Marico - Mahurat Picks 2012 - ICICIdirect

(Buying Range: Rs.205--Rs.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.

Source : Equity Bulls

Keywords