INSUBCONTINENT EXCLUSIVE:
Motilal Oswal Securities has a buy call on Marico with a target price of Rs 460.
The current market price of Marico is Rs 364.25.
Time
period given by the brokerage is one year when Marico price can reach the defined target
Investment rationale by the brokerage-Input cost pressure is easing, especially for copra, which accounts for 40-50 per cent of the
HDPE price down 0.6 per cent MoM).
Average copra Calicut prices were down 18.7 per cent YoY to Rs 111.3/kg in 4QFY19
Even other key commodity prices were lower during the quarter (Cochin Coconut Oil down 15 per cent YoY, LLP down 3.2 per cent YoY and HDPE
down 9.2 per cent YoY).
Notably, copra prices have been on a downtrend for the second consecutive month now, after a marginal upmove over
Management had highlighted in its last quarter concall that it expects copra costs to ease by 15-20 per cent YoY in FY20 (from the flush
We believe the company may tweak promotional efforts, if required, and will only take proactive pricing action if there a significant
reduction in copra prices relative to expectations
30 per cent of sales coming from rural (management is targeting 40 per cent), and particularly with its technological edge over peers, MRCO
of Rs 460, implying a 26 per cent upside to the CMP
From a medium-term perspective, particularly if the targeted 7-8 per cent of sales come from new products, MRCO is one of the few companies
with potential to deliver 50-60 per cent returns over the next 2-3 years.