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Strong growth outlook despite macro headwinds

We upgrade MRCO from Accumulate to BUY given

1) healthy demand outloo

2) EBITDA growth guidance raised to mid-20s vs. 20%+ earlier

3) advancement of Rs200bn revenue target to 2029 vs. 2030 earlier

4) subdued competitive intensity in Parachute, supporting near-term growth

5) sustained traction in Foods/FMCG and digital-first brands

6) Sustained traction in IBD with all non-Bangladesh markets growing CC sales in double digits.

MRCO has sustained strong momentum across Parachute, VAHO, Saffola Foods and B2C food and BPC brands. The company has guided sales of >Rs150bn and EBITDA growth of ~24-25% in FY27. It is embarking on SETU 2.0, with a focus on AI adoption and GTM expansion of its premium portfolio. We expect sustained growth, driven by strong double-digit growth in Foods/PC and Digital First portfolio, with an improving margin trajectory

While we expect margins to improve YoY, QoQ margins might be under pressure given 19% rise in Copra prices from bottom and increase in prices of other inputs like HDPE, LLP and Rice bran oil. We factor in ~130bps margin expansion and a CAGR of 17.1% in EPS over FY27-29. We value MRCO at 45x Sep28 EPS and assign a target price of Rs 958 (Rs940 earlier). Upgrade to Buy

Domestic Volumes increased 10%, Parachute volumes up 13%: Revenues grew by 11.9% YoY to Rs39bn (PLe: Rs38.99bn). Domestic volumes grew at 10%, Parachute volumes increased 13% in 2Q. Gross margins expanded by 547bps YoY to 48.1% (Ple: 45.5%). EBITDA grew by 26.6% YoY to Rs7.1bn (PLe:Rs 7.02bn); Margins expanded by 211bps YoY to 18.2% (PLe:18%). A&P Spends expanded by 166bps YoY to 11.6%. Adj PAT grew by 31.3% YoY to Rs5.5bn (PLe:Rs5.31bn) mainly due to 420bps lower tax rate.

International business: Bangladesh posted 5% CCG with sequential improvement despite demand softness due to inflation and high base. Vietnam grew 22% in CCG with healthy growth across the portfolio, and E-com acceleration. MENA delivered 15% CCG, led by strong performance in Gulf and focused execution. South Africa and NCD & exports recorded 15% and 17% CCG respectively.

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SEBI Registration number is INH000000933