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High copra prices hit margins, volume growth remains strong…
Marico’s Q3FY11 results were in line with our estimates with sales
growing by 22.1% to | 817.8 crore led by ~15% volume growth and ~7%
price led growth. EBITDA margin dipped by 260 bps to 12.2%, led by
higher raw material cost. Raw material cost increased from 39.2% of the
sales in Q3FY10 to 43.1% in Q3FY11 due to higher copra and rice bran
prices. Interest cost increased by 19.5% to | 7.6 crore and other income
increased by 21.2% to | 6.9 crore during the quarter. Net profit rose by
10% to | 69.5 crore on the back of higher EBITDA and other income.
ƒ Egypt disturbances may impact production temporarily
Egypt has been Marico’s manufacturing hub for Middle East and North
Africa (MENA) operations that contribute ~8% to the company’s revenues.
The company had to shut down production facilities in Egypt temporarily
due to disturbances in the country, which we believe could negatively
impact the supply in the MENA region. Though the company has plants to
supplement the supplies from India, any prolonged closure of the facility
would affect the sales in the region in Q4FY11.
Valuation
At the current market price of | 126, the stock is trading at 27.9x and 20.3x
its FY11 and FY12 estimated EPS of | 4.5 and | 6.2, respectively. The
company has witnessed a volume growth of 31% in hair oils and 13% and
5% price rise in Saffola and Parachute, respectively. Simultaneously,
earnings from Kaya have also improved by | 2.8 crore YoY in Q3FY11. We
believe the rising copra and safflower prices would continue to haunt
margins as it would not be possible to pass on the entire increased cost to
consumers. We have valued the stock at 23x its FY12E EPS of | 6.2 with a
price target of | 142.6 per share with a BUY rating
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
High copra prices hit margins, volume growth remains strong…
Marico’s Q3FY11 results were in line with our estimates with sales
growing by 22.1% to | 817.8 crore led by ~15% volume growth and ~7%
price led growth. EBITDA margin dipped by 260 bps to 12.2%, led by
higher raw material cost. Raw material cost increased from 39.2% of the
sales in Q3FY10 to 43.1% in Q3FY11 due to higher copra and rice bran
prices. Interest cost increased by 19.5% to | 7.6 crore and other income
increased by 21.2% to | 6.9 crore during the quarter. Net profit rose by
10% to | 69.5 crore on the back of higher EBITDA and other income.
ƒ Egypt disturbances may impact production temporarily
Egypt has been Marico’s manufacturing hub for Middle East and North
Africa (MENA) operations that contribute ~8% to the company’s revenues.
The company had to shut down production facilities in Egypt temporarily
due to disturbances in the country, which we believe could negatively
impact the supply in the MENA region. Though the company has plants to
supplement the supplies from India, any prolonged closure of the facility
would affect the sales in the region in Q4FY11.
Valuation
At the current market price of | 126, the stock is trading at 27.9x and 20.3x
its FY11 and FY12 estimated EPS of | 4.5 and | 6.2, respectively. The
company has witnessed a volume growth of 31% in hair oils and 13% and
5% price rise in Saffola and Parachute, respectively. Simultaneously,
earnings from Kaya have also improved by | 2.8 crore YoY in Q3FY11. We
believe the rising copra and safflower prices would continue to haunt
margins as it would not be possible to pass on the entire increased cost to
consumers. We have valued the stock at 23x its FY12E EPS of | 6.2 with a
price target of | 142.6 per share with a BUY rating
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