Marico stock dips 4% on profit booking post Q1 results; Bangladesh unrest

Despite of today's decline, in the past six months, Marico has outperformed the market by surging 25%, againsts 10% rise in BSE Sensex and 14% rally in BSE FMCG index.

Shares of Marico dipped 4 per cent to Rs 642.55 on the BSE in Tuesday’s intra-day trade on profit booking a day after the company reported better-than-expected net profit of Rs 464 crore for June 2024 quarter (Q1FY25). The company which owns the Saffola and Parachute packaged oil brands had posted profit of Rs 427 crore in the year ago period.

Meanwhile, Bangladesh is experiencing a turbulent political situation as Sheikh Hasina has stepped down amid escalating protests. The country is a major component of Marico's international business, which contributes 44 per cent revenue share in international business in FY24. However, the company expects the revenue share of Bangladesh to moderate gradually to about 40 per cent by FY27.

Despite today’s decline, in the past six months, Marico has outperformed the market by surging 25 per cent. In comparison, the BSE Sensex and BSE FMCG index gained 10 per cent and 14 per cent, respectively.

In Q1FY25, Marico’s earnings before interest, taxes, depreciation, and amortization (EBITDA) margin improved 50 bps to 23.7 per cent as against 23.2 per cent in Q1FY24.  Revenue grew 7 per cent year-on-year at Rs 2,643 crore, with underlying volume growth of 4 per cent in the domestic business and constant currency growth of 10 per cent in the international business.

After a positive start to the year, Marico expects sectoral volume trends to sustain the improving trajectory, aided by stable retail inflation, a healthily progressing monsoon season and Government’s budgetary allocations towards boosting the rural economy. However, elevated food inflation and spatial distribution of rainfall will be key factors to be monitored, the company said.

The management expects consolidated revenue growth to trend upwards during the course of the year, on the back of an improving trajectory in domestic volume growth, a favorable pricing cycle in key domestic portfolios and healthy growth momentum in the International business. The company aims to deliver revenue-led earnings growth in FY25.

The improvement in rural markets, market share gains, accelerated growth in Foods and Premium Personal Care, healthy growth in international business, and the normalization of price cuts should help Marico to deliver a much better revenue print in FY25-26, according to Motilal Oswal Financial Services (MOFSL).

The brokerage firm reiterates BUY rating on the stock. Although it has rallied 35 per cent in the last three months, MOFSL continues to believe that rich valuation will sustain given earnings acceleration.

“We continue to like Marico within our home and personal care (HPC) coverage; with outlook on core portfolio improving and increased thrust on portfolio diversification (which is encouraging), we expect premium valuations to sustain. Any sharp corrections should be used as opportunity to add in the name,” analysts at JM Financial Institutional Securities said in the result update.