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Quick Pointers:

* MRCO guides for double-digit revenue growth led by volumes in FY25

* Price hikes in Parachute & Saffola edible Oils due to rising commodity prices

MRCO reported inline nos led by stable volume growth, positive pricing growth & favorable portfolio mix. We have cut our FY25/FY26/FY27 estimates by 2.4%/2.2%/2.8% given 1) Peaked out margin with no major expansion expected in near term and 2) Persistent sluggishness in Saffola/VAHO (32% of domestic sales) before recent price hikes. Innovation funnel remains strong with portfolio diversification and scale up in Foods, D2C portfolio & B2C acquisitions. Beardo is likely to end FY25 with double-digit EBITDA margins, MRCO plans to adopt the same strategy for scaling Digital-first franchises and targets double-digit margins by FY27. We factor in 11.2% sales growth & 9.8% PAT CAGR over FY25-27. We value MRCO at 46x FY27 EPS and assign a target price of Rs693 (Rs681 earlier). MRCO seems better placed than peers in current environment, Upgrade to Accumulate.

Sales up 7.6%, Domestic Volume up 5% (Ple: 5%): Volume Growth: overall domestic volumes up 5% (PLe: 3.0%) whereas Parachute rigid volumes up 4% (PLe: 5%). Saffola volumes remained flat YoY supported by positive pricing growth after 8 quarters. Revenues grew by 7.6% YoY to Rs26.6bn (PLe: Rs26.86bn). Gross margins expanded by 30bps YoY to 50.8% (Ple: 49.5%) EBITDA grew by 5% YoY to Rs5.2bn (PLe:Rs 5.3bn); Margins contracted by 48bps YoY to 19.6% (PLe:19.8%) A&P Spends expanded by 6bps YoY to 10.9% Adj PAT grew by 10% YoY to Rs3.88bn (PLe:Rs3.89bn) excluding Rs420mn of one off income pertaining to settlement of past litigation claims. Bangladesh/South-east Asia/MENA/SA registered growth of 8%/7%/43%/20% CCG

Concall takeaways: 1) Rural demand outpaced urban demand with buoyancy in consumption in top & upper middle class in foods/personal care. Food Inflation & overall muted sentiment affected consumption among the middle & lower middle class. 2) Pricing growth is expected to pick up in 2HFY25 in view of the sequential rise in commodity prices ( Copra/ Edible Oil). 3) MRCO has taken ~4% price hikes (which will flow through in 2H) in parachute portfolio & atleast ~15% price increase in response to recent hike in import duties which led to a steep increase in vegetable oil prices. 4) Offtakes remained healthy across key portfolios with more than 90% of the business either gaining or sustaining market share and penetration, both on a MAT basis. 5) Q2FY25 marked the extension of Project SETU to four more states, taking the tally to 10 states. It will be transformational in terms of restructuring GT profitability for long-term growth 6) MRCO continues to aggressively diversify the portfolio through the scale up of Foods and Premium Persona Care portfolios & aims at growing Foods at 20-25%+ CAGR to 2x of FY24 revenues in FY27. The Digital-first portfolio is expected to exit FY25 at an ARR of ~Rs.600 cr. and scale to 2x of FY24 ARR in FY27. 7) Beardo on course to deliver double digit EBITDA margin in FY25 8) MRCO reported 8% CCG in Bangladesh in spite of macro-economic headwinds but will eventually reduce its share owing to volatile nature

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