300% Dividend Payment Soon: FMCG Stock Below Rs 550 Is An Attractive Bet, 25% Upside Likely Ahead

Consumer products company, Marico has declared its financial results for September 2023 quarter where it posted 17.3% YoY growth in consolidated net profit to Rs 360 crore, however, revenue declined marginally to Rs 2,476 crore. After the Q2 results, brokerages have given hold to buy recommendations on Marico shares. The stock will be in focus for its 300% dividend payout ahead.

While Prabhudas Lilladher has suggested a hold on Marico shares with a slight trim in target price to Rs 556, other brokerages like Centrum and Religare have given 'Buy' recommendations with target prices of Rs 600 and Rs 666 respectively. From the current price level, the stock is expected to rally up to 25%.

On BSE, Marico shares stood at Rs 534.85 apiece after market hours of Wednesday, marginally down from its previous close. The market cap stood over Rs 69,188 crore.

As per the regulatory filing, Marico declared an interim dividend of Rs 3 per share or 300% having a face value of Re 1 each for the current financial year. The company fixed November 7th as the record date for determining eligible shareholders, while the payout is said to be on or before Wednesday, November 29, 2023. The ex-dividend date is set for November 7.

Analysts at Prabhudas Lilladher in their research note said, "We are cutting FY24/FY25 EPS estimates by 0.9/6.7% given tepid consumer demand in rural India and local competition in core categories. 2Q24 results were in line with 3% volume growth and 17.3% PAT growth driven by 280bps margin expansion. MRCO expects Parachute volume growth to recover as the expected increase in copra prices will help gain some share from unorganized players post-3Q. VAHO will continue to remain under pressure given heightened competition from not only unorganized players but some large players also."

Further, PL analysts note added, "Innovation funnel remains strong as MRCO has launched hair and Care Shampoo, Parachute Advanced oil with superfoods, Saffola peanut butter and Mayonnaise, Livon Curl cream, Style pro and Parachute Body wash. Strong innovations, success in foods and B2C acquisitions will enable the company to achieve the targeted 20% of sales from these in FY24. We believe EBITDA margins will peak out in FY24 which will curtail Sales/PAT CAGR to 9.2%/10.7% over FY23-26."

Accordingly, the analysts said, "We value MRCO at 43xSept25 EPS and assign a target price of Rs556 (Rs581 earlier based on 43xJune'25 EPS). Although MRCO has corrected 11% from its peak, it lacks near-term triggers. Retain Hold."

On the other hand, brokerages like Religare Broking and Centrum have recommended buying Marico shares.

In its research note, Centrum said, "Marico's Sep-Q earnings were c.2-3% better vs what we were expecting. Topline performance was mostly inline. GPM recovery was again much better and drove the beat in earnings. Volume trajectory remained soft, though - a sector-wide issue at present, and was due to rural weakness given erratic rainfall patterns in the country, increased competitive activities from smaller players, and inventories being lowered in the general trade channel."

Further, Centrum's note added, "Management sounded hopeful of a gradual improvement from H2 and given a benign costs outlook, has also upped its FY24 margin guidance once again - now looking at a potential gross margin gain of 350-400bps in FY24E (vs 250-300bps in July, 200-250bps in May) and EBITDA margin expansion of >200bps (vs >100bps at the start of the year). Newer businesses are growing well and there is a sharp focus on profitability here. We expect the stock to do better here onwards - price-corrections-led drag on the topline would be lower going forward, which, along with continued RM-cost benefits, provides some comfort on earnings visibility. Maintain BUY."

Centrum sets a target price of Rs 600 on Marico.

Meanwhile, Religare's note said, "We believe management strategy of focusing on growing its foods and premium digital brands along with maintaining a share of core would bode well for growth. Besides, easing raw material prices along with its plan of spending on advertisement for brand building and at the same time maintaining margin will continue to strengthen its operating performance. Going ahead, pickup in rural sentiments will be a key for further improvement in growth. On the financial front, we expect its Revenue/EBITDA/PAT to grow by 11.5%/18.7%/18.9% CAGR over FY23 -25E and continue to maintain our Buy rating and a target price of Rs 666."

Marico is one of India's leading consumer products companies, in the global beauty and wellness space. In FY 2022-23, Marico recorded a turnover of about USD 1.2 billion through its products sold in India and chosen markets in Asia and Africa.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.