Marico hits new high, gains 10% thus far in August on strong Q1 results

Shares of Marico rose 2.6 per cent intra-day to hit an all-time-high of Rs 402 on the BSE on Monday, gaining 10 per cent thus far in August, after it reported a strong set of numbers for April-June quarter (Q1FY20). In comparison, the benchmark S&P BSE Sensex has gained 0.46 per cent in the past 11 trading days.

In Q1FY20, Marico delivered strong earnings' growth on the back of resilient volume growth, amidst moderation in the overall demand environment in the domestic market. The consolidated revenue from operations grew 7 per cent year-on-year (YoY) to Rs 2,166 crore, with an underlying domestic volume growth of 6 per cent.

The company's consolidated net profit jumped 26 per cent to Rs 320 crore on YoY basis. Further, EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin expanded 324 basis points (bps) to 21.3 per cent during the quarter, which was mainly attributable to a benign input cost environment, the financials of the company show.

During the quarter, the average market price of the domestic copra was down 25 per cent YoY. Other key input prices for the India business- rice bran oil, liquid paraffin (LLP) and HDPE, too, were down 12 per cent, 1 per cent and 21 per cent, respectively on a YoY basis.

"The company aims for a volume growth of 8-10 per cent and a topline growth of 13-15 per cent, subject to inflation, over the medium term. It, however, expects volume and value growth in FY20 to be in high single digits," the management said in a statement.

Analysts at HDFC Securities remain constructive on Marico and believe its performance will be superior relative to its peers in FY20 on the back of the copra deflationary cycle and plans to capitalise by building its futuristic portfolio.

“With 25 per cent decline in copra prices, the company has been leveraging that benefit in increasing its A&P spend to propel growth in struggling and newer categories. We believe foods, male grooming and skin care categories would be the future growth driver for the company. Moreover, benign raw material cost would continue to help the company maintain elevated margins,” analysts at ICICI Securities said in a report. The brokerage firm maintains ‘buy’ recommendation on the stock with a target price of Rs 425.

At 12:25 pm, Marico was quoting at a per cent higher at Rs 398 on the BSE, as compared to a 0.83 per cent gain in the S&P BSE Sensex. A combined 1.7 million shares changed hands on the counter on the NSE and BSE, till the time of writing this report.