Dolat Capital's research report on Marico
Marico’s Q1FY20 revenue was in line with our estimate, but EBITDA and APAT was a beat. Volume growth was 6%, on a base of 12.5% growth. Although volume growth in Parachute was impressive at 9%, VAHO and Saffola posted mere 3% volume growth. VAHO reported improvement in performance, volume growth improved to 7% in Q1FY20 vs 1% in Q4FY19. The company continues to gain traction in modern trade and e-commerce. However, general trade in urban markets posted decline during Q1FY20. GM improved significantly (+500bps), from Q1FY19, primarily due to a decline in copra prices. We believe the trend will continue as copra prices are trading at low levels, compared to last year. We also believe that Saffola and VAHO volumes would recover, due to a favorable base, and the Parachute brand will continue its strong growth. In addition, low RM costs will help improve margin performance.
Outlook
We have upward revised our FY20E and FY21E EPS estimates at ` 9.3 and ` 10.2 respectively. Valuing the stock at 38x FY21E EPS to arrive at a TP of `388. Maintain Accumulate.
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