Shares of Marico surged to a record high of ₹719.80 in Thursday's intra-day trading, climbing 4% despite a generally weak market. This impressive peak surpassed the previous record of ₹713.60 set just days earlier, on September 27, 2024. By mid-afternoon, Marico's shares had moderated slightly, trading at ₹696.50, still marking a 0.5% increase.
In stark contrast, the BSE Sensex experienced a substantial decline, dropping 2.1% or 1,781 points to 82,485. Over the past six months, Marico has notably outperformed the market with a 41% surge, significantly outpacing the 12% rise in the benchmark index. This robust performance underscores the strength of Marico's share market investment potential.
Q2 financial highlights and market dynamics
Marico's Q2 update revealed that consolidated revenue growth remained strong in the high single digits. This was supported by higher realisations in the domestic market, although offset somewhat by currency fluctuations in international markets. The company anticipates a shift into double-digit revenue growth in the latter half of the year, driven by sustained demand and strategic market positioning.
Rural areas lead demand, supporting share market investment
The company reported that rural demand continues to outpace urban, marking the third consecutive quarter of this trend. Marico's domestic business saw mid-single digit volume growth, showing an improvement over previous quarters. The international segment also performed well, with strong low teen constant currency growth. Each market, including Bangladesh and Vietnam, contributed positively, while the MENA (Middle East and North Africa) and South Africa regions maintained strong double-digit growth trajectories.
Operational challenges and forward-looking strategies
Despite the positive growth, Marico expects a moderation in gross margin year-over-year, due to the partial absorption of rising input costs. This strategic choice aims to expand the consumer base in the current economic climate, though it may lead to a slight delay in operating profit growth relative to revenue increases.
Key inputs such as copra and vegetable oils saw price hikes, influenced by global market changes and local import duties. However, crude oil derivatives remained stable, helping to mitigate some cost pressures.
Analysts' outlook on Marico's future
Following a less favourable update from competitor Dabur, Marico's performance has reassured investors and analysts alike. According to Nuvama Wealth Management, Marico is on track to achieve an 8% year-on-year consolidated revenue growth. The domestic sector is expected to register a 5% volume growth, while international operations could see a 13% constant currency growth.
Analysts remain optimistic about Marico's capacity to manage ongoing commodity inflation and geopolitical challenges, reinforcing the company's strong position for share market investment. They maintain a 'BUY' rating on Marico with a target price of ₹780 per share, suggesting continued confidence in Marico's market strategy and growth potential.
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