Marico rallies 6%, hits record high on healthy Sept quarter business update

Shares of Marico rallied nearly 6 per cent to hit a record high of Rs 590 on the BSE in Wednesday’s intra-day trade after the company said it has recorded revenue growth in the low twenties with strong double digit volume growth during the September 2021 quarter. The stock of the personal products company surpassed its previous high of Rs 587 touched on September 13, 2021.

During the quarter, the sector witnessed improved demand trends as mobility levels increased with reducing Covid infections and accelerated vaccination drives. Discretionary categories and out-of-home consumption also visibly picked up, Marico said in the July-September (Q2FY22) quarterly update.

Parachute, VAHO continued to witness high growth whereas Saffola's growth was muted due to high base and volatility in input prices. Foods, digital brand grew strongly in line with the company’s target, it said.

“The international business delivered double digit constant currency growth as we witnessed positive trends in all markets, except Vietnam. Vietnam, where a large part of our portfolio is of a discretionary nature, was in the grip of a severe Covid surge and stringent lockdown restrictions” Marico said.

Among key inputs, copra prices corrected further, crude remained firm, while edible oil prices oscillated at higher levels. Gross margin is expected to improve marginally from the previous quarter, but will be under pressure on a year-on-year basis due to much higher input costs over the last year, it added.

Operating margin is also expected to contract on a year-on-year basis given the arithmetic effect of significant pricing growth in the topline. As a result, the company expects modest bottom line growth in the quarter.

ICICI Securities believes the company would continue to witness robust volume growth in the medium term on the back of a tailwind of consumer shift towards healthier food. Moreover, contraction in gross margins resulted from high copra and other input costs in previous year, which will normalise in the next two quarters. We remain positive on foods, edible oil and digital brands business of the company, which would drive growth in the long run, the brokerage firm said in a note.