MOSL: MARICO (Downgrade to Neutral)-Remarkable volume growth, despite weak operating environment
​Marico: Remarkable volume growth, despite weak operating environment
(MRCO IN, Mkt Cap USD6.2b, CMP INR319, TP INR335, 5% Upside, Downgrade to Neutral)
- Strong volume growth: Marico's (MRCO) consolidated net sales rose 2.2% YoY (est. of +4.4%) to INR13.2b. Domestic volumes increased 10% YoY (est. of +7%), despite 8% growth in the base quarter. Domestic revenues grew 6% YoY, while reported international revenues declined 8% (-5% CC). Parachute sales grew 11% with 15% volume growth (est. of +11%), Saffola sales grew 3% with 6% volume growth (est. of mid-single-digit increase), and Value Added Hair Oils sales grew 9% with 10% volume growth (est. of mid-single-digit increase).
- Consolidated gross margin contracted 180bp YoY (est. of -300bp) to 51.6%. EBITDA came in 17.7% ahead of expectations, mainly led by lower-than-expected contraction in gross margin (despite a huge increase in material costs) and a sharp cut in A&P (-410bp YoY). EBITDA increased 20.1% YoY (est. of +2.1% YoY) to INR2.5b, with the margin expanding 290bp YoY (est. of -30bp) to 19.2%. Adj. PAT increased 25.5% YoY (est. of +6.2%) to INR1.7b.
- FY17 performance: Consolidated sales declined 1.6% YoY to INR59.2b. EBITDA margin was up 200bp YoY to 19.3%. Adj. PAT rose 12.1% YoY to INR8.1b, registering the sixth consecutive year of double-digit growth. Inventory days rose to 67 from 58 due to an increase in costs of copra and other materials.
Marico is a consumer products company operating in the beauty and wellness space. Co. has multiple brands in the categories of hair care, skin care, health foods, male grooming, and fabric care. Co.'s India business markets household brands such as Parachute Advansed, Saffola, Hair & Care, Nihar, Mediker, Revive, Manjal, Setwet, Zatak and Livon among others. The International business offers brands such as Parachute, Hair Code, Fiancee, Caivil, Hercules, BlackChic, Code 10, Ingwe, X-Men, L'Ovite and Thuan Phat.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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