Marico - Problems More Than Solutions: ICICI Securities

ICICI Securities Report

Consensus (including us) has four expectations from Marico Ltd. –

1. drive market share gains led volume growth in coconut oil portfolio,

2. consistency in the performance of added hair oil with expansion into premium segment,

3. drive penetration-led volume growth in Saffola edible oil, and

4. continued revenue momentum in Foods (to provide comfort on the expansion of Saffola franchise).

While Marico has been consistently taking steps (proactive pricing actions, launch of premium VAHO) towards delivering these expectations, macro headwinds (commodity prices volatility, rural slowdown etc.) have led to undesirable outcomes in the near term for core segments.

There are lingering questions about structural growth deceleration for hair oil too (as observed in performance of all hair oil players). We believe improvement of operating environment is important as it may provide enabling conditions for Marico’s expansion into new segments (foods and premium VAHO).

Marico should also start seeing the benefits of distribution expansion in both urban (chemist channel) and rural regions. Healthy foods and digital-first brands’ portfolios continue to trend well and are likely to provide another leg to growth).

We continue to believe that Marico's leadership which has a strong track record of outperformance will find solutions in long term.

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