Motilal Oswal's research report on Marico
Marico’s (MRCO) 4QFY23 sales was in line with our estimates, while the beat on profitability was on account of higher ‘other income’ which included a one-time gain of INR280m from the sale of land. Adjusting for this, profitability was also in line with our estimates. Employee expenses were up YoY, due to additional costs related to acquisitions and the base was low due to reversals of some management incentives. The management indicated that both gross and EBITDA margin are expected to improve in the future along with increase in ad-spends. The outlook on gross and EBITDA margins is gradually improving. The overall consumption trends are indicating improvement and it is likely that the rural sector has bottomed out as the declining volume trend reversed. This should lead to an improvement in MRCO’s earnings growth prospects. Valuations are inexpensive at 43x/37.5x FY24/FY25 EPS. We reiterate our BUY rating on the stock.
Outlook
digital-first brands. If sustained, this can lead to higher multiples for MRCO as compared to the past. We reiterate our BUY rating on the stock with a TP of INR590 (based on 45xFY25E EPS).
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