Marico has come out with its third quarter update and it does not look good. They said personal care products haven’t done well. They were expecting some revival in demand to come by but that hasn’t happened.
The big data point that has come through in the update is that this time around India business as a whole has posted a marginal decline in volume growth and this after the company posted double-digit volume growth in Saffola, foods business and the ancillary businesses doing well. Therefore, it means their core business, which is parachute coconut oil, as well as the value added hair oils have seen a much larger decline. The company has asked all the analyst to expect marginal volume decline in the third quarter.
"Overall consumption trends during the quarter belied expectations of the beginning of a revival in sentiment which were built on the back of good monsoons and announcement of various government measures. Category growths across personal care remained under pressure, while foods and allied categories fared relatively better," said the company in the press release of their third quarter update.
However, EBITDA margins are expected to improve year-on-year on back of benign input costs, which should translate into a reasonable growth in the bottomline.
The company expects to see some green shoots of recovery in fourth quarter on back of focused marketing initiatives and pricing interventions taken in key portfolios that hit the shelves late in Q3.
The company's international business posted high single-digit constant currency growth with the Bangladesh business holding firm, while other geographies lacked fervour.
"They will continue to drive sustained profitable volume-led growth over the medium term, through its focus on strengthening the franchise in the core categories and driving the new engines of growth towards gaining critical mass," said the company in its press release.
The stock has corrected a fair bit from its 52 week high but is still trading at 41 times FY20 earnings. and management commentary definitely not looking good for the personal care space and India volume is a decline.