Marico rallies 20% in one month; check key factors behind the sharp up move

With improved macroeconomic indicators, enhanced government spending, a favorable monsoon forecast and moderate retail inflation, the upcoming year holds promise for a gradual uptick in consumption.

Marico share price today: Shares of Marico hit a new high of Rs 615.60, up 2 per cent on the BSE in Tuesday’s intra-day trade in otherwise subdued market. In past one month, the stock of fast moving consumer goods (FMCG) company Marico has outperformed the market by surging 20 per cent. In comparison, the S&P BSE Sensex was down 0.06 per cent at 75,346 at 12:30 pm. In past one month, the benchmark index and the S&P BSE FMCG index are up 1 per cent.

The last financial year 2023-24 (FY24) has been a mixed year with sectoral volume growth consolidating on a low base, the company said, while commodity and consumer pricing trended lower.

"While premium and discretionary segments within FMCG continued to witness positive traction, demand trends in mass consumption categories belied expectations of a visible pickup owing to the slower-than-anticipated recovery in rural and urban sentiment, subdued general trade and resurgence of regional and unorganized competition," Marico said.

In FY24, the premium and urban-centric segments stayed ahead of the rural and mass segments. The rural sentiment, too, saw revival toward the quarter end. The management is optimistic about growth revival in FY25 and expects double-digit revenue growth, driven by healthy volume growth.

With improved macroeconomic indicators, enhanced government spending, a favorable monsoon forecast, moderate retail inflation and reduced volatility in commodity prices, the upcoming year holds promise for a gradual uptick in consumption sentiment across both urban and rural, Marico said in Q4FY24 earnings call.

Domestic volume growth

Marico expects domestic volume growth to trend up consistently from Q1FY25. “We have continued to witness healthy offtakes with 75 per cent of the business either gaining or maintaining market share and 100 per cent sustaining or enhancing penetration,” the company said.

"The company is targeting low double-digit earnings growth in the near-to-medium term with gradual improvement in the volume growth of core portfolio, a 20 per cent plus growth in the new businesses and consistent improvement in the profitability in the coming years. Portfolio diversification to premium foods and personal care products will improve the revenue growth trajectory in long run," brokerage firm Sharekhan said in a result update note. It retains a 'Buy' rating on the stock with a revised price target of Rs 620.

Outlook on margins

While key commodities are showing an upward trend, the management is confident in the company’s ability to maintain steady margins in the coming year through strategic pricing, favourable product mix, effective cost management, and procurement gains, analysts said.

"In the long-term, Marico expects operating margin to gradually increase on account of leverage benefits, portfolio premiumisation and diversification across both domestic and international markets," wrote analysts at Geojit Financial Services in a recent note.

Hence, maintaining a positive outlook, Geojit Financial Services has reiterated its 'Buy' rating on the stock with a revised target price of Rs 668 based on 46x FY26E adjusted earnings per share (EPS).