Anand Rathi, Marico -Enters Vietnam by acquiring ICP; Buy

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Marico
Enters Vietnam by acquiring ICP; Buy
Marico entered Vietnam via an 85% stake in ICP, a hair-care
company. ICP is a market leader in male shampoos with its XMen
and L’Ovita brands. The management team, including
CEO Dr Phan Cong, has been retained.

 The acquisition. Marico acquired an 85% stake in International
Consumer Products Corp. a leading hair-care company in Vietnam
for an undisclosed amount. The acquisition was funded by ECBs
at Libor+300bps as well as internal accruals. In CY10, ICP had
revenue of US$25m and EBITDA margin of ~10%. It recorded a
revenue CAGR of 23% over CY07-10 and has retained margins of
~10% in the past three years.
 About ICP. ICP focuses on hair care, with strong brands X-Men
(with a 35% market share in men’s shampoos) and L’Ovite
(focused on personal care). Other products under the X-Men
brand are conditioners and hair styling products. 20% of ICP’s
revenues come from food products under the Thuan Phat brand.
 Retains management team. ICP’s management team has been
retained, including Dr. Phan Cong, who continues as CEO. He
also holds the balance 15% stake in ICP.
 Valuation and risks. We value the stock at `158, at a target PE
of 24x FY12e earnings. Our target PE is at a 35% premium to the
12-month-forward Nifty PE (five-year average premium: 25%).
Key risks: higher raw material prices and keener competition.