Marico Q4 Results Review - Well Oiled For Growth: HDFC Securities

HDFC Securities Institutional Equities

We upgrade Marico Ltd. to Buy from Add with target price of Rs 650 (45 times FY26 earnings per share, 10% premium to its five year Average PE) and move it to high conviction list within staples pack as worst is behind us wr.t muted volume growth, pricing correction, loss related to new business and transient currency headwinds.

We expect Marico to see revenue/ Ebitda / profit after tax compound annual growth rate of 6/13/13% respectively over FY23-26 as-

1. Domestic business fires on all cylinders

• Parachute (35% of domestic sales) expected to see mid-single volume growth on back of market share gains and conversion from unbranded to branded, as we have always seen in inflationary copra environment. Moreover, we expect double digit revenue growth in FY25 on back of mid to single digit price hikes,

• Saffola edible oil (20% of domestic sales) expected to see volume led mid single digit value growth in FY25, courtesy pricing correction anniversarian (down 20% in FY24)

• Value added hair oil – easing competitive intensity in BOP segment along with uptick in mid to premium end segment shall drive much better outcomes.

2. Significant improvement in profitability of fast-growing foods and digital first business (20% of domestic sales)

3. Sustaining double digit constant currency revenue growth momentum in International business as worst related to currency headwinds is behind us. Key risks to our call –

• Volatility in raw material index, as copra still forms 35% of raw material basket,

• Increased competitive intensity in VAHO segment.

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