Marico Q4FY23 results preview: Profit may grow in double digits, but sales may remain muted as India biz drags

Marico is expected to report a double-digit profit growth jumping as high as 14 per cent. Marico had posted a consolidated net profit of Rs 257 crore for the fourth quarter ended March 2022.

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As a result, the EPS estimates for FY24E/FY25E were lowered by 2%/2.2%, and the target price was revised to Rs 559.

FMCG major Marico is expected to report a moderate growth in net sales in the range of 1.7-3.6 per cent for the fiscal fourth quarter ended March 31, 2023 on the back of dip in India business. “Marico is likely to see muted sales growth of 1.7 per cent in Q4 mainly due to expected 2 per cent dip in India business and 14.9 per cent growth in international business. The decline in sales growth is mainly due to sharp price cuts taken in Parachute and Saffola edible oil categories in the last one year,” said ICICI Securities.

However, the FMCG giant is expected to report a double-digit profit growth jumping as high as 14 per cent. Marico had posted a consolidated net profit of Rs 257 crore for the fourth quarter ended March 2022. “Marico will continue to reap benefits of lower input prices and fast scale-up in some of the new ventures such as foods and digital brands,” said Sharekhan.

According to brokerage firms and analysts, gross margin is expected to record expansion of 90 bps on-year. “We model GM expansion of 90 bps YoY to 45.4 per cent. EBITDA  margin to expand by 40 bps YoY to 16.4 per cent. EBITDA to grow by 5 per cent YoY,” said HDFC Securities. Marico is due to announce its fourth quarter results on Friday, May 5.

Brokerage Estimates for Marico Q4 FY23 financial results (on-year comparisons):

Elara Capital
Net sales:
Rs 2,225 crore; up 3%
EBITDA: Rs 387.40 crore; up 12%
Recurring PAT: Rs 286.10 crore; up 14%

ICICI Securities
Rs 2,197.6 crore; up 1.7%
EBITDA: Rs 383 crore; up 10.7%
PAT: Rs 277.6 crore; up 8.1%

Kotak Institutional Equities
Net sales:
Rs 2,238 crore; up 3.6%
EBITDA: Rs 384.80 crore; up 11.2%
Reported PAT: Rs 260.90 crore; up 3.9%

HDFC Securities
Net sales:
Rs 2,220 crore; up 2.7%
EBITDA: Rs 360 crore; up 5.2%
APAT: Rs 260 crore; up 4.2%

Prabhudas Lilladher
Rs 2,205.10 crore; up 2%
EBITDA: Rs 398.10 crore; up 15.1%
Adjusted PAT: Rs 290.70 crore; up 13.1%

Net sales:
Rs 2,233 crore; up 3.3%
Operating margin: 17.5%
Adjusted PAT: Rs 278 crore; up 8.2%

Marico’s category-wise performance

Even as Marico is expected to witness volume growth in the hair oil category, it will still underperform given high penetration levels. Oral care category too is saturated. “Parachute oil would see mid-single digit volume growth and Saffola edible oil is likely to see volume de-growth due to high base. Value added hair oil (VAHO) is expected to witness double digit value growth in Q4,” said ICICI Securities, while maintaining that foods business, digital first brands and premium personal care businesses are growing at faster pace and maintaining strong growth momentum.

“Marico’s revenue growth is expected to be muted led by low single digit growth in Parachute and double digit decline in the Saffola portfolio, while value-added hair oil continued to be impacted by rural slowdown,” said Sharekhan. 

The FMCG company’s India business is expected to see a dip while the international business will witness growth. “We model 3.7 per cent YoY growth in the domestic FMCG business on the back of about 4.5 per cent YoY volume growth. For the international business, we model about 3.2 per cent YoY growth (versus 4.9 per cent in 3Q) as currency depreciation (Bangladesh) would weigh on reported revenues. We expect consolidated revenue growth of 3.6 per cent,” said Kotak Institutional Equities. Meanwhile, HDFC Securities expects 1 per cent YoY decline in domestic revenues and 15 per cent YoY growth in International revenue.

What to watch from Marico Q4FY23 results?

While Marico is one of the preferred picks in the FMCG segment along with others like Hindustan Unilever (HUL), ITC, Godrej Consumer Products (GCPL), etc., what are the key things to watch out for in the Q4FY23 results by Marico? Key monitorables are: commentary on copra prices, PCNO pricing strategy post copra deflation, updates on Saffola growth, commentary on CSD channel, NPD pipeline, and improvement in international business, said HDFC Securities. 

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First published on: 01-05-2023 at 18:11 IST