Marico (Buying Range: |205--|195)
• With falling copra prices, margins for the company should
expand, going forward. Marico has high susceptibility to copra
(CP) and safflower oil (SO) prices as they constitute ~40% and
~15%, respectively, of its raw material (RM) costs. With CO
witnessing ~40% YoY decline, margins would expand, going
forward. We believe Marico would be able to sustain 14%+
margins
• With the acquisition of Paras's personal care (Set Wet, Zatak and
Livon) business, the company has added new category within its
fold. we believe the company would continue to witness robust
volume growth on the back of shift in consumer preference for
Branded products. We believe the company the company would
continue to witness healthy volume growth in future.
• The stock has been trading in the range of 23x-28x two year
forward PE, which is discount to FMCG index. With the
sustainable volume growth and healthy margins, the company
would start commanding higher multiple in future. We remain
positive on the stock.
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