MOSL: MARICO (Neutral)-Domestic volumes and operating margins disappoint
marico: Domestic volumes and operating margins disappoint; Maintain Neutral
(mrco IN, Mkt Cap USD6.2b, CMP INR312, TP INR350, 12% Upside, Neutral)
- Marico’s (MRCO) 4QFY18 sales grew 12.6% YoY to INR14.8b (est. of INR14.6b). Domestic volume growth stood at 1% YoY (est. of +5%), while overall volume growth was 2% YoY. Domestic revenue grew 12% YoY, while reported international revenue grew 13% YoY (+16% on a CC basis).
- gross margin contracted 550bp YoY to 46.6%, mainly as copra costs increased 61% YoY. Consol. A&P expenses declined 50bp YoY. Other expenditure declined by 190bp YoY and staff costs by 50bp YoY. EBITDA margin contracted 260bp YoY (est. of -20bp) to 17%.
- EBITDA declined 2.5% YoY (est. of +9.8% YoY) to INR2.5b (9% miss). Adj. PAT increased 7.2% YoY (est. of +5.8%) to INR1.8b. Tax rate of 26% came in lower than our estimate of 30.7%.
- FY18 performance: Consol. sales grew 6.8% YoY to INR63.2b. EBITDA margin shrunk 160bp YoY to 18%. EBITDA was down 1.8% YoY to INR11.4b, while adj. PAT was up 2% YoY to INR8.3b.
- Balance sheet comments: Debtors days increased 33% in FY18, probably on account of the sales mix.
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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