Marico Share Price Drops 4% Amidst Low Volume Growth Report

Marico Share Price Drops 4% Amidst Low Volume Growth Report
Marico Share Price Drops 4% Amidst Low Volume Growth Report
Marico Share Price Drops 4% Amidst Low Volume Growth Report
Marico Share Price Drops 4% Amidst Low Volume Growth Report

Marico Share Price Drops 4% Amidst Low Volume Growth Report

Marico Share Price Drops 4% Amidst Low Volume Growth Report

Marico Share Price Drops 4% Amidst Low Volume Growth Report

In the early hours of Thursday, Marico, a prominent player in the consumer goods industry, witnessed a significant dip in its share price, tumbling over 4%. This came in the wake of the company’s business update for the quarter ending in September 2023, which revealed low-single-digit volume growth. Marico shares fell sharply, plunging 4.22% to ₹546.40 per share on the BSE.

Challenges in Volume Growth

Marico reported that during the second quarter of FY24, domestic volumes experienced only modest growth when compared to the same period the previous year. Specifically, low-single-digit volume growth was observed in products like Parachute Coconut Oil and Saffola Edible Oils. The value-added hair oils segment also exhibited low single-digit growth.

The company attributed these challenges to various factors, including rising food prices and uneven rainfall patterns in certain regions, which hindered the expected recovery in rural demand. However, Marico remains optimistic about the future, anticipating an improvement in consumption trends, particularly in rural areas, during the second half of the fiscal year. This optimism is grounded in factors such as retail inflation remaining within the RBI’s target range, an increase in MSPs (Minimum Support Prices), a healthy sowing season, improved liquidity, and government spending.

International Business Resilience

In contrast to the domestic performance, Marico’s international business showcased double-digit growth in constant currency terms, demonstrating remarkable resilience in a volatile global operating environment.

Consolidated Performance

On a consolidated basis, Marico’s revenue in Q2FY24 saw a marginal decline compared to the previous year. This decline was attributed to pricing adjustments in key domestic portfolios over the past year and currency depreciation in certain overseas markets, impacting the reported INR growth in the international business.

Despite these challenges, Marico remains optimistic about its gross margin expansion on a year-on-year basis. The company also reported a significant increase in advertising and promotional expenses to strengthen its core and new categories.

Positive Outlook

Marico is optimistic about the second half of the fiscal year, expecting a gradual recovery in volume and topline growth in the domestic business, as well as healthy momentum in the international business. The company’s full-year margin guidance remains unchanged, and it aims to achieve sustainable and profitable volume-led growth over the medium term.

Analyst Perspective

Brokerage firm Motilal Oswal Financial Services has maintained a ‘Buy’ rating on Marico, with a target price of ₹690 per share. They cite attractive valuations and a healthy return on equity as reasons for their positive outlook. Marico has demonstrated consistent earnings growth and is expected to continue this trend, with an estimated CAGR of 9.1% over FY18-23 and similar growth projected over FY24-25E.

As of 10:00 am, Marico’s share price was trading 3.98% lower at ₹547.80 per share on the BSE.

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