We hosted the Marico management for an NDR in Europe. The company intends to reinvest the likely GM gains to accelerate growth in its new growth engines (health foods and male grooming). Saffola’s performance remains the only major area of concern. Underlying market growth momentum, driven by rural demand acceleration, is healthy. Management expressed confidence in its ability to deliver 13- 15% topline growth CAGR in the medium term. We remain constructive. Add.
Resurgence in rural growth, led by a combination of recent stimulus as well as benefits of structural measures like direct benefit transfer and indirect tax rate cuts, is likely to sustain and drive overall market volume growth momentum, per MRCO management. Return of 10% volume growth for the sector as a whole may be difficult; however, 6-8% volume growth for the sector and slightly better (8-10%) for players who execute well, looks likely. Share gains from the unorganised/ unbranded players will be gradual as GST compliance picks up.
The management reiterated its target of 13-15% topline growth in the medium term, broken into (a) 8-10% volume growth, (b) 3-4% pricing growth and (c) 1-2% premiumization uplift. From a portfolio perspective, the company expects (a) India CNO (parachute) to deliver 9-11% value growth (5-7% volumes), (b) India VAHO to grow in the mid-to-high-teens, (c) Saffola to grow in high single digits, (d) health foods, serums and male grooming to grow 20% and (e) International business to grow in low double digits (in constant currency terms). With this growth construct, the company expects the contribution of the CNO portfolio to reduce to mid- 20s (as % of India business) from the current mid-30s; this would reduce GM volatility.
Source: Financial Express