The company had earlier increased prices on the back of rising raw material costs. It can now choose to pass on the benefits to consumers to a certain extent. Additional marketing spends can also help consolidate its position in the market. Both these factors will improve its competitive position.
The company had earnings before interest, tax, depreciation and amortisation (Ebitda) margin of around 17 per cent in the September quarter. The Ebitda margin is a measure of how much operating profit the company makes as a percentage of its sales.
The reported margins came at a time when copra prices were at Rs 10,496 per 100 kilograms. This has fallen to Rs 9,600 in November. This 8.5 per cent further decline since the end of the September quarter is a positive. The management had indicated in an earnings call that the softening copra prices would result in higher margins in the second half of the year, even with limited copra price correction.
Bloomberg estimates show that over 90 per cent of analysts tracking the stock has a buy or hold rating on the stock. However, the consensus target price has almost been breached. This would indicate that room for upside is limited