Dolat Capital recommended accumulate rating on Marico with a target price of Rs 388 in its research report dated May 07, 2019.
Dolat Capital's research report on Marico
Marico’s Q4FY19 revenue was below our estimate, but APAT was in line. Volume growth was 8%, on a base of 1% growth. Although volume growth in Saffola was impressive at 18%, VAHO’s was a mere 1% in the quarter. The Saffola portfolio gained traction in modern trade and e-commerce. Going ahead, the company plans to introduce new improved offerings in the Saffola brand to accelerate volumes. The GM has improved significantly (+500bps), from Q2FY19, primarily due to a decline in copra prices and calibrated price hikes. We believe the trend will continue as copra prices are trading at low levels, compared to last year. We believe Saffola and VAHO volumes are likely to rise, due to a favorable base, and the Parachute brand will continue its strong growth. In addition, low RM costs will help improve margin performance.
We have maintained our FY20E and FY21E EPS estimates at ` 9.0 and ` 10.2 respectively. Valuing the stock at 38x FY21E EPS to arrive at a TP of `388. Maintain Accumulate.
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