute to a 20% revenue share of the domestic business in FY24. The fact that Marico has been able to sustain or gain market share in 85% of its portfolio is comforting.
Additionally, the international business has maintained a healthy revenue growth trajectory. The strong operating profit margins are attributed to input cost deflation. Furthermore, Marico’s foray into the plant-based nutraceutical space through a strategic investment, holding a 33% stake in ‘Plix,’ is considered positive. In light of these factors, we maintain an ‘ADD’ recommendation.
Consolidated revenue declined by 3% y-o-y but Ebitda grew by 9% y-o-y, reaching 5.7 billion. Domestic revenue also saw a decline of 5% y-o-y, with subdued volume growth at 3% y-o-y compared to 5% y-o-y in 4QFY23. The decline was mainly attributed to (i) price corrections made in previous quarters and pricing drops in Saffola Oil in the current quarter, (ii) channel de-stocking by the trade in Saffola oils due to significant corrections in vegetable oil prices, and (iii) trade scheme rationalisation in core categories to address historical 1Q revenue skew. General trade experienced a mid-single-digit decline, while modern trade (MT) and E-commerce showed double-digit growth, accounting for approximately 29% of total revenue. The management noted a continued sequential recovery in the FMCG sector, primarily driven by urban areas, while rural areas consolidated on a lower base.
International business: strong performance across regions
Revenue grew 9% y-o-y in constant currency terms driven by broad-based performance across geographies – Bangladesh (+9% in CC), South East Asia (+5% in CC) and continued performance in MENA (+15% in CC) and South Africa (+37% in CC).