Marico Ltd

Money Times - - Stock Watch -

(BSE Code: 531642) (CMP: Rs.381.50) (FV: Re.1)

In­cor­po­rated in 1988, Mum­bai based Marico Ltd man­u­fac­tures and mar­kets con­sumer prod­ucts such as co­conut oil, hair oils, re­fined ed­i­ble oils, anti-lice treat­ments, fab­ric care, func­tional and other pro­cessed foods, hair creams and gels, hair serums, sham­poos, shower gels, hair re­lax­ers and straight­en­ers, de­odor­ants and other re­lated con­sumer prod­ucts and by-prod­ucts. It mar­kets its prod­ucts un­der the fol­low­ing brands: Para­chute, Ni­har, Saf­fola, Hair & Care, Re­vive, Mediker, Livon, Set-wet, Fi­ancée, Hair Code, Caivil, Her­cules, Black Chic, Code 10, Ingwe, X-men, Thuan Phat, etc. Its dis­tri­bu­tion net­work com­prises re­gional of­fices, car­ry­ing and for­ward­ing agents, re­dis­tri­bu­tion cen­ters and dis­trib­u­tors. The over­all de­mand en­vi­ron­ment in Q3FY19 was good with mar­ket share gains across key port­fo­lios. The pos­i­tive sen­ti­ment dur­ing the quar­ter was led by fes­tive sea­son and ex­pec­ta­tions of a stim­u­lus from favourable gov­ern­ment ini­tia­tives. The ru­ral seg­ment con­tin­ues to do well on the back of good de­mand. Mean­while, growth in ur­ban ar­eas was driven by newer chan­nels. Dur­ing the quar­ter, Para­chute grew healthily while Saf­fola re­mained sub­dued. Its new port­fo­lios i.e. Pre­mium Hair Nour­ish­ment, Male Groom­ing and Healthy Foods grew in line with ex­pec­ta­tions. It launched a cou­ple of new prod­ucts dur­ing the quar­ter like ‘Hair & Care Dry Fruit Oil’ and ‘Saf­fola FITTIFY Gourmet’. Marico’s in­ter­na­tional busi­ness saw de­cent growth led by port­fo­lio di­ver­si­fi­ca­tion in Bangladesh and en­hanced GTM (goto-mar­ket) ini­tia­tives in Viet­nam, sup­ported by rea­son­able growth in MENA (Mid­dle East and North Africa). Three fac­tors un­der­pin our con­fi­dence on Marico’s earn­ing prospects: (a) likely be­nign raw ma­te­rial en­vi­ron­ment over the next 18-24 months (Co­pra ac­counts for 40-50% of the ma­te­rial cost); (b) strong per­for­mance of Para­chute vol­umes in re­cent quar­ters and healthy growth prospects in the VAHO seg­ment; and (c) good trac­tion be­ing wit­nessed on new prod­uct devel­op­ment. Cru­cially, at a time when both sec­tor mul­ti­ples as well as abil­ity of peers to pass on the emerg­ing ma­te­rial cost pres­sures are un­der ques­tion, Marico pro­vides far higher vis­i­bil­ity com­pared to its peers. More­over, with over 30% of sales com­ing from ru­ral (man­age­ment’s tar­get is 40%) and par­tic­u­larly with its tech­no­log­i­cal edge over peers, Marico is emerg­ing as an in­ter­est­ing play on ru­ral growth.

Tech­ni­cal Out­look: The Marico share looks good on the daily chart for medium-term in­vest­ment. It has bro­ken out of the spike pat­tern formed on the daily chart. The stock trades near its all-time high and above all im­por­tant mov­ing av­er­ages like the 200 DMA level on the daily chart.

Start ac­cu­mu­lat­ing at this level of Rs.381.5 and on dips to Rs.350 for medium-to-long term in­vest­ment and a pos­si­ble price tar­get of Rs.450+ in the next 12 months.

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