Marico posted muted Q2FY20 results with 1% YoY volume growth owing to subpar performance from its core segments. Parachute rigid packs volume declined 1% while value added hair oil (VAHO) portfolio volume growth was flat during the quarter. Saffola volume growth was muted at 1%. With 564 bps gross margin expansion, the company leveraged additional cash flows towards higher promotional spend. Despite 12% increase in A&P spend, operating margins expanded 270 bps to 19.3%. Net profit grew 17% YoY to Rs 253 crore. The company declared interim dividend of Rs 2.75 per share.
OutlookHowever, due to weakness in VAHO & Saffola categories and tepid domestic volume growth on the back of sluggish rural demand, we believe near term upside will remain capped. Hence, we downgrade our rating to HOLD with a revised target price of Rs 410/share.
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