Marico - SELL, 1% downside - Ambit

Marico will report its results later today. Sales growth is likely to be weak at 10% YoY as the company's coconut oil and edible oil portfolio has been adversely impacted by the slowdown in discretionary consumption. We expect volume growth of 8% YoY led by the value-added and foods portfolio. We expect gross margin expansion of ~150bps YoY (led by lower copra prices), which is, however, likely to translate into an EBITDA margin expansion of only 90bps YoY, owing to higher growth in other expenditure (including forex losses). Lower interest costs will likely be offset by higher depreciation and taxes, leading to PAT growth of 18% YoY. The stock currently trades at 28.0x FY14E earnings and 23.0x FY15E earnings.

Source : Equity Bulls

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