7 reasons why Citi is bullish on this recently listed FMCG play – Sees 35% upside potential

Citi Research has initiated coverage with a ‘Buy’ rating and a target price of Rs 750, implying a 35.4% total return including dividends. It argues the selloff has created an entry point into a structurally sound business trading at a discount to every large-cap Indian consumer staples peer.

Here is a detailed analysis of Citi’s investment rationale

1. Regional leadership in South India

Orkla India is not chasing a pan-India scale. According to Citi Research, it operates under two regional heritage brands MTR, whose packaged foods business was acquired in 2007, and Eastern Condiments, acquired in March 2021. Between them, the two brands dominate four southern states with market shares that are difficult to replicate.

In Karnataka, Orkla India holds 31.2% of packaged spices and approximately 41% of blended spices. In Kerala, those numbers are 41.8% and approximately 44%. In Andhra Pradesh and Telangana combined, it holds 15.2% of packaged spices.

Pan India’s ready-to-eat and ready-to-cook convenience foods portfolio commands 18.6% market share.

The product range spans the full daily meal spectrum from breakfast mixes like Puttu, Upma and Dosa through lunch and dinner formats including Puliyogare, Sambar and Chicken Masala, to beverages, vermicelli and desserts.

“The company has established itself as one of the leading players in the spices and convenience foods categories, with market leadership across its priority South Indian states of Karnataka, Kerala, Andhra Pradesh and Telangana,” Citi Research notes in the initiation report.

2. Revenue growth and margin outlook

Citi Research forecasts a 9% consolidated revenue compound annual growth rate between FY26 and FY28, taking net revenue from Rs 2,508.4 crore in FY26 estimated to Rs 2,953.9 crore in FY28 estimated.

Spices are expected to grow at 7% compound annual growth rate over that period, with convenience foods growing faster at 10%.

Citi Research estimates EBITDA margin will expand to 17.2% in FY28 estimated from 16.6% in FY25, driven by a mix shift toward higher margin blended spices and ready to cook or ready to eat formats alongside manufacturing cost efficiencies.

Recurring profit after tax is estimated at Rs 350.8 crore in FY28, growing from Rs 293 crore in FY26, at a 9% compound annual growth rate. Earnings per share is projected to rise from Rs 21.39 in FY26 to Rs 25.61 in FY28.

“We estimate EBITDA margin to expand to 17.2% in FY28E from 16.6% in FY25. We estimate 10% EBITDA CAGR over FY26 to FY28E,” Citi Research states.

The balance sheet carries zero long term debt, according to Citi Research estimates. Free cash flow averaged Rs 250 crore annually over the past three years and reached Rs 370.9 crore in FY25. Working capital days improved sharply to 30 days of sales in FY25 from 46 days in FY23.

Return on capital employed is projected to reach 18% by FY28 estimated, up from 14% in FY25, according to Citi Research.

3. Large opportunity in spices market

This is the structural argument that Citi Research leans on hardest. India’s domestic spices market remains approximately 60% unorganised, meaning the majority of Indian households still buy loose unpackaged spices from local vendors with no quality standardisation or adulteration protection.

Industry research firm Technopak projects the packaged spices market to expand from Rs 34,500 crore in FY24 to Rs 61,500 crore by FY29, a 12.3% compound annual growth rate, according to data cited by Citi Research.

The convenience foods market is projected to nearly double from Rs 7,900 crore to Rs 16,600 crore over the same period at a 16% compound annual growth rate. Frozen foods within that are expected to grow even faster at 18.1%, driven by improving cold chain infrastructure.

South India, Orkla India‘s core territory, is estimated to post approximately 12% compound annual growth rate in spices between 2024 and 2029, according to Technopak data cited by Citi Research.

“India’s spices market remains approximately 60% unorganised, providing ample scope for branded conversion as consumers shift towards better quality, hygienic and standardised products,” Citi Research writes.

4. Household penetration and usage gap

Here is the precise growth lever Citi Research finds most compelling at the household level.

In Karnataka and Kerala, MTR and Eastern together achieve roughly 90% household penetration, meaning nearly every home buys at least one of their products annually. But adoption of the broader product range beyond core stock-keeping units sits at only around 40%, according to Citi Research estimates.

That gap between brand reach and portfolio adoption is, in Citi Research’s framing, the single largest medium-term growth opportunity available to the company.

To illustrate how much headroom exists even within loyal households, MTR’s Sambar Masala, its highest-selling product in Karnataka, translates to only about 120 grams of annual usage per household. That covers just 10 to 12 cooking occasions out of the roughly 265 times a typical Karnataka household makes sambar in a year.

“This gap highlights the significant headroom for increased frequency and quantity of branded masala use,” Citi Research notes.

5. Channel mix and digital growth

The domestic business channel mix is shifting in a direction that improves margins and reach simultaneously.

General trade as a share of domestic sales fell from 85% in FY23 to 77% by the first quarter of FY26, according to Citi Research. Modern trade grew from 11% to 14% over the same period. Electronic commerce and quick commerce increased from 4% to 9%.

In the third quarter of FY26, digital commerce grew 43.4% year on year and reached 9.5% of domestic sales, according to Citi Research.

The company recently launched MTR Prakriti, a digital-first brand with its own dedicated direct-to-consumer website distributed through quick commerce platforms in metros. It is positioned as a single-origin premium spice offering aimed at younger urban consumers who prioritise quality and provenance.

“The brand is positioned as a single-origin premium spices offering, targeting the younger, discerning consumers that seek quality,” Citi Research states.

6. Strong and growing export business

International markets contributed 21% of consolidated revenue in the nine months ended FY26, according to Citi Research, and the segment is growing faster than the domestic business.

Exports posted a 15% compound annual growth rate between FY22 and FY25, compared with 8% for India, according to Citi Research estimates.

Orkla India exports to 45 countries, with strategic concentration in Gulf Cooperation Council nations, the United States and Canada.

Eastern holds approximately 22% share of India’s total branded spice exports and has maintained its position as India’s largest branded spice exporter for 24 consecutive years, according to Citi Research.

Citi Research estimates the exports business will grow at 11% compound annual growth rate, reaching Rs 660 crore revenue by FY28, while the India business grows at 8% to Rs 2,280 crore. By FY28, the projected split is 78% domestic and 22% international.

One risk Citi Research explicitly flags is export concentration. Approximately 70% of Orkla India’s export business is concentrated in the Middle East, and the brokerage says it will monitor the ongoing regional conflict to assess any potential revenue impact.

7. Valuation discount to peers

At current levels, Orkla India trades at 26.1 times FY26 estimated earnings and 24.1 times FY27 estimated earnings, according to Citi Research.

Its enterprise value to EBITDA stands at 17.4 times FY26 estimated and 15.9 times FY27 estimated.

Citi Research’s target price of Rs 750 is based on 30 times December 2027 estimated earnings per share. The brokerage says this multiple sits at the lower end of the range applied to Indian consumer staples companies to reflect commodity-driven earnings volatility and the company’s South India geographic concentration.

The valuation gap to peers is significant. According to Citi Research, Nestle India trades at 61 times FY27 estimated earnings, Hindustan Unilever at 46 times, Marico at 48 times, Britannia Industries at 49 times, and Tata Consumer Products at 53 times.

Orkla India, at around 24 times FY27 estimated earnings, looks materially cheaper on most metrics, including enterprise value to sales at 2.7 times FY27 versus a peer group average of 6.5 times, according to Citi Research.

The bull case scenario in the Citi Research report places a Rs 1,000 price target, implying 79% upside, premised on stronger revenue growth, higher margins and a 35 times December 2027 earnings multiple.

The bear case scenario is Rs 530, implying about 4.5% downside, based on a 24 times earnings multiple under weaker growth assumptions.

Conclusion

Citi is positive on Orkla India for a host of reasons. The stock price falling below most comparable large cap consumer staples companies in India coupled with zero long-term debt, free cash flow of Rs 370.9 crore in FY25, and category tailwinds in a market that is still 60% unorganised, support the ‘Buy’ rating.