Fundamental

Marico Initiating Coverage



Marico is the market leader in Coconut Oil (Parachute), Value Added Hair Oil (VAHO) and Refined Edible Oil (Saffola brand) and enjoys strong brand equity. The Company aims for a volume growth of 8-10% and a topline growth of 13-15% (depending on inflation) in the medium term. We expect Marico to report 14.6% CAGR in its revenues over FY18-20E, while PAT will witness a CAGR of 17.1% over the same period. EBITDA margin is expected to be steady around 17-18% level. We remain positive on Marico’s future growth prospects, and initiate coverage on the stock with a BUY rating and a target price of Rs 476 (55x FY20E earnings), giving an upside potential of 26.2%.

 

Valuations : At CMP of Rs 377, Marico trades at FY19E and FY20E, P/E multiples of 51.6x and 43.6x respectively. We value the stock at a FY20E target P/E multiple of 55x, which yields a target price of Rs 476 per share. We are bullish on the future prospects of Marico and initiate coverage on the stock with a BUY rating and a target price of Rs 476 (55x FY20E earnings), which gives an upside of 26.2%.


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