Stock in Action – Marico

Stock of the day – Marico

Highlights

1- Marico's financial performance has shown growth over the past year.

2- Marico share price indicates a bullish trend in the market after decent Q1 updates.

3- Marico's quarterly earnings report shows a dip in net profit for the March quarter.

4- Marico's recent gains from ₹600 to ₹655 including today’s gain.

5- For Marico's stock analyst forecasts positive trends for the future.

6- Marico is trading at ₹649, showing a 5.47% increase as of 11:16 am on NSE.

7- Nifty FMCG index has risen in the last month, while Marico is flat -0.41% including today’s gain.

8- Marico's stock performance has been good, gaining 23.13% over the past year.

9- NIFTY gain comparison reveals that Marico's growth of 23.13% outperformed NIFTY's 25.44% gain in the same period.

10- ICICI Securities has retained its buy rating on Marico, setting a target price of ₹600.

Marico Share is in Buzz?

Shares of Marico jumped over 6 % on July 8 after the company released positive updates for the April June quarter. The company's revenue grew by a high single digit in Q1 of FY25 and the management expects this upward trend to continue throughout the year. Additionally, the gross margin is expected to improve due to a favorable product mix.

In its domestic market, Marico saw a modest increase in volume growth. Parachute coconut oil experienced low single digit growth but the company expects this to improve as demand increases. Saffola Oils had mid single digit growth while Value Added Hair Oils had a slower start due to competition.

Morgan Stanley believes Marico's revenue and volume growth will improve driven by higher prices. Nuvama expects Marico's revenue, EBITDA and volumes to grow by 8%, 11 %, and 3.5% respectively in Q1 FY25. They predict sales growth of around 9 % for Parachute and 7 % for Saffola driven by both volume and price increases while VAHO is expected to remain flat.

International segment is expected to perform well with an 11% growth in constant currency terms. Marico's gross and EBITDA margins are projected to increase by 222 basis points and 63 basis points respectively reaching 52.2% and 23.8%.

Why Should I Invest in Marico Shares?

Investing in Marico shares requires a thorough understanding of its financial health, market position & risks. Here's a short analysis to help you make an informed decision.

Marico’s Financial Performance

Marico's net profit has shown a consistent upward trend over the past few years. In March 2021, net profit was ₹1,199 crore which increased to ₹1,255 crore in March 2022. This growth continued with the net profit reaching ₹1,322 crore in March 2023 and further rising to ₹1,502 crore in March 2024. Correspondingly, Earnings Per Share (EPS) also saw an increase, from ₹9.08 in March 2021 to ₹9.48 in March 2022, ₹10.07 in March 2023 and ₹11.44 in March 2024. This consistent growth in both net profit and EPS reflects Marico's strong financial performance over these years.

Analyst Recommendations

ICICI Securities reaffirmed its buy rating on Marico, setting a target price of ₹600. Morgan Stanley believes that Marico's revenue and volume growth will improve, driven by higher prices. Additionally, Nuvama expects Marico's revenue, EBITDA and volumes to grow by 8 %, 11 %, and 3.5 % respectively in Q1 FY25. For the Parachute and Saffola brands, Nuvama projects sales growth of around 9 percent and 7 percent, respectively, driven by a balanced mix of volume and price increases. However, they expect Value Added Hair Oils (VAHO) to remain flat.

Technical Chart

Technical chart of Marico indicates a trend reversal on the weekly timeframe. Stock reached a peak of around ₹668 in June 2024, but since then, it has been consolidating around ₹600. After hitting a low of ₹600, stock has reversed and following today's Q1 update, it is approaching its previous high. If Marico's stock breaks and sustains above ₹668 investors could see more upside. Marico has already surpassed its 2021 high and is trying to sustain above this level. Investors should closely watch the stock with ₹600 acting as strong support on the downside.

Conclusion

Investing in Marico shares presents opportunities for traders and investors, supported by its positive market performance and positive outlook from brokerages and Q1 updates. The company's strong financial performance, strong ROE and ROCE highlight reasons to consider investment. However, prospective investors should conduct thorough evaluations of the company's financial statements and technical as well as monitor its performance relative to the Nifty FMCG index before making investment decisions.