Marico Shares Fall 5% After Lower Q2 Revenue and Volume Woes

Shares of Marico witnessed a 4 per cent drop to Rs 540.40 on Thursday after reporting a low-single-digit volume growth in its Q2 result.

In the second quarter of FY24, Marico reported single-digit year-on-year growth in domestic volumes. This growth was reflected in low-single-digit volume growth for Parachute Coconut Oil and Saffola Edible oils, as well as low-single-digit value growth for value-added hair oils. Much of this decline can be attributed to poor rural demand.

In a regulatory filing, Marico said, “During the quarter, demand trends largely mirrored the trends observed in the preceding quarter. Instances of rising food prices and below-normal rainfall distribution in some regions seemed to impede the anticipated recovery in rural demand. Consumption trends, particularly in rural areas, are expected to improve in H2 owing to retail inflation levels staying within the RBI’s target range, a hike in MSPs, a healthy sowing season, easing liquidity pressures, and government spending."

The company highlighted that its international business achieved robust double-digit growth when measured in constant currency, showcasing its ability to withstand the challenges of a volatile global operating landscape.

On an aggregate level, the company's revenue for Q2 FY24 showed a slight year-on-year decline. This was primarily attributed to price adjustments in significant domestic product lines made over the past year and unfavourable currency exchange rates in certain international markets. These currency fluctuations had a negative impact on the reported revenue growth in Indian rupees for the international segment.

“Consequently, we expect robust gross margin expansion on a year-on-year basis. While A&P spends were also significantly ramped up towards strategic brand building in its core and new categories, we expect healthy operating profit margin expansion leading to low double-digit operating profit growth," Marico added.

The company anticipates an upward trajectory in essential performance indicators during the second half of the fiscal year. This will be supported by a gradual increase in volume and revenue growth in the domestic market, as well as strong momentum in the international business segment. The company also reaffirmed its full-year margin guidance.

Motilal Oswal Financial Services has reaffirmed its 'Buy' rating for Marico, setting a target price of Rs 690 per share. This decision is based on the company's appealing valuations and its strong return on equity, indicating a positive outlook for the stock.

The stock ended at Rs 541.85, down more than 5.08 percent from its previous closing on the National Stock Exchange.