Buy Marico; target of Rs 670: ICICI Securities

ICICI Securities research report on Marico

We met Saugata Gupta, MD & CEO, Marico. Takeaways: (1) Marico has medium-term volume growth aspiration of ~8% (versus revenue growth of 8% in FY2013-2023). We like the ambition to grow faster on a larger base, (2) in PCNO, with stability in copra price and revival in rural consumption, volume growth is likely to improve, (3) competitive intensity at the bottom of pyramid (BOP) segment in value-added hair oil has normalized. This along with incremental thrust on premiumization may help value growth in VAHO to gradually improve, (4) in edible oil, Saffola expects to hold threshold margin while maintaining stable growth, (5) revenue from food segment is expected to be more than edible oil business over the medium term. This may reduce operating margin volatility due to reduced exposure to cyclical commodity price, (6) on D2C brands, incremental focus would be on profitable scale-up by using distribution and marketing strength. Upgrade to BUY (ADD previously).

Outlook

We maintain our earnings estimates for FY24-25E, modelling revenue / EBITDA / PAT CAGR of 9 / 16 / 16 (%) over FY23-25E. We upgrade to BUY (from ADD) with a revised DCF-based target price of INR 670 (vs previous TP of INR 610). At our target price, the stock will trade at 49x P/E multiple Mar’25E. Key downside risk: Higher-than-expected inflation in copra prices.

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