Marico Limited (NSE: MARICO)

Few of my takeaways from Q1 FY25 of Marico

Marico appears cautiously optimistic about its near-term prospects. The company is seeing gradual improvement in demand trends, especially in rural areas. While pricing growth has flattened year-over-year, both home and personal care (HPC) and food segments are showing upticks. Premium segments are outpacing mass segments, and alternate channels are gaining prominence versus general trade. Marico expects volume trends to sustain their improving trajectory, aided by stable retail inflation and a progressing monsoon season.

𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐢𝐜 𝐁𝐥𝐮𝐞𝐩𝐫𝐢𝐧𝐭:

A key focus for Marico is Project SETU, aimed at expanding direct distribution reach. The initial phase has been launched in 6 states with promising results in urban and rural markets. This is expected to drive market share gains and enhance assortment levels. Marico is also aggressively pursuing portfolio diversification, aiming for foods and premium personal care to cross 25% of revenue by FY27. The recent deal with Kaya for exclusive rights to their personal care products is another strategic move to bolster the premium segment.

𝐌𝐚𝐫𝐤𝐞𝐭 𝐃𝐲𝐧𝐚𝐦𝐢𝐜𝐬:

Rural growth is outpacing urban growth, a reversal from previous trends. There’s a shift towards premium products and alternate sales channels. In value-added hair oils, there’s been some downtrading to lower-priced products. Foods and digital-first brands are showing robust growth. The company is also seeing encouraging trends in market share and penetration for key brands like Parachute.

𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐓𝐚𝐢𝐥𝐰𝐢𝐧𝐝𝐬:

Stable retail inflation and a good monsoon season are expected to boost rural demand. The growth of quick commerce presents opportunities, especially for food products. There’s increasing consumer preference for premium and digital-first brands.

𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐇𝐞𝐚𝐝𝐰𝐢𝐧𝐝𝐬:

Elevated food inflation and uneven rainfall distribution could impact rural demand. There’s intense competition in the value-added hair oils segment, especially at the lower end. The edible oils market remains volatile.

𝐈𝐧𝐯𝐞𝐬𝐭𝐨𝐫/𝐀𝐧𝐚𝐥𝐲𝐬𝐭 𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧𝐬:

Analysts expressed concern about the persistent underperformance of value-added hair oils. Management acknowledged the challenges but highlighted their strategy to focus on mid and premium segments where margins are better. There were also questions about the situation in Bangladesh, to which management cautioned it was too early to comment definitively but expressed confidence in their long-term prospects there.

𝐂𝐨𝐦𝐩𝐞𝐭𝐢𝐭𝐢𝐯𝐞 𝐋𝐚𝐧𝐝𝐬𝐜𝐚𝐩𝐞:

Marico is facing intense competition in value-added hair oils, especially in the mass segment. However, the company claims to be gaining or maintaining market share in over 90% of its business on a moving annual total (MAT) basis. In foods, Marico believes it’s outperforming many competitors.

𝐅𝐮𝐭𝐮𝐫𝐞 𝐏𝐫𝐨𝐣𝐞𝐜𝐭𝐢𝐨𝐧𝐬:

Marico is targeting double-digit revenue growth for FY25, driven by gradual uptick in domestic volumes and pricing growth. The company aims to maintain operating margins at FY24 levels despite some inflationary pressures.

𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐃𝐞𝐩𝐥𝐨𝐲𝐦𝐞𝐧𝐭:

Marico’s focus appears to be on organic growth and strategic collaborations (like the Kaya deal) rather than major acquisitions. The company is investing in distribution expansion and brand building for its growth categories.

𝐎𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐢𝐞𝐬 & 𝐑𝐢𝐬𝐤𝐬:

Key opportunities include the growing premium segment, expansion in foods, and the potential of digital-first brands. Risks include volatility in input costs, especially copra prices, and geopolitical uncertainties in markets like Bangladesh and Myanmar.

𝐂𝐨𝐧𝐬𝐮𝐦𝐞𝐫 𝐏𝐮𝐥𝐬𝐞:

Management indicated improving consumer sentiment, especially in rural areas. Premium products continue to see strong demand, suggesting resilient spending by higher-income consumers.

Disclaimer: This is a general analysis and does not constitute financial advice.