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Marico shares rally 10% after Q4 results to see biggest one-day gain in 3 years but analysts are divided
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Even as Marico share price gained, brokerages were divided in their approach about FMCG major after Q4 results. While Citi gave a buy rating to the stock and even increased the target price, CLSA retained its sell call and expects downside in the stock.
Marico shares rallied almost 10% in early trade on May 7, a day after the fast-moving consumer goods (FMCG) company reported earnings for the January to March 2024 quarter, which met CNBC-TV18 poll expectations on most other parameters.
However, brokerages were divided in their approach to the Q4 results. While Citi gave a ‘buy’ rating to the stock and even increased the target price, CLSA retained its ‘sell’ call and expected a downside in the stock. Motilal Oswal, too, has a buy call on the FMCG stock.
Citi has set the target price at ₹610, implying a 15% upside in the share price from the previous close on May 6. The positive stance comes as it expects distribution initiatives and pricing action to drive growth. It also expects the trajectory to improve in FY25 due to volume growth acceleration and pricing-led growth. It noted that the company took a 6% price hike in Parachute in April 2024.
Citi believes Marico’s continued focus on new product development and innovations along with strong growth in international business should be accretive to overall growth.
| Brokerage | Rating | Target price |
| Citi | Buy | 610 |
| Motilal Oswal | Buy | 625 |
| CLSA | Sell | 460 |
Motilal Oswal expects the stock to rally 18% to ₹625 on the back of gradual improvement in volume trend. The analyst noted that the company has been sustaining double-digit EBITDA growth.
“The improvement in the rural market, market share gain, accelerated growth in Foods and Premium Personal Care, healthy growth in international business, and the normalisation of price cuts should help Marico deliver better revenue in FY25-26. To improve its distribution reach, Marico has also started “Project SETU,” which helps to drive growth in GT through a transformative expansion of its direct reach,” the brokerage said.
However, CLSA has set the target price at ₹460, meaning it sees a potential downside of 13%. According to the analyst, Q4 saw “subdued volume growth” and value growth whereas the margin improved.
It has pointed out that margin improvement continues but the question is if this is at the cost of growth. It also sees core categories continuing to face structural issues.
The brokerage commentary comes after homegrown FMCG major Marico reported a 4.9% rise in consolidated net profit to ₹320 crore in the fourth quarter ended March 2024. The company had posted a consolidated net profit of ₹305 crore in the same quarter of the previous fiscal year, Marico said in a regulatory filing.
The consolidated revenue from operations during the quarter under review stood at ₹2,278 crore as against ₹2,240 crore in the year-ago period. Total expenses in the fourth quarter were lower at ₹1,894 crore compared to ₹1,907 crore a year ago, the company said.
In Q4FY24, underlying volume growth was 3% in the domestic business and constant currency growth of 10% in the international business, it added.
“The domestic operating environment during the quarter was closely akin to the preceding quarters of this year. Across various FMCG categories, premium and urban-centric segments stayed ahead of rural and mass segments,” the company said.
Marico shares traded 6.7% higher at ₹565.90 on NSE at 10:28 am.
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