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Marico’s 4Q earnings print was inline with expectations. Volume trajectory (+3%) was inline and similar to trends seen in recent quarters. Going ahead for FY25, management expects improvement in domestic volume growth – aided by uptick in Parachute volumes and Saffola edible oils, acceleration in growth businesses (Foods & D2C personal care), traction in international business and initiatives around expanding direct distribution. Moreover, price correction-led drag on topline is now behind with price hikes in Parachute, focus on value growth in VAHO & anniversarisation of price cuts in Saffola, which should drive double digit sales growth (ahead of vol growth). On the margin front, however, further expansion is unlikely with key commodities inching up, thereby resulting in low double digit EBITDA growth for FY25E. While valuations at c.42x FY25E are below historical averages which restricts downsides, pace of recovery in core domestic volumes & scale up in profitability of newer businesses could improve the earnings growth trajectory over medium term; hence, execution on these areas will be key for rerate from current levels, in our view.

* Inline quarter: Marico’s 4QFY24 consolidated revenue grew 1.7% to INR22.8bn, but EBITDA grew well by 12.5% to INR4.4bn. PAT growth was lower at 5.3% to INR3.2bn due to sharply lower other income. Domestic volumes grew 3%, broadly similar to trend seen in past 3 quarters.

* Domestic volumes inline; international business does relatively better: 1) Parachute sales grew by 2% entirely driven by volumes - helped by loose-to-branded conversion picking up pace with copra prices slowly firming up. Further, company has implemented a price hike of c.6% in April. 2) Saffola edible-oils’ volumes grew in mid-single digit as the base normalized and trade sentiment settled owing to price stability. Value-sales fell 16% impacted by steep price-corrections taken in recent past. With anniversarisation of price cuts, growth trajectory is expected to improve in coming quarters 3) VAHO performance remained muted with sales decline of 7%, albeit on high base. While premium-portfolio did relatively better, bottom-of-pyramid range remained impacted by weak rural demand and high competition. Going ahead, focus will be to drive value growth through midpremium portfolio while recovery in mass-end will be a function of competitive activity becoming more rationale in FY25. 4) Newer businesses’ performance - Foods grew by 24% (better compared to 18% seen in 3Q); premium personal care also saw healthy growth. Mgmt. is targeting c.20%+ CAGR in both these businesses. 5) International growth recovered and grew 10% CC – aided by recovery in key market of Bangladesh (+8% CC vs decline in 3Q) along with strong growth MENA and South Africa.

* Gross margin progression remains healthy: GM expanded 417bps yoy (+30bps qoq) to 51.6% (vs JMFe: 51%), led by lower input costs and favourable mix. Staff costs & other expenses grew by 8.8%/11.5% respectively. A&P spends grew by 7.6% overall but standalone A&P was up just 0.9% (function of cut-down in spends on Saffola, rationalised ATL on VAHO). Resultant scale-deleverage led to lower flowthrough to operating margin (+186bps to 19.4%). Other income was lower yoy - lower investment income due to higher dividend payout, adverse forex related hit & proceeds from land sales in base.

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SEBI Registration Number is INM000010361