Buy Marico; target of Rs 420: Sharekhan

Sharekhan's research repor on Marico

Revenue is expected to recover to mid-to-high single digits in Q2FY2021 from 3% in May-June (and an 11% decline in Q1FY2021). Core brands Parachute coconut oil have recovered and registered sales that is better than pre-COVID levels (in July-August); Saffola edible oil continues to get good demand and is expected to register an 8-12% volume growth. Conservative ad-spends and stringent cost-saving measures would help company save Rs. 150 crore in FY2021; consolidated OPM to remain at over 20%. Stock is trading at 36x its FY2022E earnings, which is at discount to large-cap stocks.

Outlook

We maintain our Buy recommendation on the stock with unchanged PT of Rs. 420.

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