Marico's Q1 profit margin gets a boost from softer copra prices

Marico, popular for its Parachute coconut hair oil brand, has registered a 6 per cent domestic volume growth in the last quarter. Comparing the volume growth in the base June 2018 quarter was relatively high at 12 per cent, the current year’s performance doesn’t look that bad.

This volume performance in the June quarter was aided by good growth in Parachute rigid packs (blue bottles), which saw volume market share gain. It’s nothing to sneeze at particularly when copra, which is a key raw material, is in a downcycle. Whereas, Saffola edible oil’s performance continues to be in trouble.

The prices of copra have seen a sharp fall of 25 per cent year-on-year during the June quarter. This has helped the company to benefit on the profit margin front.

Meanwhile, copra prices fell sharply by 25% year-on-year during the June quarter. This has helped the company benefit on the profit margin front. On a consolidated basis, Marico’s EBITDA (earnings before interest, taxes, depreciation and amortization) margin for the June quarter expanded 323 basis points year-on-year to 21.3 per cent. This is despite a sharp increase in advertisement and sales promotion expenses.

According to the Marico, there might be an increase in copra prices in the second half of the fiscal year.

For now, when demand woes are clouding sentiments for FMCG stocks, Marico seems to be enjoying a comfortable spot. At present, the stock trades are at about 43 times FY20 estimated earnings, not as expensive as some of its peers.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.