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In-line quarter; sharp run-up drives downgrade to ADD from BUY. Marico delivered a broadly in-line 3QFY15 despite unexpected sharp decline in the company’s Egypt business. Even as we continue to find Marico well-positioned to deliver consistent, strong earnings growth over the next few years, the recent sharp run-up forces us to downgrade our rating a notch to ADD from BUY. We remain positive on the name.
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3QFY15 – healthy revenue/EBITDA growth, albeit in line with expectations Marico reported consolidated revenues of `14.5 bn for 3QFY15, up 21% yoy, EBITDA of `2.33 bn, up 17% yoy and PAT of `1.6 bn, +18% yoy. Headline financials were broadly in line with our expectations. Gross margins declined 290 bps yoy on account of sustained (though decelerating) RM inflation yoy, primarily copra. EBITDA margin decline was contained to 54 bps yoy on account of leverage gains from strong pricing-led 21% revenue growth. For 9MFY15, Marico has delivered consolidated revenue, EBITDA and PAT growth of 25%, 18% and 17% respectively. EPS for 9MFY15 stood at `7.2. India volume growth a tad below expectations; Egypt business declines 46% yoy Marico’s 21% consolidated topline growth was a combination of (1) strong 26% growth in the domestic FMCG business and (2) weak 4% INR revenue growth in the international business. India business growth was primarily price-led – volume growth was weaker than expectations at 5% on account of lower-than-expected growth in the value-added hair oil (VAHO) portfolio (10% reported versus our expected 14%) as well as Saffola (3% reported versus 10% expected). Saffola volume growth was particularly disappointing. The company attributed the same to increased pricing premium in the market versus other refined edible oils. International business growth was impacted by a sharp 46% decline in the company’s revenues from Egypt. The sharp decline was on account of the company completely overhauling its distribution structure in the country (from one mega distributor) to four distributors. 3QFY15 was a quarter of transition on this front and the company expects growth to resume in 4QFY15. Performance in other geographies was in line with expectations. Embarks on a major process outsourcing drive Marico has decided to outsource some of the company’s processes like procure-to-pay, orderto-cash and F&A to a third-party outsourcing firm. It is prototyping a few projects currently and plans a full-fledged rollout of the new framework by end-4QFY15. The company aims to accelerate revenue growth through this initiative by becoming more efficient and achieving the fine balance of maintaining low distributor level inventory without any sales loss. It expects the initiative to free up management/sales force bandwidth and improve range-selling.
LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily04022015rq.pdf
In-line quarter; sharp run-up drives downgrade to ADD from BUY. Marico delivered a broadly in-line 3QFY15 despite unexpected sharp decline in the company’s Egypt business. Even as we continue to find Marico well-positioned to deliver consistent, strong earnings growth over the next few years, the recent sharp run-up forces us to downgrade our rating a notch to ADD from BUY. We remain positive on the name.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
3QFY15 – healthy revenue/EBITDA growth, albeit in line with expectations Marico reported consolidated revenues of `14.5 bn for 3QFY15, up 21% yoy, EBITDA of `2.33 bn, up 17% yoy and PAT of `1.6 bn, +18% yoy. Headline financials were broadly in line with our expectations. Gross margins declined 290 bps yoy on account of sustained (though decelerating) RM inflation yoy, primarily copra. EBITDA margin decline was contained to 54 bps yoy on account of leverage gains from strong pricing-led 21% revenue growth. For 9MFY15, Marico has delivered consolidated revenue, EBITDA and PAT growth of 25%, 18% and 17% respectively. EPS for 9MFY15 stood at `7.2. India volume growth a tad below expectations; Egypt business declines 46% yoy Marico’s 21% consolidated topline growth was a combination of (1) strong 26% growth in the domestic FMCG business and (2) weak 4% INR revenue growth in the international business. India business growth was primarily price-led – volume growth was weaker than expectations at 5% on account of lower-than-expected growth in the value-added hair oil (VAHO) portfolio (10% reported versus our expected 14%) as well as Saffola (3% reported versus 10% expected). Saffola volume growth was particularly disappointing. The company attributed the same to increased pricing premium in the market versus other refined edible oils. International business growth was impacted by a sharp 46% decline in the company’s revenues from Egypt. The sharp decline was on account of the company completely overhauling its distribution structure in the country (from one mega distributor) to four distributors. 3QFY15 was a quarter of transition on this front and the company expects growth to resume in 4QFY15. Performance in other geographies was in line with expectations. Embarks on a major process outsourcing drive Marico has decided to outsource some of the company’s processes like procure-to-pay, orderto-cash and F&A to a third-party outsourcing firm. It is prototyping a few projects currently and plans a full-fledged rollout of the new framework by end-4QFY15. The company aims to accelerate revenue growth through this initiative by becoming more efficient and achieving the fine balance of maintaining low distributor level inventory without any sales loss. It expects the initiative to free up management/sales force bandwidth and improve range-selling.
LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily04022015rq.pdf
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