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Strong operational performance; 16% domestic volume growth: Marico
reported strong operational Q3Y12 performance, with 16% domestic volume
growth (13% overall) and 300bps gross margin expansion being the key
highlights. Notwithstanding the price hikes in its core brands and general
inflationary headwinds to consumer wallets, volume growth of 16% reinforces
MRCO’s dominant brand franchise. Sales, EBITDA and PAT came in at Rs10.56bn
(up 29% YoY), Rs1.22bn (up 22.1% YoY) and Rs841m (up 21%YoY), against our
expectations of Rs10bn, Rs1.19bn and Rs810m, respectively. Recurring PAT
adjusted for exceptional grew solid 25%. Parachute, Saffola and Value-added
hair oils posted 13%, 15% and 2% volume growth, while Kaya reported 15%
same store clinic growth. International division delivered 16% organic revenue
growth.
Softening in RM and price hikes boost gross margins: With high RM in the base
and softening in Copra (down 9% QoQ), standalone as well as consol gross
margins expanded 300bps (consol gross margins up 120bps YoY). Like to like
EBITDA margins (adjusting for Rs96m as excise provisioning in Q3FY11)
contracted ~200bps driven by higher ad-spends (up170bps). Current quarter
also contains a charge of Rs129m in Kaya Middle East, pertaining to
misstatement of expenses related to earlier years, thus, resulting in
consequent overstatement of Kaya profitability in the relevant period. As per
the management, appropriate action has been taken for this lapse and
monitoring process has been further strengthened.
Maintain ‘Accumulate’: MRCO’s continued strong volume driven performance,
despite the aggressive price hikes (taken in 2HFY11) and turn-around in RM
dynamics, creates a good tailwind for EPS upgrades, going forward. However,
current valuations at 23.6x FY13e is fair, in our view. Maintain ‘Accumulate’,
with a revised Mar-13 TP of Rs170. Turnaround in Copra price trajectory is the
key risk.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strong operational performance; 16% domestic volume growth: Marico
reported strong operational Q3Y12 performance, with 16% domestic volume
growth (13% overall) and 300bps gross margin expansion being the key
highlights. Notwithstanding the price hikes in its core brands and general
inflationary headwinds to consumer wallets, volume growth of 16% reinforces
MRCO’s dominant brand franchise. Sales, EBITDA and PAT came in at Rs10.56bn
(up 29% YoY), Rs1.22bn (up 22.1% YoY) and Rs841m (up 21%YoY), against our
expectations of Rs10bn, Rs1.19bn and Rs810m, respectively. Recurring PAT
adjusted for exceptional grew solid 25%. Parachute, Saffola and Value-added
hair oils posted 13%, 15% and 2% volume growth, while Kaya reported 15%
same store clinic growth. International division delivered 16% organic revenue
growth.
Softening in RM and price hikes boost gross margins: With high RM in the base
and softening in Copra (down 9% QoQ), standalone as well as consol gross
margins expanded 300bps (consol gross margins up 120bps YoY). Like to like
EBITDA margins (adjusting for Rs96m as excise provisioning in Q3FY11)
contracted ~200bps driven by higher ad-spends (up170bps). Current quarter
also contains a charge of Rs129m in Kaya Middle East, pertaining to
misstatement of expenses related to earlier years, thus, resulting in
consequent overstatement of Kaya profitability in the relevant period. As per
the management, appropriate action has been taken for this lapse and
monitoring process has been further strengthened.
Maintain ‘Accumulate’: MRCO’s continued strong volume driven performance,
despite the aggressive price hikes (taken in 2HFY11) and turn-around in RM
dynamics, creates a good tailwind for EPS upgrades, going forward. However,
current valuations at 23.6x FY13e is fair, in our view. Maintain ‘Accumulate’,
with a revised Mar-13 TP of Rs170. Turnaround in Copra price trajectory is the
key risk.
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