Multibagger stock turns ₹1 lakh to ₹3.85 Cr by giving 1 bonus share: Buy?

With a market value of Rs. 70,167.91 Cr, Marico Ltd. is a large-cap company operating in the fast-moving consumer goods (FMCG) industry. Through its portfolio of brands, including Parachute, Saffola, Saffola FITTIFY Gourmet, Saffola ImmuniVeda, Saffola Mealmaker, Hair & Care, Parachute Advansed, Nihar Naturals, Mediker, Coco Soul, Revive, Set Wet, Livon and Beardo, and Just Herbs, Marico is one of India’s leading consumer products companies. The international line of consumer products includes brands such as Parachute, Parachute Advansed, HairCode, Fiancée, Caivil, Hercules, Black Chic, Code 10, Ingwe, X-Men, Mediker SafeLife, Thuan Phat and Isoplus. With its headquarters in Mumbai, the company has a presence in more than 25 developing countries in Asia and Africa. Seven factories operated by the company are located in India at Puducherry, Perundurai, Jalgaon, Guwahati, Baddi and Sanand. By issuing only one free share, Marico Ltd. is one of the multibagger stocks that took investors from lakhpati to crorepati.

Marico Ltd share price history

On Friday, shares of Marico Ltd. ended trading on the NSE at Rs. 542.05 apiece, a fall of 1.35% from the previous close of Rs. 549.45. Compared to the 20-day average volume of 1,439,506 shares, the stock’s total trading volume on Friday was 1,834,851 shares. The stock has fallen 1.00% over the past year, but year-to-date has gained 5.44% so far in 2022. On the NSE, the stock had hit a high of 52 weeks of 607.70 on (October 18, 2021) and a 52 week low of 455.65 on (Jan 27, 2022) indicating that at the current market price the stock is trading 10.80% below the high and 18.96% above the low. The company reported developer equity of 59.48%, FII equity of 25.16%, DII equity of 8.67%, government equity of 0.09% and public equity of 6, 49% for the quarter that ended in June 2022.

Of 2.81 on July 6, 2001, at current market price, the stock price shot up tremendously, posting a multibagger return and an all-time high of 19,190.04%. Initially, if an investor had decided to invest 1 lakh then he had obtained a total sum of 35,587 shares of this company. Many years later, in 2015, on December 22, the company declared the free shares in a ratio of 1:1, which is a good sign for savvy investors. After this event, the number of investor shares increased to 71,174 from the original shareholding. Therefore, the aggregate value of the shares after the issuance of the bonus at the current market price is over Rs. 3.85 crores.

Marico’s T1FY23 Results

The company’s profit after tax (PAT) increased 4% year over year for 371 Cr at T1FY23 from 356 Cr at T1FY22. The company reported profit before tax (PBT) of 499 Cr at T1FY23, greater than 467 Cr in Q1FY22, an annual growth of 7%. The company said EBITDA increased 10% year-on-year to 528 Cr at T1FY23 from 481 Cr in Q1FY22 and the EBITDA margin jumped 159 basis points to 20.6% from 19.0%. In Q1FY23, the company’s revenue increased 1% year-over-year to reach 2,558 Cr from 2,525 Cr at T1FY22.

Should you buy Marico’s stock?

Research analysts at brokerage firm ICICI Securities have set a price target of 610 for Marico from a purchase range of 540-547, with a stop loss recommendation of 500. Analysts have set a target frame of 3 months for the stock to reach the target price.

They said in a research note that “in Nifty’s recent consolidation, mid and small cap stocks are seeing a catch-up exercise. We believe that the Nifty may continue its consolidation for some time after the strong rise seen over the past two months. However, further upside is likely to be seen in FMCG stocks where, apart from sector heavyweights, some mid-cap stocks are likely to perform in the coming sessions. Stocks like Marico, which has seen delivery-based buying interest, should regain positive momentum thanks to new positions in the futures segment.”

“Leveraged positions in the stock have declined significantly over the past two months as the stock has experienced a short-hedging trend. Current open interest in the stock is one of the lowest seen in six months in below 1 crore in shares, while the stock showed an upward trend with a long accumulation whenever open interest broke below 1 crore.We saw the first signs of new long additions in the stock, suggesting further upside on the back of further accumulation.The stock benefited from continued buying support near 505-510 levels. It has been trading above these levels for almost the last three series. At the same time, with continued put writing at 500 and 520 strikes, we expect downside risk to be limited. Additionally, Call OI of 540 strike is already experiencing a close in the September series, suggesting a positive bias in the stock. These positions should help him break the options range from the top,” they added.

Research analysts claimed that “the stock had one of the notable delivery-based actions around 510 last week. Since then it has been crawling north with the first signs of the stock establishing a base in the support zone. From July 2022 to now, the stock has seen timebase consolidation between the range of 510 and 550. Currently, all data points indicate that the stock is well positioned to cross the thresholds of 550 and could see a breakout of the current consolidation.”

Disclaimer: The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.

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