Marico Ltd. share price target

Marico's Q1FY21 earnings were above our estimates on all fronts. Consolidated revenue stood at Rs 19,250 mn, above our estimate of Rs 18,470 mn, registering a growth of +28.68% QoQ/-11.13% YoY. Reported EBITDA grew by +65.60% QoQ/+0.86% YoY to Rs 4,670 mn, above our estimate of Rs 3,694 mn, while EBITDA margin expanded by 541bps QoQ/288bps YoY, aggressive cost control and rationalization of A&P; spends in few discretionary portfolios on a lower topline, will lead to expansion of operating margins compared to the corresponding quarter last year. PAT for...

impacted by COVID-19 among the sectors, b) a significant share of migrant labor has returned to villages, potentially resulting in the lower end of consumption shifting to rural, c) the forecast for monsoon is better than the long-term average, and d) MGNREGA wages have been raised. relatively discretionary categories (35% of the portfolio) such as male styling, premium hair nourishment, and premium hair oil in the Value-Added Hair Oil (VAHO) to witness impact on sales in the near term. falling wage rates, b) low food inflation / high non-food inflation, and c) low However company believes that, going ahead, rural should perform better than the sectors, b) a significant share of migrant labor has returned to villages, potentially resulting in the lower end of consumption shifting to rural, c) the forecast for monsoon is better than the long-term average, and d) MGNREGA In the Coconut Oil category, 35% of the market is unorganized (loose form).

We recommend a BUY on MARICO with a Target Price of Rs 333, an upside of 6% from CMP of Rs. 317 and Stop Loss Rs 307.

With one of the biggest challenges faced by the economy in the last decade, income levels of bottom of the pyramid are likely to be adversely impacted. In turn, this is expected to result in cutting down of discretionary spends. However, consumer focus would clearly shift towards food, health & hygiene. An indication of that has been seen in strong Q4 Saffola sales. During the lockdown period, the robust growth in Saffola can be attributed to (1) heightened media spend & in-store promotion by the company in January-February, (2) stocking up by consumers & retailers in last two weeks...

Valuations appear attractive at 32x FY22E EPS, below 3/5/10-year average for a business that has better earnings visibility Overall volume declined 4% YoY while EBITDA decreased 4.1% YoY to INR2.8b (v/s est. In the medium term, MRCO aims to revive growth in this franchise by adopting a three-pronged strategy, which includes (a) aggressive participation at the pyramids bottom on the back of its leadership position, (b) accelerating growth in the mid segment through pricing and brand renovation, and (c) aiming to gain market share in the premium segments (where the company is relatively under- represented) through innovations that offer higher order sensorial/functional refined edible oils grew 25% in volume terms in 4QFY20 on robust base (+9% in FY20). Mid-single-digit primary terms would have been witnessed if not for the COVID- volumes had recovered before COVID-19 v/s the previous 90-95% of MRCOs portfolio gained market share.

Green shoots until early March obstructed by Covid-19 disruption Marico's Q4FY20 revenue and EBITDA came below our estimate but APAT was in line. India business reported 3% volume de-growth while overall volume de-growth was 4%....

Marico's Q4 performance was relatively better than peers, led by strong growth in Saffola. Consolidated sales declined 7% - marginally lower than estimates, whereas EBITDA and PBT fell 3-4% but still better than expectations on lower ad spends (down 18%). India business dropped 8% and as per management, growth would have been flat, excluding disruptions. Saffola's improved growth outlook and management's increased...

In fact, with the ongoing sharp reduction in crude costs, MRCO could gain more on the gross margin front in the coming total sales) is likely to report gradual recovery in volume growth after the price reductions, recovery in Saffola (13%) witnessed in 3QFY20 is at an early stage and cannot yet be termed a turnaround. However, over the past 5 years, growth while healthy has tapered off with the companys sales at ~5%, EBITDA at 11% and PAT at The stock has corrected nearly 35% since we downgraded MRCO to Neutral at end-2QFY20 results due to the company reporting a sharp deceleration in volume growth, a trend that has well continued in 3QFY20 Trailing FY20 valuations of 32.2x FY20E EPS and FY21/FY22 valuations of 33.4x/27.5x FY22E respectively (much lower than 3-year/5-year/10-year average of 44.8x/ 42.7x/35.2x) offers potential for an upside.

Marico's Q4FY2020 performance was affected by supply disruption in the fag-end of the quarter caused by lockdown due to spread of COVID-19. The company's revenue declined by 7% with India business revenue declining by 8% (volume decline of 3%) and international business down by 5% during the quarter. If supply disruption would have not been there, volume growth would have been in mid-single digit. Parachute rigid pack and value-added hair oil posted 8% and 11% decline in sales volume, respectively, while Saffola edible oil witnessed 25% volume growth due to stocking of food products prior to the...

Gradual recovery in demand is expected going forward. At current level, the stock looks attractive and hence we upgrade our rating to a BUY with a roll forward target price of Rs. 353 based on 35.0x FY22E adj. EPS. Sales volumes decline; Margins improve Q3FY20 revenue declined 2.0% YoY to Rs. 1,824cr due to lower domestic sales volumes amid continued slowdown in consumption. Domestic business posted sales decline of 4.8% YoY to Rs. 1,380cr, while International business continued to grow at Rs. 444cr (+7.9% YoY). On constant currency basis, Bangladesh business grew 15.0%...