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Informist, Monday, Oct. 28, 2024

By Steffy Maria Paul

MUMBAI – Marico Ltd.'s earnings for Jul-Sept are expected to grow in high single digits on the back of growth in rural demand outpacing stable demand in urban areas. This is despite analysts expecting the Jul-Sept earnings for the fast-moving consumer goods company to take a hit from heavy rains and floods, which affected out-of-home consumption and consumer offtake.

Marico is expected to post a consolidated net profit of INR 3.83 billion for the September quarter, up 8.5% on year, according to the average of estimates from 12 brokerages. Sequentially, however, Marico's consolidated net profit is expected to fall 17.5%. The company is expected to post consolidated revenues of INR 26.75 billion during the quarter, up 8.0% on year, on the back of higher domestic realisations and modest growth in domestic sales volumes. Sequentially, the company's consolidated revenue is expected to rise only 1.2%.

The highest estimate of INR 4.05 billion for consolidated net profit was from Antique Stock Broking Ltd. and the lowest estimate of INR 3.67 billion was from HDFC Securities Ltd. Antique Stock Broking gave the highest estimate for consolidated revenue at INR 27.06 billion, while the lowest estimate was given by Anand Rathi and was INR 26.25 billion.

In its quarterly operational update, Marico had said the consolidated revenue growth of the company remained in high single digits during Jul-Sept, as higher realisations in the domestic business were offset by incremental currency headwinds in some overseas markets. Marico said its domestic business posted mid-single digit volume growth during the latest quarter. 

Parachute, its coconut oil brand, posted close to mid-single-digit volume growth and double-digit revenue growth in the quarter owing to price hikes at the start of the year and also at the end of the September quarter, both attributed to the rise in prices of copra, the basic raw material. However, the growth was subdued in its value-added hair oils vertical due to competitive headwinds in the base income segment, the company said, and added that it expects demand to improve gradually due to investments in marketing.

Saffola Oils posted low single-digit growth in its revenue for the latest quarter, though the pricing cycle for the brand turned slightly favourable after eight quarters, the company said. Additionally, Marico's foods and digital-first brands sustained their strong growth momentum during the quarter. 

Among key raw materials, while crude oil remained range-bound, copra prices rose more than internal forecasts and vegetable oil prices rose due to the recent hike in import duty. Antique Stock Broking expects Marico's profitability to be affected by the steep inflation in copra prices. An increase in the prices of edible oils and copra will play out in the coming quarter, brokerage firm Prabhudas Lilladher Pvt. Ltd. said in its earnings preview.

Nirmal Bang said Marico's consolidated revenue is expected to have grown due to modest mid single-digit growth in volume and higher realisations in the domestic business. The brokerage expects the company's domestic segment volume to grow 5%. Antique Stock Broking expects Marico to report high single-digit revenue in the domestic business, driven by double-digit growth in Parachute coconut oil and food and digital-first brands.

Marico said its international business delivered robust low teen constant currency growth during the quarter. However, brokerage firm Emkay Global expects Marico's international business to post 8% growth in the quarter, with most markets except Bangladesh sustaining their double-digit constant currency growth. Bangladesh business posted high-single digit growth, despite a challenging operating environment which has now largely stabilised, the company had said in the report. However, the brokerage expects the disruption in Bangladesh to have dragged down the growth in constant currency terms by 200-300 basis points. Operations in Vietnam also grew in high single digits, while the West Asia and North Africa region and South Africa maintained their double-digit growth trajectory, Marico said.

Marico is expected to report earnings before interest, tax, depreciation, and amortisation of INR 5.3 billion for the latest quarter, according to the average of estimates from 10 brokerages. The EBITDA is expected to be in the range of INR 5.1 billion to INR 5.4 billion.

Marico expects its gross margin to moderate on a year-on-year basis due to partial absorption of higher input costs, as the company prioritised expanding its consumer franchise. The company also expects a moderate lag in operating profit growth as compared to revenue growth on a year-on-year basis. Emkay Global expects the company's EBITDA margin to contract 30 bps on-year and its EBITDA to rise 6% on year. YES Securities expects Marico to report an EBITDA margin of 19.9% for the quarter and its EBITDA to grow 7.6% on year.

Marico said it expects its consolidated revenue to achieve double-digit growth in the second half of the year. The company expects to deliver double-digit revenue growth in 2024-25 (Apr-Mar). The company will focus on its revenue growth target for FY25 "while remaining watchful on the margin front," Marico had earlier said. For the rest of the financial year, analysts are optimistic about rural recovery, helped by good rainfall, festival demand, and government initiatives. 

The fast-moving consumer goods company will declare its Jul-Sept financial results Tuesday. On Monday, shares of Marico closed at INR 634 on the National Stock Exchange, down 1%. 

Following are the Jul-Sept earnings estimates of Marico based on reports from 12 brokerage houses:

End

Edited by Manisha Baxla

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