India's multinational Consumer goods company Marico Limited said it has more than 20 years of operations in Bangladesh and, hence, any adverse headwinds should not affect its competitive position much.
The resignation and fleeing of Bangladesh Prime Minister Sheikh Hasina, the announcement by the Bangladeshi Army on the formation of interim government and the prevailing unrest in the country could hit Marico sales in the short term.
The FMCG (fast moving consumer goods) major has exposure of 11-12 per cent of consolidated business to Bangladesh. Analysts noted that the Marico management is focusing on reducing the dependence on Bangladesh business and at the same time diluting its core portfolio with addition of new products.
Marico, as per analysts, said the company has diversified its international business and that it has reduced its dependency on coconut oil in Bangladesh and is diversifying into shampoo and baby oil. The FMCG major said it has more than 20 years of operations in Bangladesh and, hence, any adverse headwinds should not affect its competitive position much.
"We remain concerned about Bangladesh in Q2FY25. Other FMCG companies have highlighted a significant adverse impact in Q2 sales in Bangladesh due to massive protests. Marico has the highest exposure 11-12 per cent of consolidated business); for others, exposure is small," Nuvama said.
Kotak Institutional Equities said Marico has maintained its FY2025 guidance of double-digit revenue growth, with flat YoY margins, even as it is monitoring the situation in Bangladesh that contributed 11 per cent to its consolidated sales and 23 per cent to PAT in FY2024. The brokerage said Marico's risk reward is unfavourable. It suggested a fair value of Rs 625 on the counter.
Systematix Institutional Equities downgraded the stock to 'HOLD' rating from 'BUY' but revised its target to Rs 660 from Rs 615 earlier, in-line with its past 5-year average multiple. The brokerage sees no reason to ascribe a valuation discount to the long-period average.
"However, the stock has significantly appreciated, leaving little upside to our valuation. While we note the strong longterm growth potential of new businesses and steady core performance, we would wait for a better entry point to get constructive on the stock," it said.
Antique Stock Broking said it increased its target multiple to 50 times based on improvement in performance on the management initiatives, post June quarter results.
Vikram Kasat, Head of Advisory at PL Capital said the turmoil in Bangladesh is indeed worrying.
"Some of the notable names that come to mind are VIP, Emami, Marico, Dabur, Asian Paints, Pidilite, Tata Motors, and Hero MotoCorp, all of whom have significant operations there.
This unrest will undoubtedly damage the country's brand value in the eyes of US and European manufacturers, who often give Bangladesh preference. Consequently, the garments and textile sector in India may gain an advantage due to these ongoing protests and clashes," he noted. —Business Today (India)
