Marico Ltd. | Q3FY15 Result Update | Muted demand impacts performance; we maintain our HOLD rating on the stock with target price of Rs 355 on the stock :: IndiaNivesh

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Marico: In-line quarter; sharp run-up drives downgrade to ADD from BUY ::Kotak Sec, report

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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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Valuation comfort Marico’s 3QFY15 ::HDFC Sec, report

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Urban discretionary demand still remains muted • Marico’s Q3FY15 results :ICICI Securities, report

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Marico Kaya Enterprises - Invigorating Growth; Visit Note :: Edelweiss

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Annual Report Analysis - Marico:: Edelweiss

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Sustainable volume growth; margin shrinks • Marico :: ICICI Securities, PDF link

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Marico - Volumes Glossy; Margins Likely To Shine In Fy16; Result Update :: Edelweiss report link

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

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Marico (MRCO.BO) Buy: Changing Business Mix Is Positive; Look Beyond A Quarter :Citi

 Mix shift within hair oils — Marico’s business profile is changing – dependence on
coconut oils reduces (~30% of revenues now vs. >40%, 5 yrs ago) as superior growth
& share gains across high margin segments emerge. Despite Marico’s entry into many
categories, the share of other hair oils has moved up (16% of revs vs. 13%, 5 yrs ago)
– and mgmt is confident of mid to high teens volume growth medium term, driven by
continued share gains, wider offering & distribution initiatives. We think other hair oils
will be >20% of consol revs by FY15E, which coupled with improving overseas/
personal care share buoys growth, profit mix & reduces impact of copra price volatility.

Marico Industries :Back to being a well-oiled machine: Nomura research

Back to being a well-oiled machine
Improving fundamentals into
FY14; new businesses to aid LT
growth. Upgrade to Buy

Marico (Buying Range: |205--|195) •Muhurat Picks - 2012 :: ICICI Direct

Marico (Buying Range: |205--|195)
• With falling copra prices, margins for the company should
expand, going forward. Marico has high susceptibility to copra
(CP) and safflower oil (SO) prices as they constitute ~40% and
~15%, respectively, of its raw material (RM) costs. With CO
witnessing ~40% YoY decline, margins would expand, going
forward. We believe Marico would be able to sustain 14%+
margins
• With the acquisition of Paras's personal care (Set Wet, Zatak and
Livon) business, the company has added new category within its
fold. we believe the company would continue to witness robust
volume growth on the back of shift in consumer preference for
Branded products. We believe the company the company would
continue to witness healthy volume growth in future.
• The stock has been trading in the range of 23x-28x two year
forward PE, which is discount to FMCG index. With the
sustainable volume growth and healthy margins, the company
would start commanding higher multiple in future. We remain
positive on the stock.

Marico::Lower Sales High A&P Sluggish Performance:: Karvy,

Lower Sales High A&P Sluggish Performance
Marico’s Q2FY13 performance was below our expectation. Net sales –
excluding recently acquired Setwet, Zatak & Livon brands – have clocked slower
growth of 14% YoY. Parachute rigid pack and Saffola has registered slower
9% and 6% volume growth as compared to the strong volume growth
performance in the past 5‐6 quarters. Copra price reduction has benefited
and resulted into 634bps YoY and 211bps QoQ improvement in the gross
margin. However, on account of higher A&P spending – were at 13.7% (% of
sales) up 400bps YoY and 140bps QoQ‐ partially set off gross level profitability.
EBITDA margin has expanded by mere 107bps YoY while it contracted by
175bps on QoQ basis. Lower other income and higher depreciation has
further impacted the net profitability and resulted into slower PAT growth of
10% YoY while it declined by 30% on QoQ. PAT stood at Rs859mn (Karvy
expectation Rs1,180mn). Although, we maintain our FY13‐FY15 earnings
estimates owing to the expectation of performance improvement in the
coming quarters

Nov 4: Union Bank, Marico, :: Business Line

 

Technical: Power finance corp, VIP Industries, Marico, Greaves Cotton, GAIL, HCL::Business Line

Marico ::Sharekhan Top Picks -April 2012

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Remarks: Marico is one of the strongest players in the Indian hair care and edible oil markets. Its flagship brand
Parachute along with Nihar commands a 54% share in the domestic branded coconut oil market. Its portfolio
of value-added hair oil got strong traction in the domestic market helping it to clock around 20% volume
growth in the domestic market. The company’s good for heart edible oil brand Saffola is also witnessing midteen
volume growth on account of improving consumer awareness.
Apart from domestic operations, Marico has strong international presence in Bangladesh, Egypt, South Africa,
and the recently entered South East Asia. Though the near-term performance has been affected by political
instability and high inflationary environment in some of the international markets, we believe the long-term
growth potential is intact in these markets.
Kaya is showing signs of improvement with a double-digit same-store collection growth in the past few quarters.
Any significant increase in the prices of the key raw materials (including copra) and a slowdown in the sales
volume growth would act as the key risks to our earnings estimates.
We expect the top line to grow at a CAGR of about 25% over FY2011-13 and the bottom line to grow at a CAGR
of 30% over the same period (on the back of an expected improvement in the margins due to the softening of
raw material prices). At the current market price the stock trades at 32.9x its FY2012E EPS of Rs5.3 and 24.6x
its FY2013E EPS of Rs7.1.

MARICO Leap into high growth category ::Edelweiss,

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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.

Marico - Leap into high growth category; event update; Buy :: Edelweiss (pdf link)

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Marico (MRCO IN, INR 165, Buy)

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.

Marico shines on strong volumes and cooling :: Reliance Capital

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Marico shines on strong volumes and cooling Copra prices
Key highlights of the result
The yoy comparison for Marico is not valid as the current quarter includes the
financials of International Consumer Product (ICP) and Derma Rx.
 Top-line growth strong, aided by volume growth despite price hikes: Marico
reported robust 29% yoy growth in its top-line, aided by strong volume growth
(overall volume growth of 20% with organic volume growth at 13% yoy) and
absorption of price hikes taken in the previous quarters. In terms of category, the
hair oil category grew ~40% yoy on account of rural thrust and higher amla hair
oil growth duly supported by volume growth of ~18-20% in the rigid packs of
Parachute. Saffola registered a growth of ~29% yoy aided by ~14-15% increase
in volumes. The International Business (IBG) of the company grew by a stellar
39% yoy (including the forex impact and currency depreciation; organic growth of
IBG stood at ~16% yoy). Kaya reported revenue growth of ~21% yoy (not
comparable on yoy basis due to the change in accounting policy for revenue
recognition in Kaya) to Rs75cr with same store collection in India and the MENA
region at ~15%.
 Marico reinvests savings in gross margin behind its brands: Marico reported
gross margin expansion of 114bp yoy as copra prices showed signs of softening.
However, OPM registered contraction of 68bp yoy as the company reinvested
the benefits of gross margin expansion behind higher brand spends, registering
higher advertisement expense (up 164bp yoy; Marico is test marketing Saffola
Oats savories and launched Parachute Body Lotion, which has already garnered
a market share of ~5%). Staff cost also registered an increase of 83bp yoy,
however, savings in other expense (down 66bp yoy) curtailed further margin
contraction.
 Earnings growth aided by trickle-down effect of high price realization: Earnings
reported a growth of 21.3% yoy to Rs86cr primarily aided by higher EBITDA (up
22.1% yoy aided by trickle-down effect of higher realization) and other income
(up 33.8% yoy to Rs9.2cr). Increase in depreciation (up 28.9% yoy) and interest
expenses (up 7.4% yoy) restricted further increase in earnings.
Outlook and Valuation
Post the 3QFY2012 results, we have upgraded our revenue estimates by 3–4% over
FY2012–13E to factor in consistent double digit volume growth across the board,
while maintaining our margin estimates. For FY2011–13E, we expect CAGR of
26.6% and 35.5% in net revenues and recurring PAT respectively. We expect the
margins to improve for the company in FY2013E from the current 11-12% margins.
At CMP, the stock is trading at 23xFY2013E EPS of Rs7.1 which is fair and captures
the positives of the result. Hence, we are Neutral on the stock with a fair value of
Rs163.
Risks to the view
 Slowdown in the volume growth of the company could impact our estimates
 Revenue from IBG is subject to political turmoil and exchange rate fluctuation

Marico: Robust Volume Growth Across Segments ::PINC

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Robust Volume Growth Across Segments
Marico reported better than expected net sales growth of 29% led by
20% volume growth during the quarter. Parachute coconut oil
clocked 40% sales growth which includes 13% volume growth. The
benefit of price during Q3FY11 was only partially available during that
quarter and hence the realisation growth in Q3FY12 is higher than our
anticipation. Higher A&P spending impacted the profitability and
resulted into 68bps YoY and 45bps QoQ decline in EBITDA margin.
PAT grew by 21% to Rs842mn (PINCe Rs801mn).
We slightly increase Parachute hair oil volume growth assumption for
FY13 and FY14 owing to strong consumer response for newly
introduced 45ml and 175ml packs. We raise FY13 and FY14 estimates
by 4% and 5% respectively. We retain our 24x P/E on 12-month
forward earnings and increase TP to Rs150 (earlier Rs144) while
maintain our ‘REDUCE’ rating on the stock.
Encouraging Volume Growth
Marico registered 13%, 20% and 15% volume growth for Parachute oil,
Value added hair oil and Saffola oil respectively. Parachute oil in the
last three quarters registered encouraging 10%, 10% and 13% volume
growth and beat the competition through introduction of new packs.
Marico gained 150bps YoY market share on coconut oil to 54%. Value
added hair oil and Saffola maintained high volume growth.
International Business (IBD) Maintain Strong Growth
IBD (25% of sales) posted 39% growth that includes 16% organic and
24% inorganic growth. Bangladesh (~45% of IBD) posted 11% growth
while rest of the organic business clocked ~20% growth. We expect
higher marketing efforts to continue to maintain this high growth.
EBITDA margin under pressure
Higher A&P (164bps YoY and 300bps QoQ) spend was due to the new
product launches and higher marketing efforts for the overseas
market. We expect such marketing efforts would be required going
forward to. We anticipate EBITDA margin improvement to the tune of
~100bps during FY13-14E due to softening of input prices.
VALUATIONS AND RECOMMENDATION
On account of limited product portfolio, higher exposure to commodity
prices and moderate scope for further price hike on key brands, we
maintain Marico's P/E discount over FMCG sector. We retain our 24x
multiple on 12-month forward earnings and raise TP to Rs150 (earlier
Rs144). We maintain our ‘REDUCE’ rating on the stock.