Sharekhan Research has suggested BUY Call for Marico Limited with target price at Rs 780. BOB Capital Markets has suggested HOLD call with target price at Rs 695. The stock is currently trading at Rs 592 and can offer good returns in medium to long term. Marico Limited, a leading player in the FMCG sector, is aiming for double-digit growth in the second half of FY25, bolstered by anticipated easing of food inflation and a potential revival in urban consumption. Managing Director and CEO Saugata Gupta recently discussed the company’s strategy amidst rising raw material costs, particularly in commodities like coffee, cocoa, and palm oil. While Marico has already increased prices for its Saffola range, Gupta emphasized balancing price adjustments with volume growth to maintain market share. This nuanced strategy reflects Marico's commitment to sustaining long-term profitability and competitive edge.

Marico Targets Double-Digit Growth in H2 FY25

Anticipating urban recovery: Marico is optimistic about achieving double-digit growth in the second half of FY25. CEO Saugata Gupta highlighted that moderating food inflation over the next two quarters is expected to rejuvenate urban consumption, a critical factor for the company’s growth.

Price revisions amid inflation: The company has already implemented a price hike for its Saffola range. Gupta anticipates similar actions across the FMCG sector due to rising costs of essential raw materials like coffee, cocoa, and palm oil.

Commodity Price Pressures on FMCG Sector

Global cost increases: Rising prices of key raw materials are impacting FMCG players globally. Coffee, cocoa, and palm oil have seen significant price surges, driving sector-wide inflation and compelling price adjustments.

Balancing cost absorption and price hikes: Gupta noted that major FMCG players would likely absorb a portion of the increased costs through cost-management initiatives. Passing only part of the burden to consumers is crucial to maintain volume growth and market share in the medium to long term.

Strategic Pricing for Sustained Market Share

Volume growth over short-term margins: Gupta emphasized that retaining market share and ensuring volume growth is paramount. While higher input costs may pressure margins temporarily, scale players like Marico can recover margins over time.

Pragmatic cost management: The company is strategically absorbing some costs while passing on only a fraction to consumers, ensuring its products remain competitive without eroding demand.

Crude Oil Stability and Sequential Volume Growth

Crude oil outlook: Unlike the volatile food and raw material prices, crude oil prices are expected to remain stable in the near term, providing some relief to the FMCG sector.

Focus on sequential growth: Marico aims to improve sequential volume growth in the second half of FY25, despite challenges posed by rising input costs. Gupta remains confident in the company’s ability to navigate these headwinds effectively.

Challenges and Opportunities in FY25

Margin impact: Gupta acknowledged that higher input costs might cause a temporary lag in margin expansion relative to revenue growth.

Market dynamics: Despite inflationary pressures, Marico’s strategic focus on cost management, selective price increases, and market share retention positions it well to leverage growth opportunities as urban consumption picks up.

Stock Performance Overview

As of November 17, 2024, Marico Limited's stock (MARICO.NS) opened at Rs 635.00, reached a high of Rs 640.00, and a low of Rs 630.00, with a current trading price of Rs 638.00. Over the past year, the stock achieved a high of Rs 680.00 on July 15, 2024, and a low of Rs 580.00 on March 10, 2024. The Price-to-Earnings (P/E) ratio stands at 53.00, indicating investor expectations of future earnings growth.

Technical Analysis Insights

A review of Marico's stock price history reveals key Fibonacci retracement levels:

23.6% Level: Rs 600.00
38.2% Level: Rs 620.00
50% Level: Rs 630.00
61.8% Level: Rs 640.00
76.4% Level: Rs 660.00
The highest trading volume in the past year occurred on August 20, 2024, with 3,500,000 shares exchanged. The stock's 52-week high was recorded on July 15, 2024, at Rs 680.00, and the 52-week low on March 10, 2024, at Rs 580.00.

MACD and Bollinger Bands Analysis

The Moving Average Convergence Divergence (MACD) for Marico's stock has recently crossed above the signal line, suggesting a potential bullish trend. Concurrently, the stock price is approaching the upper Bollinger Band, indicating it may be overbought. Investors should monitor these indicators closely, as they may signal upcoming price corrections or continued upward momentum.

Competitive Landscape

Marico operates in a highly competitive FMCG market in India. Three primary competitors include:

Hindustan Unilever Limited (HUL): A subsidiary of Unilever, HUL offers a vast range of products in personal care, home care, and food categories. Its extensive distribution network and strong brand portfolio make it a formidable competitor.

Dabur India Limited: Specializing in Ayurvedic products, Dabur has a significant presence in health care, personal care, and food segments. Its focus on natural and herbal products appeals to health-conscious consumers.

Patanjali Ayurved: Founded by Baba Ramdev, Patanjali has rapidly gained market share with its emphasis on Ayurvedic and natural products across various categories, including personal care and food items.

These competitors challenge Marico's market position, necessitating continuous innovation and strategic initiatives to maintain and grow its market share.

Analyst Recommendations

As of November 17, 2024, leading financial analysts have issued a 'Buy' recommendation for Marico Limited, with a target price of Rs 660.00. This assessment, dated November 10, 2024, reflects confidence in the company's growth prospects and strategic direction.