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Marico (MRCO.BO)
In Line 2QFY12 Results
In line PAT growth — Consolidated revenues at Rs9.7bn increased ~26% Y/Y (~14%
Y/Y volume growth), a tad lower than expectations. However, better than forecast GMs
(down 470bps Y/Y, up 200bps QoQ) led to Rs1.2bn EBITDA, in line with our/street
ests. EBITDA margins declined 80bps Y/Y to ~12% as GM decline was offset by lower
A&P (flat Y/Y, ~9.7% of sales). A higher tax rate led to ~9% Y/Y PAT growth to Rs783m.
Steady domestic business — Strong 44% Y/Y domestic growth was driven by higher
pricing / mix, with a healthy ~14% Y/Y volume growth. Parachute volume growth
remained steady at ~10% Y/Y; Saffola and other hair oils growth slightly moderated
sequentially to ~11% / 26% Y/Y volume growth respectively. Adjusting for the lower
promotional volumes, Saffola growth would be ~14% (34% Y/Y value growth). Growth
in value-added hair oils may be lower going forward as the price hikes undertaken in
2HFY11 would now be in the base.
Near-term margin pressures — While copra prices (~40% of raw material costs) have
softened by ~11% QoQ, these are still higher by ~50% Y/Y. Other key inputs, safflower
prices (~13% of RM costs) increased ~24% Y/Y and rice bran by 46% in 2QFY12.
Margin pressures will likely continue, but are baked into consensus estimates to some
extent after the mgmt released a profit warning in mid 2QFY12.
Mixed international trends — International business (~25% of revenues) growth of
~19% Y/Y (14% organic + 19% from the Vietnam acquisition – 14% FX translation /
accounting changes in VAT in Bangladesh) was relatively slower sequentially. However
margins improved QoQ to ~11-12% (~10% in 1Q) due to likely mix / scale benefits.
Bangladesh performance remained steady; other countries were impacted by
a) depreciation of local currencies, b) food inflation and / or c) political uncertainties.
Kaya stabilizing — Kaya revenues (~7% of overall) rose 7% Y/Y reflecting 16% Y/Y
same store growth. 2Q PBT loss of Rs75m remained flat QoQ. Steps to spur demand
continue: a) new services (Aqua Advanced Fairness, Indulge), b) milestone programs
to bring back customers; & c) more products from Derma Rx (now 23% of revenues).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Marico (MRCO.BO)
In Line 2QFY12 Results
In line PAT growth — Consolidated revenues at Rs9.7bn increased ~26% Y/Y (~14%
Y/Y volume growth), a tad lower than expectations. However, better than forecast GMs
(down 470bps Y/Y, up 200bps QoQ) led to Rs1.2bn EBITDA, in line with our/street
ests. EBITDA margins declined 80bps Y/Y to ~12% as GM decline was offset by lower
A&P (flat Y/Y, ~9.7% of sales). A higher tax rate led to ~9% Y/Y PAT growth to Rs783m.
Steady domestic business — Strong 44% Y/Y domestic growth was driven by higher
pricing / mix, with a healthy ~14% Y/Y volume growth. Parachute volume growth
remained steady at ~10% Y/Y; Saffola and other hair oils growth slightly moderated
sequentially to ~11% / 26% Y/Y volume growth respectively. Adjusting for the lower
promotional volumes, Saffola growth would be ~14% (34% Y/Y value growth). Growth
in value-added hair oils may be lower going forward as the price hikes undertaken in
2HFY11 would now be in the base.
Near-term margin pressures — While copra prices (~40% of raw material costs) have
softened by ~11% QoQ, these are still higher by ~50% Y/Y. Other key inputs, safflower
prices (~13% of RM costs) increased ~24% Y/Y and rice bran by 46% in 2QFY12.
Margin pressures will likely continue, but are baked into consensus estimates to some
extent after the mgmt released a profit warning in mid 2QFY12.
Mixed international trends — International business (~25% of revenues) growth of
~19% Y/Y (14% organic + 19% from the Vietnam acquisition – 14% FX translation /
accounting changes in VAT in Bangladesh) was relatively slower sequentially. However
margins improved QoQ to ~11-12% (~10% in 1Q) due to likely mix / scale benefits.
Bangladesh performance remained steady; other countries were impacted by
a) depreciation of local currencies, b) food inflation and / or c) political uncertainties.
Kaya stabilizing — Kaya revenues (~7% of overall) rose 7% Y/Y reflecting 16% Y/Y
same store growth. 2Q PBT loss of Rs75m remained flat QoQ. Steps to spur demand
continue: a) new services (Aqua Advanced Fairness, Indulge), b) milestone programs
to bring back customers; & c) more products from Derma Rx (now 23% of revenues).
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