Marico::Takeaways Motilal Oswal Annual Global Investor Conferences

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Key Takeaways
Parachute volume growth intact; hair oils displaying strong momentum
 Volumes grew 15% YoY in 1QFY12, backed by 10% growth in Parachute, 32% in
hair oils, and 15% in Saffola.
 Parachute Coconut Oil volume growth came as a positive surprise, given 32% price
increase. Value-added hair oil volumes have increased 32%, led by Parachute
Advanced, Shanti Amla and the introduction of new launches like cooling oil and
ayurvedic oil in new markets.
Intent to reduce dependence on copra; aggressive pricing of amla oil to sustain
 MRCO wants to reduce dependence on copra in the long term by increasing the
share of value-added hair oils. Its market share in the amla oil segment has increased
from 7% to 15% while it has garnered 9-10% share in cooling oil in South India.
 MRCO plans to maintain aggressive pricing in Shanti Amla and expand its franchise,
as it is aiming at gross margin of 45% and EBITDA margin of 12-15% in this segment.
Kaya being transformed
 Kaya Skin Care operates 105 clinics; like-to-like sales are increasing in mid teens.
 Kaya's business model has seen a transformation, with focus on increasing the
frequency of consumer visits and projecting it as a destination for beauty solutions
rather than dermatology solutions.
Saffola being extended to other wellness categories
 MRCO is extending Saffola from oils to other food product categories to capture
various food consumption options during the day. It has launched Arise again and
has launched a basmati variant of Arise. Oats have received encouraging response
and MRCO has launched a new flavor in oats.
International business: Looking at leveraging cross-selling opportunities
 MRCO is looking at leveraging cross-selling opportunities across segments. It has
launched Haircode hair dye in Bangladesh, which has garnered 30% market share.
 Middle East and Egypt business remains under pressure due to pricing restrictions
and unrest in countries like Libya, Syria and Egypt. Recovery will be gradual and
near-term pressures are likely.
Valuation and view
 Near-term margin pressures are likely to sustain due to high input costs and
aggressive pricing-led growth strategy in hair oils.
 International business excluding Bangladesh will remain under pressure due to unrest
and pricing restrictions in the Middle East and Egypt.
 The stock trades at 29.4x FY12E EPS of INR5.3 and 24.5x FY13E EPS of INR6.4.
Neutral.