Lower Raw Material Costs Help Marico Outperform FMCG Peers
Co’s margins jumped 250 bps to 18.9% in Dec quarter, analysts expect trend to continue; good monsoon to give positive trigger on revenue front
enjoy the benefit of lower input costs in the next few quarters.
Yet, improvement in margins is only half the story. Consumer demand remains subdued and given the steeper competition from unconventional FMCG players such as Patanjali, revenue growth will be a challenge. The growth in the next few quarters will dependonhowquicklythediscretionary consumer demand picks up.
A good monsoon, as forecast by the Meteorological Department, may well provide the first positive trigger on the revenue front. It will stimulate demand from rural consumers. This together with lower commodity prices augurs well for the company. At the Wednesday’s closing price of ₹ 251.3, the stock was available at the trailing price-earnings (P/E) multiple of 46.5. This compares with the P/E of 47-50 over the past 12 months. The stock is expected to remain an outlier till overall volume growth in the FMCG sector picks up triggering buying interest in other stocks.