MOSL: MARICO (Neutral)-Volumes recover-high input costs continue to impact margins
​Marico: Volumes recover; high input costs continue to impact margins
(MRCO IN, Mkt Cap USD6.2b, CMP INR315, TP INR340, 8% Upside, Neutral)
- Marico's 2QFY18 sales grew 6.7% YoY to INR15.4b (est. of INR16.4b). Domestic volume growth stood at 8% YoY (in-line), while overall volume growth was 5% YoY. Domestic revenues grew 12% YoY, while reported international revenue fell 8% YoY (1% growth on a constant currency basis).
- Consol. gross margin contracted 570bp YoY to 47.0%, mainly as copra costs were up 84% YoY. EBITDA margin shrunk 70bp YoY (est. of -110bp) to 16.9%, and EBITDA increased 2.4% YoY to INR2.59b (est. of INR2.66b). Adj. PAT increased 2.5% YoY to INR1.85b (est. of INR1.95b).
- Segmental growth: Parachute sales grew 26% YoY, with 12% volume growth (est. of +9%); Saffola sales grew 1% YoY, with volume growth of 3% (est. of +6%); and Value Added Hair Oils (VAHO) sales grew 12% YoY, with 12% volume growth (est. of +7%). There was a 14% price increase YoY in Parachute; realization in VAHO was flat YoY and in Saffola was down 2% YoY.
- 1HFY18 consolidated sales, EBITDA and adj. PAT grew 0.8%, -7.0%, -6.1% YoY respectively.
- Concall highlights: 1) Management believes that wholesale recovery is largely done. 2) Key reason for not taking a very sharp price increase in Parachute (beyond 10% taken in October) is the very strong opportunity for volume growth in the medium term and the volatile demand environment currently.
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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