Marico — Raw Material Prices Stable; Monsoon Remains A Key Monitorable: Nirmal Bang

Nirmal Bang Report

We recently hosted the management of Marico Ltd. to get an overall business update. Key highlights from the conference:

1. Overall, the demand environment is better due to stable raw material prices, but monsoon remains a key monitorable going forward.

2. No meaningful recovery has been seen in the rural market, but it seems to have bottomed out.

3. Out of overall ~11 million outlets universe, the company is reaching out to 5.6 million, of which one million is direct reach.

4. Margin profile in the international business is now higher than India business and the company expects double-digit constant currency growth of 10-12% owing to steady demand trends in the international business.

5. Foods business is likely to double from the current ~Rs 6 billion levels by FY27.

6. The company expects FY24 to be better than FY23.

While Marico's core portfolio delivered a healthy performance in Q4 FY23 and the company continues to make efforts towards meeting its medium-term growth aspirations, we believe the stock currently trades at fair valuations of ~48 times/44 times FY24E/FY25E earnings per share as we build in 11% earnings compound annual growth rate over FY23-FY25E.

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