Marico
Recommendation: Buy
Price target: Rs70
Current market price: Rs63
Exiting from non-focus business
Key points
- Marico has exited from its processed food business by divesting its brand Sil to Scandic Food Pvt Ltd, the Indian subsidiary of Good Food Group A/S.
- Sil, the no.2 brand in jams (no.1 is Hindustan Unilever’s Kissan) in India, has a market share of 8%. The brand was part of Marico’s non-focus portfolio, contributing around 1% to the total turnover of the company.
- The company is aiming at rationalising its portfolio, so that it can focus on the beauty and wellness segment. This divestment will help Marico to focus on its core beauty and wellness portfolio.
- Marico's business model has multiple revenue drivers that make us bullish on the company's prospects. The company also has a strong foothold in the domestic haircare and edible oil markets. In the absence of details of the deal, we would revise our estimates as and when the details are available to us. We remain positive on Marico’s businesses and maintain our Buy recommendation on the stock with a price target of Rs70. At the current market price of Rs63, the stock is trading at 18.9x its FY2009E earnings per share (EPS) of Rs3.34.
