PL Stock Update - Marico 1Q24 Update: Consol Revenue Declines In Low Single Digit, Margins To Improve YoY/QoQ

- India Business saw low-single digit volume growth led by stable demand in urban while rural demand was unchanged. The company expects a pickup in 2Q24 given the sustained healthy trends in offtakes, market share and penetration across key franchises.

- Parachute Coconut Oil saw a minor volume decline during the quarter.

- Saffola Edible Oils saw low double-digit volume growth while Foods continues its strong growth run.

- Value Added Hair Oils to report flattish numbers as category remains impacted due to muted sentiments in rural & mass personal care categories.

- Premium Personal Care remained steady through the quarter.

- International business delivered high single digit constant currency growth with most geographies showing strength despite a volatile macro environment.

- Gross Margins to expand YoY/QoQ (1Q23 – 45.0%/4Q23 – 47.4%) helped by stable copra prices & sharp decline in edible oil prices, which will drive EBITDA margin expansion (1Q23 – 20.6%/4Q23 – 17.5%) on both YoY/QoQ basis.

PL View:

Urban markets and premium categories continue to see stable demand trends; recovery in rural markets is delayed by another quarter. 1Q saw a one-time trade impact in edible oils as a result of sharp fall in vegetable oil prices. With key input costs stable, the company has passed through benefits in edible oil to consumers to shore up volumes. Moderating inflation, hike in MSPs, easing liquidity pressures and forecast of a near-normal monsoon fuels hope of gradual rural demand recovery over FY24.

At CMP of Rs539, stock is trading at 41.2x on FY25 earnings. We have an ACCUMULATE rating on the stock with a target price of Rs550