ICICIdirect.com is bullish on Marico and has recommended buy rating on the stock with a target of Rs 262, in its May 03, 2014 report.
Marico reported healthy volume growth of ~6% (I-direct estimate: ~3%) aided by a revival in Parachute's volume growth to ~10%
Revenue growth (adjusting base quarter revenues for ex-Kaya) was healthy at 17.3% YoY to Rs 1069.8 crore (I-direct estimate: Rs 1017.4 crore)
In spite of the input cost inflation, margins reported a 234 bps YoY increase to 14.4% aided by lower marketing spends
Volume growth to revive; we remain positive!
We believe that though Marico's volume growth has witnessed some pressure since H2FY13, the company's strong brand strength in hair oils and edible oils would soon revive its volume growth to 8-10% by H2FY15E following a revival in urban discretionary demand, increasing presence in rural India and increased marketing initiatives. We estimate the revenue growth in FY13-16E at 14.2% CAGR. Further, with a changing sales mix, stabilising margins in international business and de-merger of the loss making Kaya business, we expect margins to improve to 16.7% by FY16E (~14% in FY13). Higher margins would, thereby, aid the earnings growth to remain healthy at 19.7% CAGR in FY13-16E adjusting for Kaya numbers in FY13). Hence, we value the stock at ~10% premium to the historic two-year forward multiple at 25x FY16E EPS of Rs 10.5 assigning the stock a target price of Rs 262 with a BUY rating.
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