Last updated: Oct 3, 2023 2:26 PM IST
Marico gained 5.9 percent on October 3
Marico’s share price rose nearly 6 percent during Tuesday’s trading session, hitting its 52-week trading session high; What investors need to know
Marico share price: Marico share price rose nearly 6 percent to its 52-week trading session on Tuesday after ICICI Securities upgraded the consumer goods company’s shares from ‘add’ to ‘buy’ and revised target price to Rs 670 from Rs 610 , an increase of 19 percent.
The brokerage firm upgraded the rating based on a range of factors. Volume growth in Parachute Coconut Oil is expected to improve, sales from the food segment are likely to be higher than those from the edible oil sector and the focus on D2C brands would be on profitable scale, ICICI Securities analysts said in an October note. 1 note.
The FMCG player expects volume growth of around 8 percent in the medium term, which ICICI Securities says is positive and signals its ambition to grow faster on a larger base.
ICICI Securites also revised the price target of Marico stock to Rs 670 from Rs 610, an increase of 9.9 percent. In its analysis, the brokerage expressed the following views after meeting with Saugata Gupta, MD & CEO of Marico. Key takeaways from the conversation were that Marico is targeting medium-term volume growth of roughly 8 percent (compared to 8 percent revenue growth in the 2013-2023 financial year).
The brokerage said it appreciated the company’s drive to expand faster while maintaining its current market share. The brokerage forecast that volume growth for Parachute Coconut Oil (PCNO) would be helped by stable copra prices and a recovery in rural consumption.
The brokerage said the level of competition in the bottom of the pyramid (BOP) value-added hair oil market has stabilized. While Saffola expects to be able to maintain the threshold margin while maintaining stable edible oil growth, this, together with increasing premiumization efforts, may help the value-added hair oil (VAHO) growth rate to steadily increase.
According to the brokerage, sales from the food segment are expected to surpass that of the edible oil industry in the medium term. Because the sensitivity to cyclical commodity prices is smaller, the volatility of operating margins may decrease. For D2C companies, this would mean a greater emphasis on profitable scaling by leveraging distribution and marketing resources.
“We maintain our FY24-25E earnings estimates, assuming revenue/EBITDA/PAT CAGR of 9/16/16 (percent) for FY23-25E. We upgrade to BUY (from ADD) with a revised DCF-based price target of INR 670 (vs. previous TP of INR 610). At our target price, the stock will trade at a price-to-earnings ratio of 49x in March 25E. Key downside risk: Higher than expected copra price inflation,” ICICI Securities said in its report.
On the technical front, according to data from Trendlyne, Marico’s share price rose 7.88 percent and outperformed the sector by 1.91 percent over the past year.
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