Marico stock rises over 3% after Q3 business update

Shares of Indian consumer products maker Marico rallied over 3% to Rs 523.5 in Thursday's intraday trade even as its revenue growth slowed down in the third quarter and hit its operating profit, due to a muted recovery in rural demand amid elevated inflation.

Marico, known for its Parachute hair oil brand, estimated that its consolidated revenue grew in the low single digits in the third quarter.

"In view of the lower revenue growth, we expect a modest growth in operating profit," Marico said in a statement.

However, Marico expects gross and operating margins to improve in the quarter as key input costs and consumer prices across key franchises saw some stability.

While the urban and premium categories maintained a steady pace of growth, "recovery in rural demand was not as discernible as retail inflation stayed at elevated levels," Marico said.

Sales volume of Parachute hair oil rose in low single digits after a "visible recovery" in December, the company said. Parachute's sales fell 3% in the previous quarter. Still, the value-added hair oils segment had a subdued quarter, it added.

Marico said its Saffola edible oil franchise grew in double digits in value terms.

At 10.52 am, the scrip was trading 2.7% higher at Rs 520 over its last day's closing price of Rs 506.25 apiece. The stock has surged only 6% in the last six months, while it has risen only 4% in the last one year.

Global brokerage firm JP Morgan maintained an overweight rating on Marico with a target price of Rs 580.

According to the brokerage, there is an improving narrative on demand. “Margin expansion is likely to support stock performance in the future,” it said.

“India business reported mid-single-digit volume growth. The company did not see a significant rural recovery in Q3, while the urban and premium categories maintained their steady growth momentum,” the note added.

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