A Bet On Consumption Recovery

Apart from recovery in traditional segments, its focus on premium and under-penetrated categories will be a key driver

- Parvatha Vardhini C

Domestic consumption has been on a rough patch over the past few months and, like most FMCG players, Marico has seen a slowdown in off-take. But the worst may be over for the company.

A 10 per cent fall in price last year makes this a good entry point for investors. The stock currently trades at 37 times its trailing 12-month earnings, at a reasonable discount to Hindustan Unilever (67 times) and Dabur (57 times).

Spurring domestic volumes

Marico derives 75-80 per cent of its revenue from its domestic FMCG business. In line with the consumption slowdown seen in the Indian economy, Marico’s domestic volume growth has been on a steady decline in the last four quarters. Domestic volumes, which grew at 8 per cent in the quarter-ended March 2019, slowed to 6 per cent in the June quarter and 1 per cent in the September quarter. It has further weakened, moving marginally into the negative territory, in the three-months-ended December 2019 quarter, according to management commentary ahead of the third quarter results.

However, domestic volumes are likely to bounce back beginning the fourth quarter of FY20.