Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Marico announced 100% acquisition of Paras Personal Care Business
(sales for FY12E: INR1.5bn) for an undisclosed consideration. This would
give Marico access to brands like Set Wet, Livon and Zatak, ranked
amongst top three in respective categories. Acquisition of this business is
likely to further reduce Marico’s dependence on edibles oils and hair oils
besides giving it an opportunity to participate in the rapidly growing
categories in India. We reiterate ‘BUY’ on the stock.
Acquisition to broaden product portfolio
The acquisition has to an extent alleviated distributor’s concern over Marico’s narrow
product portfolio. This will also lessen Marico’s dependence on edible oils and hair oils
by contributing ~4% of Marico’s sales. The company will leverage its vast distribution
strength to provide an impetus to the growth of these brands. Marico plans to focus
more on fast growing hair gels, male deodorant and leave‐on hair serum categories
(blended growth rate: 20%). The company is confident to retain the high growth rate.
Valuation seen as high as 4‐5x sales
Reckitt’s acquisition of the erstwhile Paras Pharma was valued at around ~7‐8x sales.
However, personal care business being a lower margin and high competition business,
the valuation is likely to be lower. Yet, the valuation could be as high as 4‐5x sales as in
India, valuations in general tend to be higher. Thereby deal to be EPS dilutive in the
first year. The company expects 2‐3 months to complete the transaction.
Outlook and valuations: Positive; maintain ‘BUY’
Marico’s last acquisition was the Vietnam based company, ICP with revenue of
INR1500mn and valued at ~1x sales. Paras personal care business will provide an
immense growth opportunity and higher profitability. The stock is trading at 25.5x and
21.0x FY12E and FY13E EPS respectively. We recommend ‘BUY/Sector Outperformer’
on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Marico announced 100% acquisition of Paras Personal Care Business
(sales for FY12E: INR1.5bn) for an undisclosed consideration. This would
give Marico access to brands like Set Wet, Livon and Zatak, ranked
amongst top three in respective categories. Acquisition of this business is
likely to further reduce Marico’s dependence on edibles oils and hair oils
besides giving it an opportunity to participate in the rapidly growing
categories in India. We reiterate ‘BUY’ on the stock.
Acquisition to broaden product portfolio
The acquisition has to an extent alleviated distributor’s concern over Marico’s narrow
product portfolio. This will also lessen Marico’s dependence on edible oils and hair oils
by contributing ~4% of Marico’s sales. The company will leverage its vast distribution
strength to provide an impetus to the growth of these brands. Marico plans to focus
more on fast growing hair gels, male deodorant and leave‐on hair serum categories
(blended growth rate: 20%). The company is confident to retain the high growth rate.
Valuation seen as high as 4‐5x sales
Reckitt’s acquisition of the erstwhile Paras Pharma was valued at around ~7‐8x sales.
However, personal care business being a lower margin and high competition business,
the valuation is likely to be lower. Yet, the valuation could be as high as 4‐5x sales as in
India, valuations in general tend to be higher. Thereby deal to be EPS dilutive in the
first year. The company expects 2‐3 months to complete the transaction.
Outlook and valuations: Positive; maintain ‘BUY’
Marico’s last acquisition was the Vietnam based company, ICP with revenue of
INR1500mn and valued at ~1x sales. Paras personal care business will provide an
immense growth opportunity and higher profitability. The stock is trading at 25.5x and
21.0x FY12E and FY13E EPS respectively. We recommend ‘BUY/Sector Outperformer’
on the stock.
No comments:
Post a Comment