Marico shares zoom over 9% on Q4 earnings beat. More upside left?

NEW DELHI: Shares of FMCG major Marico, which owns brands like Saffola and Parachute, today rallied up to 9.3% to day's high at Rs 539.50 as investors were left pleasantly surprised with its Q4 earnings report card.

While Marico's March quarter consolidated net profit grew 20.3% on-year, revenues were up marginally by 4%. However, margins surprised by expanding 153 basis points to 17.5%.

"Slightly better than expected revenues and margin drove the 4Q earnings beat, despite a hike in advertising spend. India volume growth saw a pick-up and so did international revenue. Margin outlook is strong, led by benign input prices, which should allow investments into high growth portfolios," Jefferies said.

The global brokerage has upgraded the stock to ‘buy’ and raised its target price by Rs 50 to Rs 600.

Should you buy, sell or hold Marico after Q4 results? Here's what brokerages say:

Jefferies
After a muted 6% EPS growth in FY22/FY23, Marico is likely to see an acceleration in FY24, led by recovery in core categories (Parachute/ VAHO), traction in new ventures (foods etc.), continued growth in international and a low base. With RM prices cooling off, margin outlook is also better with mgmt expecting >200bps GM expansion and >100bps EBITDA margin expansion, along with higher ad spend. We increase our FY24-25E EPS by ~3%. Upgrade to ‘buy’ (from ‘hold’) with a target price of Rs600 (vs. Rs550 earlier)

Nuvama Institutional Equities
Marico faces intense competition across categories. Furthermore, challenges from inflationary pressures and rainfall shortage in populous states remain key variables to watch out for. In sum, we are cutting FY24E/FY25E EPS by 2%/2.2% to arrive at a target price of Rs 559 (earlier INR572). Retain ‘HOLD/SU’.

HDFC Securities
We build in ~10% revenue CAGR over FY23-25E and an EBITDA margin of ~20% for FY24-25. We prefer Marico, given its thrust to drive growth in its core brands, initiatives to drive D2C/foods, and the margin upcycle. We value the stock at 42x on Mar-25E EPS to derive a target price of Rs 565. Maintain add.

Motilal Oswal
The outlook on gross and EBITDA margins is gradually improving. The overall consumption trends are indicating improvement and it is likely that the rural sector has bottomed out as the declining volume trend reversed. This should lead to an improvement in Marico’s earnings growth prospects. Valuations are inexpensive at 43x/37.5x FY24/FY25 EPS. We reiterate our

BUY rating on the stock.

Kotak Institutional Equities
We tweak FY2024-25E estimates, roll over and revise DCF-based FV to Rs 525, implying 40X June 2025E P/E. The stock has bottomed out, but we do not see meaningful upside or earnings upgrades as yet.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)