On Wednesday, Citi adjusted its outlook on Marico Ltd (MRCO:IN), reducing the price target to INR750 from the previous INR765. The firm sustained a Buy rating on the stock. The revision follows Marico's second-quarter consolidated and domestic revenue growth of 8% year-over-year, which was primarily driven by a 5% increase in volume in its core business in India.
Marico's core business, which includes products like Parachute and Saffola oils, demonstrated an improving trajectory with an acceleration in volume and pricing. The value-added hair oils (VAHO) segment and lower consumption in certain categories saw a decline in revenue by 8% year-over-year.
Despite this, the firm anticipates continued growth in the Parachute brand, aided by formalization tailwinds and price hikes of 4% for Parachute and 15% for Saffola oils.
The company's foods and premium personal care segments are reported to be growing faster due to innovation and premiumization strategies. However, Citi noted that Marico might experience some pressure on profitability in the fiscal year 2025 due to input cost inflation, though the impact on second-half EBITDA margins is expected to be less severe.
Marico's management has guided a 50 basis points year-over-year improvement from demand slowdown in urban areas and potential benefits from initiatives aimed at enhancing distributor return on investment and Project SETU, which seeks to increase direct reach and offer a wider assortment at stores. Citi reaffirms its Buy rating based on these factors.
InvestingPro Insights
To complement Citi's analysis of Marico Ltd (MRCO:IN), recent data from InvestingPro offers additional perspective on the company's financial health and market position. As of the last twelve months ending Q2 2025, Marico reported revenue of $1,194.72 million, with a notable revenue growth of 3.56%. This aligns with the company's reported 8% year-over-year growth in consolidated and domestic revenue mentioned in the article.
Marico's gross profit margin stands at an impressive 50.66%, reflecting the company's strong pricing power and efficient cost management. This robust margin supports the InvestingPro Tip that Marico boasts "impressive gross profit margins," which is particularly relevant given the article's mention of potential pressure on profitability due to input cost inflation.
Another InvestingPro Tip highlights that Marico "holds more cash than debt on its balance sheet." This strong financial position could provide the company with flexibility to navigate potential challenges and invest in growth initiatives, such as the innovation and premiumization strategies mentioned in the article.
It's worth noting that Marico is trading at a P/E ratio of 53.09, which the InvestingPro Tips characterize as "trading at a high earnings multiple." This valuation metric suggests that investors have high expectations for Marico's future growth, possibly factoring in the anticipated benefits from initiatives like Project SETU and the improving trajectory in its core business.
For investors seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for Marico, providing a deeper understanding of the company's financial health and market position.
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