Buy Marico; target of Rs 600: ICICI Securities

ICICI Securities research report on Marico

Over the last few years, Nestle and Jyothy Labs delivered volume outperformance thanks to activating the sales growth vector effectively (numeric distribution expansion and improved line selling). Marico, with its new urban distribution (expansion) strategy and likely outperformance in D2C brands, has material potential to outperform in FY24-26E. Apart from this, it is focusing on improving distributor ROI, better credit terms, range, assortment, etc. Multiple initiatives such as reduction in channel inventory, discontinuation of inefficient trade schemes etc. are being undertaken. Within core categories a) PCNO’s volume growth trajectory is likely to improve with stability in copra prices, b) competitive intensity remains high in VAHO (we expect it to get better), and c) calibrated growth in Saffola edible oil with threshold margin.

Outlook

Our revenue estimates are unchanged, modelling revenue/EBITDA/PAT CAGR of 12/13/14 (%) over FY24-26E. Maintain BUY with a DCF-based unchanged target price of INR 600. At our target price, the stock will trade at 40x P/E multiple Mar’26E. Key downside risk is higher-than-expected inflation in copra prices.

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Marico - 08042024 - icici