Shares of Marico fell about 4 percent in intraday trade on BSE on May 6 a day after the company released its March quarter scorecard.
The stock eventually ended 3.30 percent lower at ₹503.25 on BSE.
The company's consolidated net profit for the March quarter of FY22 (Q4FY22) came at ₹257 crore against ₹227 crore in the corresponding quarter last year. Revenue from operations for the said quarter came ar ₹2,161 crore against ₹2,012 crore in Q4FY21.
Performance on expected lines
Brokerage firms highlighted Marico's consolidated Q4FY22 operating performance was in line with the commentary given in their quarterly update.
Marcio's result showed a decline in FMCG volume which was on expected lines because of high inflation and weak demand scenario.
"The FMCG sector continued to witness subdued consumption patterns, primarily on account of weak rural sentiments and persistent inflation in global commodities. Inflation, accompanied by price hikes implemented across FMCG categories, affected consumer spending and eventually resulted in a decline in FMCG volume," brokerage firm Nirmal Bang pointed out.
The brokerage firm highlighted that Marico's dividend payout remains high at more than 80 percent and return ratios are is also expected to improve over the next few years.
Another brokerage firm Motilal Oswal Financial Services said Marico's Q4FY22 result was in line its estimates. Motilal Oswal said the company's earnings growth prospects are healthy at nearly 18 percent CAGR over FY22–24E and ROEs are healthy at nearly 40 percent levels.
"The much-needed diversification is picking up momentum in foods and digital-first brands. If sustained, this could lead to higher multiples for Marico compared to the past. For now, its earnings growth provides a safe haven in an uncertain environment for staples peers," said Motilal Oswal.
Brokerage firm YES Securities highlighted that the key positives for the company for the March quarter were market share gains in Parachute rigids despite a category decline of 4 percent and strong performance from the International business. Saffola edible oil growth normalized from a high base while recovery momentum continued in premium personal care portfolio and foods business achieved the aspiration of ₹500 crore turnover in FY22, YES Securities highlighted.
"We get comfort from the solid execution and aggressive brand investment from the company which should support medium‐term growth aspirations. The second half of FY23 is when the earnings trajectory should start picking up well. We find management’s focus on expanding Foods portfolio and digital-first brands, aggressive expansion in rural stockist network and eCom/MT channels encouraging and hence continue to remain positive on the stock believing that the company should deliver one of the highest earnings growth in the staples pack," said YES Securities.
Some brokerages have expressed concerns also. For example, brokerage firm JM Financial said it continues to like Marico, but the recent strong run in the stock leaves lesser room for upside.
Kotak Institutional Equities has trim Marico's revenue and margin forecasts to factor in weaker-than-estimated demand and incremental inflationary pressure.
Buy, sell or hold?
The majority of brokerages have 'buy' calls on the stock even as they highlight the pressure of inflation and weak rural demand.
Brokerage firm Motilal Oswal Financial Services has a 'buy' call on the stock with a target price of ₹600.
JM Financial has a 'buy' call on the stock with a target price of ₹560, slightly above the previous target price of ₹550.
YES Securities has a 'buy' call on the stock with a target price of ₹603.
Nirmal Bang has maintained an 'accumulate' call on the stock with a target price of ₹580.
Kotak Institutional Equities has a 'reduce' call on the stock with a target price of ₹505.
Market sentiment on the stock is ‘neutral’, according to a MintGenie poll and an average of 37 analysts has a ‘buy’ call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies and not of MintGenie.