On Wednesday, CLSA updated its assessment of Marico Ltd (MRCO:IN), raising the price target to INR 482.00 from the previous INR 470.00. Despite this increase, the firm maintained its Underperform rating on the stock. The adjustment follows Marico's second-quarter financial year 2025 performance, which revealed sales figures and margin outlooks that fell short of expectations.
Marico reported 2QFY25 sales of Rs 26.6 billion, which was slightly below both CLSA's estimate and the Visible Alpha consensus. The company's Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) also underperformed, coming in at Rs 5.2 billion, a 5% year-over-year growth, but 6% below the estimates. The lower-than-expected results were attributed to increased input costs and a negative shift in the margin mix.
The financial report detailed that Marico's higher-margin core businesses grew by only 2% year-over-year, while its lower-margin segments saw a more substantial growth of 30% year-over-year. This imbalance contributed to the weaker margin outlook for the company.
In response to these results, CLSA has revised its earnings per share (EPS) estimates for Marico for the fiscal years 2025 to 2027. The firm anticipates a slight compression in margins and has adjusted EPS estimates downward by 2-3%. The new price target of INR 482.00 reflects this revised outlook and is based on a September 2026 cut-off valuation.
The updated assessment by CLSA indicates caution due to Marico's recent performance, with the Underperform rating suggesting that the stock might not measure up to the market or sector performance in the near term.
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