We can expect strong volume growth with margin expansion to drive an EPS growth of 22% in FY09-11. Marico''s "Parachute" brand has maintained market share over the past two years, with volume growth of 11-12% pa driven by the consumer shift from loose unbranded oil to branded oil.
The positioning of "Saffola" edible oil has been successfully transformed from a ''curative'' product to a ''preventive'' measure, thus driving increased penetration.
Although premium skin care is discretionary spending and likely to slow in the current environment, it provides Marico with a strong long-term growth avenue. BNP expect Kaya clinics to grow to 8% by FY11 from 5% of revenue in FY08 on aggressive new clinic additions, and contribute 7% of net profit versus almost 0% in FY09.
Marico is also exploiting the power of its two key brands by extending them to new products/variants, although estimate do not include any revenue from these new products.
Market Cap 4,887.23
EPS (TTM) 2.33
* P/E 34.44
* P/C 30.75
* Book Value 6.04
* Price/Book 13.29
Div(%) 65.50
Div Yield(%) 0.82
Market Lot 1.00
Face Value 1.00
Industry P/E 26.04
The target price based on 20x FY10 EPS, based on a PEG (price earning to growth ratio) of 0.9x, is in line with the historical 4-year average.A great safe and steady stock to buy for the long term investors.
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