Marico Ltd.|Q2FY15 Result Update | Strong growth across all categories and geographies; Maintain HOLD :: IndiaNivesh

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Marico Ltd declared consolidated Q2FY15 results that were below street estimates.
 Net sales grew 28.1% yoy to reach Rs 14291 mn in Q2FY15 from Rs 11154 mn
in Q2FY14 (vs. Bloomberg est: Rs 13865 mn). This growth was driven by 34.2%
yoy growth in domestic business and 12.1% yoy growth in international
business. Volume growth in India business stood at 8% and in international
business stood at 5%.
 EBITDA grew 15.9% yoy to reach Rs 1953 mn in Q2FY15 from Rs 1685 mn in
Q2FY14 (vs Bloomberg est: Rs 2169 mn). EBITDA margin contracted 280 bps
yoy to reach 13.7% in Q2FY15 from 15.1% in Q2FY14The company did not
pass on all the inflation in commodity price (i.e. Copra mainly) to the consumer
resulting in pressure on margins. This resulted in higher raw material cost
which increased to 55.7% of sales in Q2FY15 from 50% in Q2FY14.
 PAT grew 11.7% yoy to reach Rs 1183 mn in Q2FY15 from Rs 1059 mn in
Q2FY14 (vs Bloomberg est: Rs 1286 mn). PAT margin compressed 119 bps yoy
to reach 8.3% in Q2FY15. PAT margin compression was lower than EBITDA
margin compression on account of reduction in finance cost. Finance cost
reduced 50% yoy at Rs 51 mn in Q2FY15. Effective tax rate increased to 33%
in Q2FY15 from 27.9% in Q2FY14 due to phasinf out of tax benefits in India
and Vietnam.
India business grew well amid cost pressure
India business (contributing ~75% to H1FY15) grew by 34.2% yoy to reach Rs 10790
mn in Q2FY15 driven by price hikes. During the quarter volume grew by 8% yoy.
PBIT margin in India business contracted 255 bps mainly due to raw material cost
increases. For H1FY15, India business (contributing ~77% to H1FY15) grew 30.7%
yoy to reach Rs 23590 mn against Rs 18048 mn in H1FY14. PBIT margin contracted
229 bps yoy to reach 16.4% in H1FY1 mainly due to hyper inflation in input cost.
Parachute Coconut Oil (Rigid packs) grew by 55% yoy and 7% yoy in value and volume
terms in Q2FY15. In H1FY15, value and volume growth stood at 31% yoy and 7%
yoy respectively. As per the management, inflationary commodity prices tilt the
competitive position to the company’s advantage as marginal players face pressure
on working capital requirement front. Parachute along with Nihar increased its
market share by 65 bps to 57% as competitive position continued to be favourable
due to hyper-inflation.
Saffola refined edible oil grew by 18% yoy and 9% yoy in value and volume terms. In
H1FY15, value and volume growth stood at 16% yoy and 10% yoy respectively. The
brand maintained its leadership position in the super premium refined edible oils
segment with a market share of ~56% in twelve months ended September 2014.
During the quarter, the company increased the weighted average price of the
portfolio by ~3% due to increase in raw material and packing material price. Saffola
Oats grew by 31% in value terms

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