Motilal Oswal puts 'buy' on Marico
Motilal Oswal estimates that branded pure coconut oil accounts for 32% of Marico’s sales but contributes more than 50% of its profits.
By ET Bureau |
CMP: Rs 104
Marico leads in the Rs 1,500-crore branded pure coconut oil market with a share of 55%. Marico’s flagship brand, Parachute, holds 48% market share and Nihar and Oil Of Malabar account for 7%. Other prominent players in the category include Shalimar (~8%) and Dabur (5%). Regional brands like Panchratna and Kera account for the rest of the market.
Motilal Oswal estimates that branded pure coconut oil accounts for 32% of Marico’s sales but contributes more than 50% of its profits. Growth of the branded coconut oil market is expected to accelerate (12-14%) led by category expansion and upgrades from loose oil (40% of the category). Price-led competition among national brands has been minimal after the exit of HUL in FY06 (Marico acquired Nihar).
Regional players’ prices are at an 8-10% discount to Marico’s. Its focus has been to expand the category size of coconut oil rather than to aggressively capture market share as its share is 7x more than its nearest rival. Motilal estimates PAT CAGR of 21% over FY10-12. The stock trades at 22.9x FY11E EPS of Rs 4.7 and 18.7x FY12E EPS of Rs 5.7.
Marico leads in the Rs 1,500-crore branded pure coconut oil market with a share of 55%. Marico’s flagship brand, Parachute, holds 48% market share and Nihar and Oil Of Malabar account for 7%. Other prominent players in the category include Shalimar (~8%) and Dabur (5%). Regional brands like Panchratna and Kera account for the rest of the market.
Motilal Oswal estimates that branded pure coconut oil accounts for 32% of Marico’s sales but contributes more than 50% of its profits. Growth of the branded coconut oil market is expected to accelerate (12-14%) led by category expansion and upgrades from loose oil (40% of the category). Price-led competition among national brands has been minimal after the exit of HUL in FY06 (Marico acquired Nihar).
Regional players’ prices are at an 8-10% discount to Marico’s. Its focus has been to expand the category size of coconut oil rather than to aggressively capture market share as its share is 7x more than its nearest rival. Motilal estimates PAT CAGR of 21% over FY10-12. The stock trades at 22.9x FY11E EPS of Rs 4.7 and 18.7x FY12E EPS of Rs 5.7.
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