JM Financial raised the target price on Marico to Rs 825 from Rs 800, while maintaining a ‘Buy’ rating. This implies an upside of 16% from the current market price. The brokerage house says that the company’s sales trajectory remains strong and earnings growth will accelerate from the second half.
JM Financial on Marico: Another strong quarter
Marico’s pre-quarter update points to yet another strong quarter, stated JM Financial. Despite GST-led disruption, revenue growth in the 30s is better than the brokerage’s estimate of 28% largely due to better-than-expected growth in VAHO (Value Added Hair Oils) and lower volume decline in Parachute.
JM Financial on Marico: Revenue growth to grow on strong pricing
Marico’s consolidated revenue is expected to grow in the 30s, led by strong pricing-led growth in Parachute and Saffola edible oils, better-than-expected recovery in VAHO and sustained momentum in Foods and Premium personal care portfolio.
JM Financial on Marico: Increase in Copra prices to impact margins
EBITDA and net profit growth are expected to be moderate, given the steep inflation in copra and higher brand investments. While the FMCG sector stock has demonstrated strong pricing power in the core portfolio, unprecedented copra inflation will weigh on FY26 profitability (especially in H1). However, going ahead, JM Financial expects margin pressure to bottom out with moderation in the second half (copra prices down 10% from peak).
Plus, improving execution on portfolio diversification (Foods & Premium personal care, which is now 22% of India sales with EBITDA margin at breakeven level), both in terms of sales and profitability, is expected to boost overall performance.
The brokerage expects that successful execution should result in better EBITDA growth going ahead, thereby driving overall earnings growth, which it estimates 13% CAGR over FY25-28. “We like Marico’s strength in core, relatively better execution on portfolio diversification and International business against peers,” said JM Financial.