On Wednesday, Investec has adjusted its outlook on Marico Ltd (MRCO:IN), revising the company's price target to INR692.00 from the previous INR702.00, but has opted to keep a Buy rating on the stock. The decision follows Marico's second-quarter performance, which aligned with the trading update.
The company's management remains optimistic despite facing a tough demand environment, anticipating an 8% year-over-year volume growth for the upcoming two quarters.
Marico's steady operating results in Q2 have been acknowledged, with the company's management expressing confidence about future growth. Although margin expansion is not expected, the firm believes that Marico's international business and increased profitability in direct-to-consumer (D2C) brands could potentially balance any margin shrinkage. This comes as the company projects an uptrend in revenue growth through the fiscal year 2025 estimates (FY25E).
Investec's valuation of Marico is based on a multiple of 45 times the company's estimated earnings per share (EPS) for September 2026. This valuation represents a 15% discount compared to Hindustan Unilever (LON:ULVR) Limited (HUL), one of Marico's key competitors. Despite the slight decrease in the price target, the financial services company maintains its positive stance on Marico's stock.
The analyst's commentary highlights Marico's ability to navigate the challenging demand landscape while setting sights on near-term volume growth. The growth expectations are bolstered by the prospects of Marico's international segment and the performance of its D2C brands, which are anticipated to contribute to the company's profitability.
In conclusion, while the price target has been marginally reduced, the maintained Buy rating indicates a continued optimism in Marico's growth trajectory and its strategic business positioning for the coming years. The company's focus on international expansion and brand profitability is expected to play a crucial role in its overall financial performance.
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