Jefferies sees a 15% upside potential in Marico stock and has assigned a ‘Buy’ rating to the scrip, stating that the company’s outlook for the second half looks positive. “Commentary remains optimistic, with management. expecting an improving trend in 2H, led by volume pickup and continued momentum in international business. It has also reiterated its full-year margin guidance shared in 1Q, which is above 20%, Jefferies said in its report. Jefferies valued Marico at 47x Jun-25 earnings to arrive at a price target of Rs 660/ share.
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Marico’s overall consolidated revenue was marginally lower on a year-on-year basis, due to pricing corrections in key portfolios in India (Parachute/ Saffola) and currency depreciation in the international market. The company’s management expects robust gross margin expansion on a year-on-year basis. Ad-spends, however, were ramped up significantly in 2Q, which the management attributed to the core & new portfolios. Commenting on the margins, Jeffries said, “We are unsure how much of the rise can be attributed to an increase in competitive activity, a trend seen by some peers in the recent past. his would moderate EBITDA margin expansion (compared to GM).”
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The report further said that the second quarter performance appears lackluster, as the much-anticipated volume growth pickup remains elusive. “In the Int’l business, while performance is better, currency depreciation would deflate INR growth. Gross Margins should expand smartly Year on Year, led by benign input costs; however, a significant jump in ad spending would limit EBITDA margin expansion. The resultant operating profit would grow low double digits, lower than our initial expectation. The second-half outlook, however, remains positive,” added the report.
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The report however, has cautioned about the potential risks which include Inflation in input materials, pressures in rural demand and an increase in competition.
