Buy Marico, target price Rs 735: JM Financial

JM Financial has a buy call on Marico with a target price of Rs 735.0. The current market price of Marico is Rs 666.7.


Investment Rationale
Marico's India business posted a sequential uptick in underlying volume growth with market share improving across key categories. Parachute Coconut Oil grew high-teens driven by price hikes. Volumes remained sluggish due to pricing actions and ml-age reduction. Saffola Oils grew in twenties led by price increases. Value Added Hair Oils improved sequentially led by mid and premium segments. Foods and Premium Personal Care continued strong performance. International business witnessed broad-based growth across most markets, growing mid-teen in cc terms. Consolidated revenue grew high-teens (JM Financial estimates 17% sales growth) aided by price hikes in the domestic business. The management targets to maintain double-digit revenue growth in FY26E. Modest growth in EBITDA owing to RM inflation & higher A&P: Copra and vegetable oil prices remained elevated, while crude oil was controlled. Gross margin contraction to be similar to 3QFY25 (c.180bps). This along with higher brand investments to result in marginal yoy growth in operating profits. The brokerage estimates 4.6% growth in EBITDA with margin compression of c.200bps yoy.