Marico Shares Hit A Record High As Credit Suisse Hikes Target Price Citing Saffola's Potential

Shares of Marico Ltd. jumped to a record high after Credit Suisse raised its price target on the consumer goods maker, citing a huge potential for its brand Saffola.

Saffola—marketed as a safer alternative in a country where people suffer from diseases like diabetes and hypertension—scores on two key factors: possibility of extending the brand to other categories and potential for a new entrant in target categories, according to the research house.

Saffola has extended honey, soya chunks, health supplements and healthy noodles in FY21, Credit Suisse said in a report. “Honey and soya chunks hold the most promise as these are fast growing categories with large unbranded consumption, and do not have more than two major players.”

Saffola, according to Credit Suisse, also has a long runway as it dominates the premium edible oil segment with 81% market share, and more consumers are adopting healthier alternatives with rising income and consciousness.

The research firm also sees Saffola Foods reach Rs 740 crore in revenue in FY24, with oats witnessing 15-20% annual growth rate. It expects honey and soya chunks to touch more than Rs 100 crore in revenue.

Marico’s relative valuations to peers in the past, Credit Suisse said, have improved when non-Parachute brands deliver strong growth, and it expects this to happen again over FY21-23 with the Saffola expansion.

The research firm maintained its ‘outperform’ rating on the FMCG stock, and raised target price to Rs 600 from Rs 490 earlier.

Shares of Marico rose as much as 4.5% around noon on Tuesday to Rs 532.60, the highest since May 3, 1996. Of the 43 analysts tracking the stock, 35 have a ‘buy’ rating, seven suggest a ‘hold’ and one recommends a ‘sell’, according to Bloomberg data. The average of 12-month consensus price targets implies a downside of 8.7%.

The stock has gained 31.8% so far this year compared with the S&P BSE Sensex’s 10.14% advance.