Marico - Result Update – Buy ::Edelweiss

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�� Robust revenue growth following price increases
Marico’s Q4FY11 revenue rose ~24.1% Y-o-Y to INR 7.47 bn versus our estimate of INR
7.58 bn. Volume growth was healthy at 5% followed by 19% price increases Y-o-Y. PAT
jumped 40% Y-o-Y to INR 716 mn following exceptional gains of INR 755 mn.

�� Parachute and Saffola volumes sturdy
Parachute and Saffola volumes grew ~5% and 14% Y-o-Y, respectively. The company’s
international business continued to surge, up ~24% Y-o-Y, driven by ~13% volume- and
~11% price-led growth. However, due to 3% INR appreciation, overall reported growth
was 21%.
�� Kaya: Revenue increases including Derma RX
Kaya skin clinics posted revenue growth of 41% Y-o-Y Q4FY11, bolstered by same store
clinic sales growth of ~6% Y-o-Y excluding Derma RX.
�� EBITDA flat; margins decline
Marico earned EBITDA of INR 788 mn during the quarter. EBITDA margin dipped 356bps
Y-o-Y. Lower A&P and other expenditure contributed 583bps and 77bps, respectively.
Higher staff costs impacted 112bps. These savings were offset by higher COGS, which
jumped 905bps in Q4FY11. The company’s primary focus is on growing its brand
franchise rather than increasing margins.
�� Outlook and valuations: Fairly valued over near term; maintain ‘BUY’
The company is eyeing growth through low unit packs (LUPs), rural markets, focus on
non-coconut hair oil and new product initiatives in the food segment under Saffola.
Kaya’s domestic business, which we believe is an overhang in the near term, is a key
concern. Marico expects copra price to correct in the near future. Hence, we maintain
‘BUY’ recommendation on the stock. On relative return basis, the stock is rated ‘Sector
Performer’.