Marico dips 3% in firm market after December quarter business update

Shares of Marico dipped 3 per cent to Rs 498 on the BSE in Tuesday’s intra-day trade in an otherwise firm market after the personal products maker said that its revenue growth was in double digits in the October-December quarter (Q3), but its volume growth is expected to be flat.

At 01:13 pm; Marico was trading 2.6 per cent lower at Rs 500.90, as compared to a 0.63 per cent rise in the S&P BSE Sensex. The trading volumes on the counter more-than-doubled with a combined 186,000 shares having changed hands on the NSE and BSE. 

The December quarter was characterised by slowing consumption patterns, which affected the sector as a whole. This was mainly due to continuing inflation impacting overall disposable incomes as well as rising mobility unleashing some degree of pent-up demand for discretionary goods, services and out-of home consumption, Marico said in a quarterly update before announcing results.

The company saw consolidated revenue growth in low teens with some sluggishness in rural demand impacted by elevated inflation & high base. Parachute & VAHO grew at a normalised pace on two year CAGR basis.

Saffola edible oil saw volume dip due to high base & prevalent high edible oil prices during the quarter. Foods business saw 20 per cent plus growth. Gross margins continue to remain under pressure on YoY basis, however they have improved sequentially, while operating margins would remain flattish on a quarterly basis. 

The company said that among key inputs, copra prices were range bound for most of the quarter before witnessing correction towards the end of the quarter. Edible oil prices have also started softening, while crude oil prices remained firm.

We expect gross margin to improve sequentially, but remain lower on a year-on-year basis. Operating margin is expected to be near the levels of the preceding quarter, it said.

“Marico's Q3 operating numbers seems to be extending Q2 trend with edible oil on declining trend due to high inflation & foods business continue to grow at more than 20 per cent. We continue to maintain our positive stance in view on the normalisation of inflationary trend in the long run and strong growth in foods, digital only brands,” brokerage ICICI Securities said in a note.