Prabhudas Lilladher's research report on Marico
We cut FY21/22/23 EPS estimates of MRCO by 2.3%, 0.8%, 1.8% even as MRCO remains optimistic on growth led by Edible oil, Foods portfolio, Bangladesh and Vietnam. Parachute and VAHO seem well poised for growth but Saffola Oils and Oats is expected to see moderation as in-house consumption normalizes. MRCO is adopting aggressive strategy to gain share by keeping prices flat in 3Q despite 10% increase in prices of Copra and 26% in Rice bran oil, which can backfire if the expected softening of input costs does not materialize in 4Q. MRCO is betting big on Foods and Hygiene, however aspiration of Rs4.5-5bn by FY22 looks stretched given that Hygiene sales have started coming off and its entry in modern Ayurveda products through Immuniveda brand will face strong competition from established brands like Dabur, Zandu, Patanjali and Baidyanath etc.
We estimate 10% PAT CAGR over FY20-23. We value the stock at 35xFY23 EPS with a target price of Rs378 (Rs359 based on 35x Sept22 EPS earlier). Retain Hold.
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