Marico Rides High on Strong Rural Demand and Strategic Price Hikes

Marico, a player in consumer staples, anticipates double-digit revenue growth this year because to improved pricing and rural demand. Brokers maintained their positive outlook on Parachute Hair Oil, stating that the company's recently released September quarter business report was "better than expected" and that there had been a noticeable increase.

With a mid-single digit volume rise in the September quarter, Marico has increased its realisation in the domestic sector. Because further currency headwinds in several outside markets offset improved realisations in the domestic business, the company's consolidated revenue growth stayed in the high single digits.

Despite a negative market attitude, Marico shares were up 2.6 % at ₹711.9 per on the NSE at 9.15 am. Due to the partial absorption of increasing input prices, Marico stated that it anticipates its gross margin to moderate year over year. The company has emphasized growing its consumer franchise in the present demand climate.

"Consequently, we expect a moderate lag in operating profit growth vis-à-vis revenue growth on a year-on-year basis," the company report stated. Marico stated in the report that the business had to implement an additional round of price increases at the conclusion of the quarter due to higher-than-expected copra pricing.

"We believe this bodes well for both volume and value growth in the coming quarters as competition from unorganised players will come down in an inflationary environment, which is a bigger concern currently," Nomura stated. Marico is able to effectively handle competition from unorganised companies and is reporting sequential improvements in its volume growth trajectory. "We also see price hikes making a comeback in its core portfolio" , Nomura stated. Consequently, the firm upheld its 'buy' recommendation, citing a target price of ₹780 per share.

Broker’s Overview

Emkay Global anticipates stronger growth and earnings delivery in the near future due to the strengthening demand environment, emphasis on expanding distribution, emerging mild inflation in the core (coconut oil, edible oil), and robust development in the new engine. The brokerage upgraded its Marico rating from "reduce" to "add" as a consequence. The target price has also been raised to ₹775 apiece, up from ₹700 originally.

Global brokerage Morgan Stanley restated its equal-weight recommendation, assuming a fair value of ₹625. The brokerage's projection is consistent with the high single-digit rise in sales for the quarter. Investors were reassured by Marico's statement following a lacklustre one from Dabur. 

According to Nuvama Institutional Equities, the figures are generally consistent with their projections, and they have maintained their 'buy' rating and price objective of ₹780 per share.

Marico shares have increased by 20% over the last 12 months, behind the consumer staples index Nifty FMCG, which has increased by 28% over the same period.

To Summarize

Marico, a leading player in the consumer staples sector, anticipates double-digit revenue growth this year due to improved pricing and strong rural demand. The company’s September quarter report exceeded expectations, showcasing mid-single digit volume growth in the domestic market and high single-digit consolidated revenue growth despite international headwinds. Marico shares rose by 2.6%, with brokers maintaining a positive outlook. Nomura and Nuvama Institutional Equities reaffirmed their 'buy' recommendations with price targets of ₹780, while Emkay Global upgraded Marico's rating, citing strong demand, distribution expansion, and emerging price stability in key inputs.