Marico gains 4%; hits new high in weak market on stable volume growth in Q2

Dabur's Q3 likely to be better than Q2, Marico expected to deliver double-digit revenue growth this year

Shares of Marico hit a record high of Rs 719.80, gaining 4 per cent on the BSE in Thursday’s intra-day trade in an otherwise weak market on stable volume growth in July to September quarter (Q2FY25). The stock surpassed its previous high of Rs 713.60 touched on September 27, 2024.

At 02:18 pm; Marico had erased its intra-day gain and was trading 0.5 per cent higher at Rs 696.50 on the BSE. In comparison, the BSE Sensex tanked 2.1 per cent or 1,781 points at 82,485. In the last six months, the stock has outperformed the market by surging 41 per cent, as against a near 12 per cent rise in the benchmark index.

Marico in its Q2 quarterly update said that consolidated revenue growth remained in high single digits, as higher realisations in the domestic business was offset by incremental currency headwinds in some overseas markets. The company expects consolidated revenue growth to move into double digits in the second half of the year and expects to deliver double-digit revenue growth in this year.

The sector witnessed stable demand trends with rural outperforming urban on a year-on-year basis for the third quarter in a row. In the given context, the domestic business posted mid-single digit volume growth, exhibiting improvement on a sequential basis, Marico said.

The management said the International business delivered robust low teen constant currency (CC) growth with each of the markets contributing positively. Bangladesh posted high-single digit growth, demonstrating the strong resilience of the company’s business model amidst a challenging operating environment which has now largely stabilized. Vietnam also grew in high single digits, while MENA (Middle East and North Africa) and South Africa maintained their robust double digit growth trajectory.

However, Marico expects gross margin to moderate on a year-on-year basis owing to partial absorption of higher input costs, as the Company prioritized expanding its consumer franchise in the current demand environment. Consequently, the company expects a moderate lag in operating profit growth vis-à-vis revenue growth on a year-on-year basis.

Among key inputs, copra prices rose ahead of internal forecasts and the recent import duty hike led to vegetable oil prices moving higher towards the end of the quarter. Crude oil derivatives, however, remained rangebound.

On outlook, Marico said the company remains focused on achieving double-digit revenue growth while managing margin pressures from commodity inflation and geopolitical uncertainties.

After a weak update from Dabur, Marico’s update reassured investors. The numbers are largely in line with our estimates, said analysts at Nuvama Wealth Management. Value Added Hair Oils (VAHO) and Saffola Oils remain muted.

The brokerage firm said Marico’s consolidated revenue growth is likely to be 8 per cent year-on-year (YoY). Domestic business shall clock 5 per cent volume growth YoY. The International business shall deliver 13 per cent CC growth. Bangladesh shall post high-single digit growth amid a turbulent operating environment. Copra experienced inflation higher than expectations. Parachute shall see mid-single digit volume and double-digit revenue growth. Foods and Digital-first brands performed better than estimates; analysts said in company update and retain ‘BUY’ rating on the stock with a target price of Rs 780 per share.