ICICI Securities maintains a buy rating on Orkla India despite trimming its target price, citing robust revenue growth driven by regional and digital expansion, balanced against rising commodity costs and margin compression.
ICICI Securities has kept a Buy rating on Orkla India, even as it trimmed its target price to ₹800 from ₹850, implying about 41% upside from the current share price, according to a report cited by Moneycontrol. The move came after the packaged-foods maker posted its strongest revenue growth in eight quarters, but also showed renewed pressure on margins as higher commodity costs and planned investments weighed on profitability.
The brokerage said Orkla India’s revenue rose 10.4% year on year to ₹660 crore in the June quarter, helped by 11.5% growth in product sales and 1.7% volume growth. The performance was broad-based: spices climbed 11.3%, convenience foods advanced 11.9%, domestic sales rose 11.8% and overseas revenue increased 10.1%, led by 18.1% growth in the Gulf Cooperation Council markets. Modern trade remained a bright spot with 18.6% growth, while digital channels, including quick commerce, surged 38.1% and lifted their share of domestic sales to 8.9% from 7.2%.
The encouraging top-line trend was partly offset by weaker margins. ICICI Securities said gross margin slipped 125 basis points to 44.4% because of higher spice costs, while EBITDA margin fell 165 basis points to 17.1%. EBITDA rose just 0.7% to ₹112.5 crore. The brokerage cut its FY27 and FY28 earnings estimates by about 5% and 3%, respectively, and now expects revenue, EBITDA and PAT to compound at 9.5%, 11% and 11.5% respectively over FY26-FY28.
Even so, the investment thesis remains tied to execution rather than demand weakness. ICICI Securities pointed to Project Bolt, a restructuring of distribution in Kerala and further investment in digital commerce as the main levers for recovery. Management has highlighted early progress in Kerala, along with regional product innovation, premiumisation in spices, a wider convenience-foods range and continued strength in Gulf markets. The brokerage also flagged two risks: commodity-price volatility and competition from smaller unorganised players with lower cost structures.
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