Shares of Marico Ltd. jumped as much as 4.5% to a record high as Credit Suisse termed its brand Saffola to have “potential to be one of the best total addressable market (TAM) expansion stories in Indian FMCG”.
The firm said Saffola scores strongly on two key factors for TAM expansion -- brand extendibility and potential for a new entrant in target categories. Among Saffola’s four new categories of honey, soya chunks, health supplements and healthy noodles, the research firm believes honey and soya chunks hold the most promise, as these are fast growing categories with large unbranded consumption, and do not have more than two major players.
It further added that Saffola edible oils also have a long runway as it dominates premium edible oil with 81% market share and with more consumers adopting healthier edible oils with rising income and health consciousness.
Credit Suisse added that Marico’s relative valuations to peers in the past have improved when non-Parachute brands deliver strong growth and it expects this to happen again over FY21-23 with the Saffola foods expansion.
The research firm maintained its ‘outperform’ rating while increasing target price to Rs 600. Shares of Marico Ltd. jumped as much as 4.5% to Rs 532.60, the highest price since May 3, 1996. Of the 43 analysts tracking the stock, 35 have a ‘buy’ rating, seven suggest a ‘hold’ and one recommends a ‘sell’, according to Bloomberg data. The average of 12-month consensus price targets implies a downside of 8.7%.
