Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Marico Ltd
Upgrade post share price correction
[ EXTRACT]
Upgrade to Buy
We upgrade our rating from Neutral to Buy on valuation. We believe the share
price decline following management’s 14 September profit warning has brought
the valuation to an attractive level. We believe the strength of its flagship
Parachute brand will ensure good volume growth for the company. We think
management’s strategy of not increasing prices despite high commodity prices to
encourage consumers to upgrade during periods of inflation or economic
uncertainty will be viewed positively by investors due to strong volume growth.
Flat ROE, will remain under pressure near term
In FY11, ROE declined to 26%, approximately the FY01 level. ROE improved
through FY07 and then started to fall due to declining asset turnover. We expect
ROE to remain under pressure in FY12 but improve from FY13.
With all negatives factored in, expect good year ahead
With all the negatives factored in, any improvement on the cost front should result
in earnings upside for Marico, in our view. Extending its flagship Parachute brand
to the value added hair oil segment and recently the skin cream segment should
help Marico garner market share in these segments. We believe Marico will benefit
from: 1) rising incomes in rural India as consumers upgrade to branded hair oil and
2) higher spending on health foods and male grooming in India.
Valuation: upgrade rating to Buy, maintain Rs185.00 price target
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool. We assume a WACC of
10.8%.
Marico Ltd
Marico is the leading producer and distributor of hair oil, which it sells under the
Parachute and Nihar (33-35% of sales) brands. Other hair oils contribute 13% to
sales. The company also manufactures cooking oil under the Saffola brand (15%
of sales). It operates a chain of beauty and well-being clinics under the brand
name Kaya (7% of sales). International sales, mainly in Bangladesh, Egypt,
Malaysia, Singapore, South Africa, and the Middle East, contribute 23%.
Statement of Risk
We believe the potential risks for Marico include unfavourable copra price
movements, smaller-than-expected volume growth due to declining trends in
hair oil consumption and the failure to take incremental share from the
unorganised hair and edible oil market.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Marico Ltd
Upgrade post share price correction
[ EXTRACT]
Upgrade to Buy
We upgrade our rating from Neutral to Buy on valuation. We believe the share
price decline following management’s 14 September profit warning has brought
the valuation to an attractive level. We believe the strength of its flagship
Parachute brand will ensure good volume growth for the company. We think
management’s strategy of not increasing prices despite high commodity prices to
encourage consumers to upgrade during periods of inflation or economic
uncertainty will be viewed positively by investors due to strong volume growth.
Flat ROE, will remain under pressure near term
In FY11, ROE declined to 26%, approximately the FY01 level. ROE improved
through FY07 and then started to fall due to declining asset turnover. We expect
ROE to remain under pressure in FY12 but improve from FY13.
With all negatives factored in, expect good year ahead
With all the negatives factored in, any improvement on the cost front should result
in earnings upside for Marico, in our view. Extending its flagship Parachute brand
to the value added hair oil segment and recently the skin cream segment should
help Marico garner market share in these segments. We believe Marico will benefit
from: 1) rising incomes in rural India as consumers upgrade to branded hair oil and
2) higher spending on health foods and male grooming in India.
Valuation: upgrade rating to Buy, maintain Rs185.00 price target
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool. We assume a WACC of
10.8%.
Marico Ltd
Marico is the leading producer and distributor of hair oil, which it sells under the
Parachute and Nihar (33-35% of sales) brands. Other hair oils contribute 13% to
sales. The company also manufactures cooking oil under the Saffola brand (15%
of sales). It operates a chain of beauty and well-being clinics under the brand
name Kaya (7% of sales). International sales, mainly in Bangladesh, Egypt,
Malaysia, Singapore, South Africa, and the Middle East, contribute 23%.
Statement of Risk
We believe the potential risks for Marico include unfavourable copra price
movements, smaller-than-expected volume growth due to declining trends in
hair oil consumption and the failure to take incremental share from the
unorganised hair and edible oil market.
No comments:
Post a Comment