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Marico Ltd>
  • CMP : 533.6 Chg : -5.95 (-1.10%)
  • Target : 570.0 (15.38%)
  • Target Period : 12-18 Month

06 May 2023

High growth foods, digital, PC to dominate growth…

About The Stock

Marico is one of the major FMCG companies present in hair oil, edible oil, foods & personal care segment. Major brands include Parachute, Saffola, Nihar, Hair & Care, Set Wet, Livon & Beardo.

  • Marico has an overall distribution network of more than 5.6 million outlets and direct reach of ~1 million outlets. Through its stockist network, it reaches 59000 villages
  • With high gross margins of 45-50%, the company is able to spend 8-9% of its sales for advertisements to support new categories & products
Q4FY23 Results

Marico posted 3.7% sales growth; domestic volumes up 5%   

  • Sales growth was led by 9.8% growth in international business
  • EBITDA was at ₹ 393 crore, up 13.6% YoY, margins at 17.5% (up 153 bps)
  • Consequently, PAT was at ₹304.9 crore, growth of 18.7%
What should Investors do?

Marico’s share price has given 60% return in the last five years (from ₹ 301 in May 2018 to ₹ 494 in May 2023)

  • Foods, personal care & digital brands category contributes 15% to the growth. Further, international business (25% of the business) is growing at faster double-digit growth. 
  • We upgrade Marico to Buy
Target Price and Valuation

We value stock at ₹570 ascribing 45x PE on FY25 EPS

Key Triggers for future price performance
  • Foods business portfolio has grown from ₹170 crore to ₹600 crore in last three years. It is likely to grow to ₹850 crore by FY24. Marico is also Investing behind digital brands. Aims to achieve sales ARR of ₹ 400 crore by FY24
  • Though market share gains in hair oils have slowed down in last few years, stable pricing brought back volume growth in Parachute coconut oil. VAHO is likely to grow well with rural demand recovery
  • With significant decline in vegetable oil prices, Saffola volumes are likely to grow volumes in mid-single digit in the longer run. Next two quarters are likely to see sharp price decline impact on overall sales
Alternate Stock Idea

We also like Dabur in our FMCG coverage.

  • Significant shift in consumption towards healthier, natural & Ayurveda based products & aggressively foray in many big categories would be driving growth for Dabur
  • Value the business at 52x FY25 earnings. BUY with a TP of ₹ 675

Key Financial Summary

(| Crore) FY20 FY21 FY22 FY23 5 Year CAGR (18-23) FY24E FY25E 2 Year CAGR (23-25E)
Net Sales 7,315.0 8,048.0 9,512.0 9,764.0 9.0 10,499.3 11,267.9 0.1
EBITDA 1,469.0 1,591.0 1,681.0 1,810.0 9.7 2,055.2 2,242.3 0.1
EBITDA Margin % 20.1 19.8 17.7 18.5 - 19.6 19.9 -
Net Profit 1,043.0 1,199.0 1,254.9 1,321.7 9.8 1,492.9 1,623.8 0.1
Adjusted Net Profit 1,043.0 1,199.0 1,254.9 1,321.7 9.8 1,492.9 1,623.8 0.1
EPS (|) 8.1 9.3 9.7 10.2 - 11.6 12.6 -
P/E 61.1 53.1 50.8 48.2 - 42.7 39.2 -
RoNW % 34.5 37.0 37.5 34.8 - 37.3 38.6 -
RoCE (%) 41.0 40.3 41.2 38.1 - 41.2 43.3 -
Source: Company, ICICI Direct Research

Key takeaways of recent quarter

Q4FY23 Results: High growing foods, Digital brands, Personal care & international business now contributing 35% to the sales

  • Marico reported a revenue growth of 3.7% to |2240 crore led by 9.8% growth in international business & 1.8% growth in domestic business. With softening of major commodity prices (Copra, Edible Oil, Rice bran Oil & crude), the company has passed on benefit of this in terms of price cuts or increase in grammages. Domestic volume growth was 5% & constant currency international sales growth was 16% during the quarter


  • Parachute rigid pack grew by 3% led by 9% volume growth & 6% dip in prices given the company has passed on the benefit of benign copra prices in terms of price cut or higher grammages. Parachute rigid saw 70 bps gain in volume market share.  On a 4-year CAGR basis, parachute volume has grown at 6% on a conversion from loose to branded 


  • With softening of vegetable oil prices, Saffola edible oil witnessed double digit decline in sales. Edible oil volumes also saw mid-single digit de-growth during the quarter mainly on the back of high base of last year. On a 4-year cagr basis, Saffola volume grew in high single digit.


  • Value added hair Oils (VAHO) saw 13% sales growth led by volume growth after subdued growth of last one year, which was impacted by rural slowdown. With rural demand recovery & competition taking price hikes in mass brands, the category witnessed positive growth in middle of quarter specifically in March month


  • With reduction of price sensitivity in commoditised product portfolio, strong traction in premium brands (Marico participation is higher) & recovery in rural demand conditions, VAHO has witnessed strong growth. The company has gained value market share by 60 bps during the quarter


  • Foods business witnessed ~18% growth in Q4FY23. This business ended the year with close to | 600 crore sales. Saffola Oats maintained its leadership position with value market share of 43%.  The company started witnessing strong traction in multiple new products like ‘Munchez’, ‘Mayonnaise’ & ‘Saffola Fittify’ in healthier food category.


  • The company expects to clock |850 crore sales in FY24 on the back of improvement in urban demand conditions, new product innovation & extension of food distribution channel. The company expect to maintain growth momentum in foods business with tailwind of healthier food consumption   


  • Personal care business saw 40% sales growth in FY23 mainly on the low base of covid-impacted year. This category clocked |350 crore of sales. The company expects to grow 20% going forward. Given, it’s a high margin business, it would aid overall company margins of the company. Digital first brands are expected to reach ARR (average run rate) of | 400 crore


  • International business constant currency growth of 16% was led by 9% growth in Bangladesh, 16% growth in Vietnam, 21% growth in South Africa & 37% growth in MENA region.


  • Bangladesh inflation has moderated & the company has managed de-valuation in currency. The company has strong growth playbook in Bangladesh, which can be replicated in other geographies


  • Gross margin expanded by 294 bps given all major commodity prices are down in last six months for the company. Employee & overhead spend increased by 120 bps & 27 bps respectively. The company maintained high ad-spend at 9.4% of sales


  • Operating profit witnessed a growth of 13.6% to | 393 crore with operating margin expansion of 153 bps. Other income doubled from | 24 crore to |68 crore on account of one-time gains from sale of land in one of the international markets. Led by higher operating profit & other income, net profit grew by 18.7% to |304.9 crore


  • The company expect to maintain volume growth trend with revenue growth to inch up in H2FY24 with price cut in base start reflecting. High growing foods, personal care & digital first brands contribution to India business has grown from 11% in F22 to 15% in FY23. The company expect the contribution of these brands to increase to 20% in FY24.


  • International business is consistently growing at high double-digit growth from last two years with strong growth in Bangladesh & replication of similar growth strategy in Vietnam.


  • Gross margins have improved by 230 bps in FY23. The company expect further 200-250 bps margin improvement with benign commodity prices across (copra, vegetable oils, liquid paraffin, HDPE). The scaling of foods & digital brands would lead to higher profitability from these categories


  • Marico has passed on some of the benefits of gross margins in terms of price cuts however, the company has increased advertisement spends in last one year. It would continue to increase spends to 9% (as % to sales) in FY24. The company expect operating margin expansion of 100 bps in FY24.


  • Modern trade (MT) & ecommerce is contributed 29% to the sales. The high growth in the channel is mainly due new food launches has largely concentrated in MT & Ecommerce. Saffola saliency is higher in MT. The company is increasing food portfolio to general trade, which would aid growth in that channel.


  • In foods business, Masala Oats distributed to 2 lakh outlets. In new launches, Honey & Soya would be expanded to general trade first. The company is slowly expanding in foods distribution mainly due to supply chain challenges & lower shelf life


  • FMCG Market has started witnessing volume recovery with softening of commodity prices. Home & Personal care category saw flat volumes in Q4 compared to volume decline in last three quarters. Similarly, foods category also grown at 4.3% compared to 1-2% growth in last three quarters.



ICICI Direct endeavors to provide objective opinions and recommendations. ICICI Direct assigns ratings to its stocks according -to their notional target price vs. current market price and then categorizes them as Buy, Hold, Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts valuation for a stock


Buy: >15%

Hold: -5% to 15%;

Reduce: -15% to -5%;

Sell: <-15%




Pankaj Pandey

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