Marico gains on strong Q4 show led by Parachute, analysts eye diversification

The company’s flagship product Parachute’s volumes edged up 9 percent year-on-year in Q4, with a market share gain of 70 basis points. On a 4-year CAGR basis, Parachute volume growth stands at 6 percent

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Marico shares gained over 8 percent in the early trade on May 8 after the homegrown FMCG player managed to beat analysts’ expectations on topline and bottomline performance for March quarter.

At 10:45 am, the stock was quoting at Rs 531.90 on the NSE, higher by over 7.7 percent. Trading volumes at 5.6 million, were almost 4x higher than the 20-day average volume of 1.5 million shares.

The company‘s consolidated net profit jumped 18.6 percent to Rs 305 crore for the Jan-March 2023 quarter against Rs 257 crore in the year-ago period. Excluding the one-time gain of Rs 28 crore on sale of land, profit was still above estimates of Rs 284 crore.

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The company’s flagship product Parachute’s volumes edged up 9 percent year-on-year in Q4, with a market share gain of 70 basis points.  On a 4-year CAGR (compounded annual growth rate) basis, Parachute volume growth stands at 6 percent.

“The brand will continue to focus on penetration gains through micro-marketing interventions in relevant markets,” said the company in a press release.

On the operating front, margins expanded to 17.5 percent from 16 percent in the year-ago period. Domestic business volumes grew by 5 percent YoY in the quarter, as per analysts.

The good show on margins has led Jefferies to upgrade the stock to a Buy with revised target price of Rs 660 from Rs 550 earlier. “Margin outlook is strong due to favorable input prices, allowing for investments in high-growth portfolios,” it said.

Foreign broking firm JPMorgan has given an overweight call on Marico with a target of Rs 585 per share. The firm is positive about Marico’s improving revenue and margin outlook after a good Q4. “Marico’s portfolio diversification journey is largely on track, and valuations are supportive at current levels,” it said.

Marico’s foods segment saw 18 percent growth in Q4 to close near the Rs 600 crore revenue mark in FY23. Saffola Oats continued to anchor the growth as it maintained its leadership position in the Oats category, the company said.

Thus, Motilal Oswal, too, is bullish on the company’s much-needed diversification gathering momentum. “If sustained, this can lead to higher multiples for Marico as compared to the past,” it said. It has a Buy rating on the stock with a target of Rs 590.

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