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Sustained momentum across most brands but inflation headwinds to remain

Two key things which we liked (1) intent to drive growth in the premium hair oil portfolio and (2) prompt 2-3% price cut in Parachute oil with some softening in copra – we believe small players (typically) benefit if large players don’t lead price cuts during RM down cycle. 2Q volumes grew 8% YoY (on an underlying basis) on a good broadbased performance (except Saffola edible oil). Market share gains and sustained growth momentum in near-total portfolio is pleasing. While there was significant pressure on gross margins, we like its strategy of prioritising market share / volume growth.

Marico should also start seeing the benefits of distribution expansion in both urban (chemist channel) and rural. Healthy foods portfolio continues to trend well and is likely to provide another leg to growth (Rs8.5-10bn in FY24). Increased focus on D2C brands (targets Rs4.5-5bn by FY24) and focus on the premium personal care segment are other positives. A resilient international portfolio adds to potential outperformance in India. We stay believers – a conducive RM environment will unveil the results of improved execution. Maintain ADD.

* Broad-based revenue growth: Consolidated revenue / EBITDA / recurring PAT grew 22% / 9% / 8% YoY. Domestic revenue grew 24% YoY driven by 8% underlying volume growth YoY. This performance was led by (1) pick-up in demand of discretionary and out-of-home consumption categories and continued strength in the GT channel along with recovery in MT (DD volume growth in alternate channels). While rural continues to grow ahead of urban (on 2-year CAGR basis), management has highlighted a sequential slowdown.

* Segment performance: Parachute revenue grew 18% YoY with 7% YoY volume growth driven by penetration gains. Value added hair oils (VAHO) continued to report good performance with value growth of 16% YoY; management highlighted better traction in mid and premium segments. Saffola edible oils reported a slightly muted performance due to (1) trade de-stocking, (2) lower in-home consumption led by improved mobility and a (3) tough base. Nevertheless, the Saffola Foods franchise continued to perform well with value growth of 70% YoY – (1) oats franchise grew 36% YoY led by penetration gains, (2) Soya Chunks continue to grow well with 20% share in MT in Q2 and (3) scale-up of Saffola Oodles. It has also reintroduced its Chyawanprash in Sep-21. On premium personal care – (1) Livon Serums recorded double-digit growth over pre-Covid run rates, (2) male grooming is still below pre-Covid level and (3) Beardo is expected to exit at a run rate of Rs1 bn.

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