Marico Q3 Results Review - Performance Inline; Volume Recovery Sluggish: Motilal Oswal

Motilal Oswal Report

Marico Ltd. reported an in-line revenue growth with a marginal beat on Ebitda. Domestic revenue was flat owing to the impact of price cuts and an unchanged volume trend.

A sequential improvement was noted in urban areas, while the rural recovery was slow. However, the demand environment remained muted during the quarter.

Domestic revenue is likely to improve in the ensuing quarters owing to a gradual volume recovery and a low price cut impact. We model an 8% revenue compound annual growth rate during FY24-26 for the domestic business.

Gross margin hit a 23-quarter high of 51.3% in Q3 FY24, driven by softer input costs. Consequently, management raised its Ebitda margin guidance by ~250 basis point to 21% for FY24.

We model a 21-22% Ebitda margin during FY24-26, as we build a similar gross margin of 51% while assuming normalisation in Ad spending.

We value the stock based on 45 times December-25E earnings per share to arrive at our target price of Rs 625. We reiterate our 'Buy' rating on Marico. It remains a play on rural recovery.

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