Hold Marico; target of Rs 380: Emkay Global Financial

Emkay Global Financial's report on Marico

Marico’s Q2 sales performance was in line with our estimates with 9% sales growth, driven by 11% domestic volume increase. EBITDA/APAT grew 10%/15%. Parachute/VAHO/Saffola grew 10%/4%/20%, while the international business grew 12%. Core portfolio growth has improved and new innovation pace also looks good though it is yet to see meaningful success. Saffola growth may moderate from Q4 but continued recovery in Parachute/VAHO and low comparables should lead to further improvement in growth. Management plans to absorb the impact of higher commodity prices in the near term, as it expects prices to soften by Q4. Though this may affect gross margins temporarily, Marico expects overall margin impact to be low on account of its increased cost-saving targets.

Outlook

We increase FY21-23E EPS by 3%, factoring in lower ETR. At 36x FY22E and 32x FY23E EPS, the stock offers only limited upside. We maintain Hold rating with a revised TP of Rs380 (Rs350 earlier), based on 35x Dec-22E EPS.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More