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Sustained momentum; margin to improve

Headquartered in Mumbai, Marico Limited is a leading Indian FMCG company with exports to over 25 countries. The company’s product portfolio includes brands such as Parachute, Saffola, and Livon. 

* In Q4FY24, consolidated revenue rose 1.7% YoY to Rs. 2,278cr (-5.9% QoQ), driven by steady domestic business and healthy growth in its international business. 

* EBITDA margin expanded 190bps YoY to 19.4%, despite an 8.0% YoY increase in ad spends.

* Strong brand recognition, a diverse range of products, extensive distribution channels and increased spending on advertising will support revenue growth, which in turn, will boost margins. Maintaining the positive outlook, we reiterate our BUY rating on the stock with a revised target price of Rs. 668 based on 46x FY26E adj. EPS.

Moderate revenue growth seen in Q4

Consolidated revenue was up 1.7% YoY to Rs. 2,278cr (-5.9% QoQ) in Q4FY24. The domestic business witnessed muted growth owing to correction in prices during the quarter whereas the international business grew 7.4% YoY, mainly led by recovery in Bangladesh. Domestic volumes grew in Q4, thereby helping the company record flattish (~1.7% YoY) growth in revenues, after having reported de-growth over the initial 3 quarters of FY24. The management anticipates consistent growth in domestic volume from Q1FY25, with healthy offtake as 75% of its business gained or maintained market share and 100% sustained or enhanced penetration.

Margins expands due to favourable input costs

Gross profit was up 10.6% YoY to Rs. 1,175cr with gross margin improving 420bps YoY, driven by positive product mix and lower input costs. EBITDA rose 12.5% YoY to Rs. 442cr with EBITDA margin expanding 190bps YoY to 19.4%, as the company maintained its emphasis on developing the brand of both established and new businesses through strategic efforts. Subsequently, PAT attributable to shareholders increased 5.3% YoY to Rs. 318cr.

Key quarter highlights

* The company's key portfolios experienced robust offtake with 75% maintaining or increasing market share and 100% maintaining or increasing penetration, all on a MAT basis. 

* The company plans to make investments worth Rs. 80-100 crore by 2027, for coverage and infrastructure enhancement as well as demand-generative initiatives, without incurring additional costs, by reallocating resources to optimise spends in the wholesale channel organised trade, thereby improving process efficiencies, reducing supply chain waste, and leveraging technology and analytics at a large scale.

Valuation

While key commodities are showing an upward trend, the management is confident in the company’s ability to maintain steady margins in the coming year through strategic pricing, favourable product mix, effective cost management, and procurement gains. In the long term, the company expects operating margin to gradually increase on account of leverage benefits, portfolio premiumisation and diversification across both domestic and international markets. Hence, maintaining a positive outlook, we reiterate our BUY rating on the stock with a revised target price of Rs. 668 based on 46x FY26E Adj. EPS.

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SEBI Registration Number: INH200000345