A weak January-March quarter update has left Marico investors quite upset

• The shares of Marico fell over 4% on Wednesday as the FMCG company’s revenue grew in single digit in the last quarter.
• The company noted that the consumption trends remained subdued during the last quarter.
• Marico also informed the stock exchange that it had to opt for a price hike across FMCG categories.

The shares of Marico fell over 4% on Wednesday as the fast-moving consumer goods (FMCG) company’s revenue grew in single digit in the last quarter. The company's shares closed at ₹521.6 on April 6.

Marico currently sits at a market capitalisation of ₹67,431 crore, or $8.9 billion.

The 42-year-old company is yet to report its financial statement for the January to March quarter, or Q4, of fiscal year 2022. However, it did offer some not-so-strong update on April 5.

The company, in the filings with the stock exchange, noted that the consumption trends remained subdued during the last quarter majorly due to weak rural sentiments and inflation in global commodities due to aggravating geo-political issues between Russia and Ukraine.

Marico also informed the stock exchange that it had to opt for price hike across FMCG categories in order to cope up with the current inflation levels, which hurt the consumer wallets across rural and urban areas.

“While companies affected price hikes across FMCG categories to cope with the cost-push, persistent inflation continued to hurt consumer wallets across rural and urban [areas]. As a result, FMCG volumes declined in the Jan-Feb’22 period on a year-on-year basis (per Nielsen),” Marico said in a statement.

Despite the subdued update, Nomura has maintained a ‘buy’ call on the shares of Marico with a target price of ₹665. The global financial services company is of the view that Marico is a strong beneficiary of a “resilient core” and significant “future growth vectors”.

Nomura has estimated consolidated revenue growth of 7.4 percent year-on-year (YoY) in Q4 of FY2022. Meanwhile, profit growth is estimated to be at 5% YoY and EBITDA (earnings before interest, taxes, depreciation, and amortisation) at 9%.

Meanwhile, Macquarie expects a broadly flat profit and marginal volume growth for Marico in India. The brokerage firm has given it an “outperform” rating on the stock market with a target price of ₹600. CLSA, on the other hand, believes that Marico’s current valuation looks balanced. Therefore, it has given an “underperform” call on Marico with a target price of ₹530.

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