Marico Ltd, in its Q4FY23 business update on Monday, predicted higher margins for the fourth quarter as consumer goods companies benefited from lower commodity prices and potential growth in rural demand.
As raw material costs declined, Marico that owns the well-known Parachute and Saffola oil brands, has predicted that the gross margin would increase and 'drive reasonable growth'.
In a recent report, Nuvama Wealth Management Ltd said that the Q4FY23 update is in line with its expectations.
"We expect the company’s consolidated revenue/Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) to grow 3%/11% year-on-year (YoY) (Q4FY22: 7.4%/8.5%)," said the brokerage.
Further, in line with the company's outlook, the brokerage expects the company's gross margin to remain stable moving forward with an upward bias.
The report stated that the India business saw a 5% YoY volume increase while the international business maintained its growth trajectory turning in mid-teens constant currency growth.
High single-digit volume increase in Parachute Coconut Oil was driven by stable consumer pricing. Saffola oils decreased year-over-year due to a large absolute volume base, while value-added hair oils (VAHO) experienced double-digit value growth. Even as foods continue to ramp up, premium personal care also experienced double-digit growth.
It's been five quarters since Marico last reported revenue increase in the double digits.
The brokerage firm projects that the gross margin should remain stable with an upward bias moving forward, while notable green shoots in rural areas are eagerly awaited. Fast-moving consumer goods (FMCG) demand will likely rebound more steadily as macroeconomic indicators strengthen, but the monsoon under El-Nino conditions will be crucial.
Political turmoil, currency depreciation and overall macroeconomic challenges – although receding – persist for the international business, believes the brokerage house.
"Marico aspires to deliver sustainable and profitable volume-led growth over the medium term by strengthening brand equity and scaling up new growth engines. We believe the company needs to get much more aggressive on innovation and push its products across channels. All in all, we maintain ‘hold’ with a target price of ₹572," said the brokerage.
