Motilal Oswal's research report on Marico
Led by domestic volume growth of 15% (its highest in 34 quarters), MRCO exceeded expectations on the sales front, a trend that is likely to continue for the next few quarters, with all key segments doing well and a weak base in the next couple of quarters. n Strong momentum in key segments, increased confidence, and new launches in foods led us to forecast ~12% revenue CAGR between FY21- FY23E, much higher than the 5% CAGR witnessed over FY15-20. At the same time, judicious price increases and expected reduction in commodity costs from current elevated levels would result in an improvement in operating margin, which were below expectations in 3QFY21, going forward. n While the stock has appreciated nearly 60% since our upgrade to Buy in Mar’20, valuations of 42x/36.2x FY22E/FY23E are inexpensive. The stock will re-rate further, if the company can elevate its EPS CAGR to 15-20% over the next few years. Maintain BUY.
Outlook
We target 43x FY23E EPS, which gives us a TP of INR490/share, implying a 19% upside. Maintain Buy.
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