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

The Economic Times - - Smart -

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.

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