Marico Shares Jump Over 10% After Q4 Results; Will The Rally Continue?
Marico unveils Q4 FY24 results with a 4.9% increase in profits and a modest rise in revenue from operations. Delve into the details and explore future prospects.
Shares of Marico surged over 10% on Tuesday to close at Rs 583.50 on the National Stock Exchange (NSE), following the announcement of its Q4 results for FY24. The FMCG major reported a consolidated net profit of Rs 320 crore in the March quarter, marking a 4.9% increase from the previous year.
The revenue from operations for Q4FY24 climbed to Rs 2,278 crore, showing a modest year-on-year (YoY) growth of 1.7%. This growth was underpinned by a 3% increase in domestic volume and a notable 10% growth in international business on a constant currency basis.
Despite a slight miss, the Earnings Before Interest, Tax, Depreciation, and Amortization (EBIDTA) rose by 12.5% YoY to Rs 442 crore. Additionally, the EBITDA margin expanded significantly by 190 basis points to reach 19.4%.
Market Response and Outlook
While the growth figures were relatively tepid, they aligned with street expectations. The optimism among analysts primarily stems from a shift in the demand landscape and Marico's strategic focus on increasing volume and market share. The management remains positive about a growth resurgence in FY25, anticipating double-digit revenue growth driven by robust volume increases.
5 Key Takeaways from Marico's Concall
- Urban vs. Rural Market Dynamics
The urban market showed resilience, while the rural sectors lagged slightly. However, towards the end of Q4, there were emerging signs of recovery in rural demand.
- Anticipated Growth in the Mass Segment
From the second half of FY25, the mass segment is expected to witness growth, fuelled by reduced inflation, increased government spending, and favourable monsoon conditions.
- Strategic Moves and Market Share Gains
From the beginning of Q1 FY25, an uptick in volume growth is anticipated, particularly with rural demand gaining momentum. Marico's flagship brand, Parachute, is also on a recovery path, achieving a 60 basis point gain in market share. The company implemented a 6% price hike on Parachute in April 2024 due to rising copra prices, which should support further volume and market share increases.
- Robust Performance in the Food Sector
The food segment, particularly soya chunks and honey, outperformed with a 22% growth. The segment is projected to maintain a 20% Compound Annual Growth Rate (CAGR) over the medium term.
- Expansion Plans and Long-Term Projections
The SETU project remains on track, aiming to expand direct reach to 1.5 million outlets by FY27. This expansion will be self-funded (with an expenditure of Rs 800-1000 million) and is expected to positively impact margins in the long term.
Conclusion
Improvements in the rural market, increased market share, rapid expansion in the food and premium personal care sectors, robust international business growth, and stabilization of price reductions are poised to boost Marico's revenues in FY25-26E. Nonetheless, it is important to monitor how the company addresses challenges associated with the commodity price cycle and improve domestic sales growth.
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