Accumulate Marico; target of Rs 407: Arihant Capital

Arihant Capital 's research report on Marico

Marico reported a strong set of numbers in Q2FY21 with 11% YoY domestic volume growth led by continued robust growth in Saffola. Revenue from operation increased by 8.7% YoY to Rs 19,890 mn with domestic, international business seeing growth of 8%, 12%YoYrespectively.With improving consumer sentiment and supply chain operations at near pre-COVID levels, majority of the company’s portfolio came back to healthy growth on YoY basis. Input costs witnessed inflationary trend amid rise in copra and rice bran prices, which have increased by 11% and 26% respectively. However the impact was contained through aggressive cost saving initiatives. EBIDTA increased by 10.2% YoY to Rs 3890 mn. Saving in Advertisement and overhead expenses by 127 bps and 56 bps YOY respectively helped the EBIDTA margin to be stable despite rise in Input cost. EBIDTA margin expanded by 26 bps YoY to 19.3% in Q2FY21. PAT increased by 7% YOY to Rs 2640mn on the back of healthy revenue growth and operating profit.

Outlook

We value the stock at a target P/E of 40x to its FY22E EPS, which yields a target price of Rs 407 per share. We maintain our Accumulate rating on the stock.

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