Marico Q3 Review - Volume Trajectory Getting Back On Track With Margin Situation Comfortable: Systematix

Systematix Reserach Report

Marico Ltd.'s Q3 FY23 results were inline with estimates. Overall revenue/Ebitda/profit after tax growth of 2.6%/5.8%/5.8% YoY respectively, led by 8% growth in the international business and 2% in the domestic business.

Company reported domestic volume growth of 4%. Gross margin expanded 120 bps YoY/ 130 bps QoQ to 44.9%, Ebitda margin expanded 60 bps YoY to 18.5% with better gross margins partially offset by higher employee costs, marketing spends and other operating spends. Key takeaways:

1. Marico expects to deliver mid single digit volume growth in Q4 FY23 led by a low base on rural growth and benefits of price cuts in Parachute and Saffola; it continues to target sustainable gross margin of 45%, 18-19% Ebitda margin in FY23 and above 19% in FY24, with sustained advertising and promotion spends offsetting cost rationalisation initiatives,

2. Parachute reported 2% volume growth and 6% decline, management expects to see positive volume going forward on the back of stable pricing,

3. Saffola franchise revenue grew 10% YoY and volume grew in low teens led by reduction in price,

4. Value-added hair oil revenue declined 3%, with low volumes and 80 bps share gain,

5. Saffola Foods business grew 31% YoY led by strong growth in Oats franchise (20% growth),

6. serums continued their double-digit growth, and digital first brands now close to annual run rate of Rs 2.5 billion revenue, and

7. international business grew 8% YoY, led by 13% growth in Vietnam, South Africa and Middle East and North Africa each, Bangladesh business grew 9% YoY.

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