Marico gains 4%; hits new high in weak market on stable volume growth in Q2

In Dabur India’s Q2FY25 business update, the company said it had experienced disproportionately higher growth in modern trade (MT), e-commerce, and quick commerce in the last few quarters, which led to high inventory levels for its general trade (GT) channel and affected distributor return on investment (ROI).

This has prompted the company to make a strategic decision to correct distributor inventory at the GT level to improve its ROI. It is expected to impact the temporary decline in revenue.

“While demand trends were witnessing some improvement, heavy rain and floods across parts of the country impacted out-of-home consumption and consumer offtake in Q2FY25. Due to this, we saw some impact on our business especially in the beverage category,” the company said.

While this correction has happened in the Indian business, the international business is expected to register “double-digit constant currency growth in top line”, it said, adding that the ‘Badshah Masala’ business continued to perform well by growing in double digits during the quarter.

With the streamlining of the GT channel and strong growth momentum in alternative channels, the management expects the revenue growth to recover starting from October 2024.

Dabur, a leading fast-moving consumer goods (FMCG) company, is scheduled to announce its Q2FY25 results on October 30, 2024.

According to analysts at Nuvama Wealth Management, the stock could be under pressure in the near term. While downstocking and pipeline correction in FMCG are not rare, the extent of impact on Dabur seems surprising. Q3 shall be slightly better than Q2. However, consistency in growth is critical for a re-rating. The cola price war remains a key monitorable for the beverages business, the brokerage firm said, with a ‘neutral’ rating on the stock.

Meanwhile, Marico bucked the trend and hit a record high of Rs 719.80, gaining 4 per cent on the BSE in intraday trade on stable volume growth in Q2FY25. The stock ended nearly 1 per cent higher at Rs 698.55, as compared to a 2.1 per cent decline in the BSE Sensex. In the last six months, the stock has outperformed the market by surging 41 per cent against a nearly 12 per cent rise in the benchmark index.

Marico in its Q2 quarterly update said that consolidated revenue growth remained in the high single digits, as higher realisations in the domestic business were offset by incremental currency headwinds in some overseas markets. The company expects consolidated revenue growth to move into double digits in the second half of the year and expects to deliver double-digit revenue growth this year.

The sector witnessed stable demand trends with rural outperforming urban year-on-year for the third quarter in a row. In the given context, the domestic business posted mid-single-digit volume growth, exhibiting improvement on a sequential basis, Marico said.

After a weak update from Dabur, Marico’s update reassured investors. The numbers are largely in line with our estimates, said analysts at Nuvama Wealth Management. Value Added Hair Oils (VAHO) and Saffola Oils remain muted.

The brokerage firm said Marico’s consolidated revenue growth will likely be 8 per cent Y-o-Y. Domestic business shall clock 5 per cent volume growth Y-o-Y. The International business shall deliver 13 per cent constant currency (CC) growth. Bangladesh shall post high-single-digit growth amid a turbulent operating environment. Copra experienced inflation higher than expected. Parachute shall see mid-single-digit volume and double-digit revenue growth. Foods and Digital-first brands performed better than estimates, analysts said in the company update and retained a ‘buy’ rating on the stock with a target price of Rs 780 per share.

First Published: Oct 03 2024 | 3:14 PM IST