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  • Stock recommendation: Marico — Add — Target price Rs 375

    Publish date: August 7, 2018

    Results update: Mixed bag, prognosis promising

    Marico's headline data were on an upward trajectory but on closer scrutiny, it appears that a rise in copra prices and underwhelming sales growth of one of its trademark product have dampened the numbers.

    Key Highlights

    • Consolidated revenues, EBITDA and recurring profit after tax (PAT) grew by 23%, 9% and 9% (all YoY basis) respectively. But these figures were below our estimate by 1%, 2% and 6% respectively.
    • Parachute: This product posted a decent 9% (YoY) growth but the performance was slightly disappointing. The growth was expected to be better due to last year’s shrunken base.
    • Saffola: This product performed better by growing at 10% but the management believes it is yet to revive completely. The management has spent money on ad spends and has adopted modern trade channels to improve the product’s numbers further. They hope to see the product’s volume increase in double digits in the next two to three quarters.
    • Going forward, the top brass also expects the value added hair oil segment to grow in double digits.
    • The company’s rural growth remained high. It grew by 28% (YoY), while the urban demand grew by 16%.
    • The company’s international business expanded by 7% (YoY), with Egypt and the Middle East being the standout performers.

    Valuation & outlook

    We believe that the company gains to stand even more if copra prices stabilize. The company seems well-placed to profit from an improved demand environment and improved presence in the e-commerce segment.

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