Result Update: Marico Ltd - REDUCE - TP Rs.324 - Kotak

Marico's 4QFY17 profits came in significantly ahead of estimates while revenue growth lagged estimates. While the revenues miss is on account of weakness in international operations (MENA region in particular), outperformance on margins is largely attributable to a 410 bps decline in advertising spends, which is likely to be transitory in nature. Going forward, we expect Marico to register robust sales growth (enabled by re-emergence of pricing growth), and modest gains in EBITDA margin, leading to a 21.5% CAGR in earnings over FY17-FY19E. We raise our price target on the stock to Rs 324 (Rs 280 earlier; changes on roll-forward to FY19E, valuation at 35X FY19E). After 23% run-up in price since our last update, however, upside is modest We downgrade the stock to REDUCE (ACCUMULATE earlier) as we believe that earnings surprises are less likely in the first half of FY18 (GST and monsoon being the key uncertainties for FY18), which raises the likelihood of finding better entry points in the stock.

Shares of MARICO LTD. was last trading in BSE at Rs.310.8 as compared to the previous close of Rs. 315.5. The total number of shares traded during the day was 132428 in over 937 trades.

The stock hit an intraday high of Rs. 319.75 and intraday low of 310.8. The net turnover during the day was Rs. 41878529.

Source : Equity Bulls

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