ICICI Securities research report on Marico
Continued weakness (in 2QFY24) across key segments (PCNO, VAHO and Saffola edible oil) is underwhelming as demand conditions remain under pressure. However, management expects a gradual improvement as offtakes remain healthy and pricing actions largely coming into base. Further, we like the continued execution-driven outperformance in the food and premium personal care segments (~20% revenue share of domestic business in 2QFY24). International business maintains healthy revenue growth trajectory. Margins remained healthy led by input cost deflation. Marico (in our view) has been likely impacted significantly higher (vs peers) due to external reasons (weak demand environment and commodity deflation) and could witness stronger recovery (vs peers) with improving external environment and aggressive growth ambitions. We recently upgraded the stock with a long-term view (report link). BUY.
Outlook
We have cut our earnings estimates by 3-4% for FY24-25E; modelling revenue / EBITDA / PAT CAGR of 7 / 14 / 14 (%) over FY23-25E. Maintain BUY with a DCF-based revised target price of INR 650 (vs previous TP at INR 670). At our target price, the stock will trade at 50x P/E multiple Mar-25E. Key downside risk is higher-thanexpected inflation in copra prices.
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