Dolat Capital recommended accumulate rating on Marico with a target price of Rs 407 in its research report dated February 05, 2019.
Dolat Capital's research report on Marico
Marico’s Q3FY19 results came in line with our estimates. The company posted 6% volume growth, on a base of +7%. Though volume performance in Parachute was impressive at 9%, Saffola and VAHO registered mere 7% and 2% volume growth during the quarter. The Saffola portfolio gained traction in modern trade and e-com, but could not accelerate in general trade. Going ahead, the company plans to launch new innovations under Saffola brand to accelerate volumes. Furthermore, planned new launches in VAHO are expected to improve traction in volume growth. The GM has improved significantly since Q2 primarily due to decline in copra prices and calibrated price hikes. We believe that the trend would continue as Copra prices are still trading at very low levels compared to last year. Going ahead, we believe that the volume traction would improve in Saffola and VAHO due to favorable base and Parachute would continue its strong growth momentum. In addition, low RM costs would help improve margin performance. We have revised our FY19E and FY20E estimates to factor in Q3 performance and expected improvement in GM hereon.
We have introduced FY21E at ` 10.2. Valuing the stock at 40x FY21E EPS to arrive at a TP of ` 407. Considering recent up move in the stock price we are downgrading the rating to Accumulate.
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