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Marico Limited (MRCO.BO)
Research Tactical Idea
We believe the share price will fall in absolute terms over the next 30 days.
After the ~18% fall in Copra prices from the recent peak, we calculate the market is implying that over 55% gross margin
(similar to previous peak in F10) is sustainable in the key Parachute portfolio. We think ~45% is more likely. We expect
Marico to pass through input cost benefits to sustain volume growth momentum, capping margin expansion at 30bps over
the next three years. Marico has outperformed the market by ~45% YTD and by ~7% over the last month making
short-term valuations much less compelling.
We estimate that there is about a 70% to 80% or "very likely" probability for the scenario.
Estimated probabilities are illustrative and assigned subjectively based on our assessment of the likelihood of the
scenario.
Stock Rating: Underweight
Industry View: Cautious
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Marico Limited (MRCO.BO)
Research Tactical Idea
We believe the share price will fall in absolute terms over the next 30 days.
After the ~18% fall in Copra prices from the recent peak, we calculate the market is implying that over 55% gross margin
(similar to previous peak in F10) is sustainable in the key Parachute portfolio. We think ~45% is more likely. We expect
Marico to pass through input cost benefits to sustain volume growth momentum, capping margin expansion at 30bps over
the next three years. Marico has outperformed the market by ~45% YTD and by ~7% over the last month making
short-term valuations much less compelling.
We estimate that there is about a 70% to 80% or "very likely" probability for the scenario.
Estimated probabilities are illustrative and assigned subjectively based on our assessment of the likelihood of the
scenario.
Stock Rating: Underweight
Industry View: Cautious
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