MOSL: MARICO (Buy)-Parachute likely to report healthy growth-Overall 3QFY19 demand in fine fettle

MARICO: Parachute likely to report healthy growth; Overall 3QFY19 demand in fine fettle; rural doing well

(MRCO IN, Mkt Cap USD7b, CMP INR378, TP INR465, 23% Upside, Buy)

For the first time, Marico (MRCO) released a pre-quarterly update for the quarter ended Dec’18. Key highlights:-

• Overall demand environment was good in 3QFY19 with market share gains across key portfolios. The positive sentiment during the quarter was led by festive season and expectations of a stimulus from Government initiatives.
• Rural continues to do well on the back of good demand. Meanwhile, growth in urban was driven by newer channels (modern trade, ecommerce and CSD).
• Parachute grew healthily in 3QFY19, while VAHO was a tad short of expectations. Saffola remains subdued and management believes that recovery in the segment might take longer than earlier expectation.
• Marico’s newer portfolios (Premium Hair Nourishment, Male Grooming and Healthy Foods) grew in line with company’s expectation.
• There were a couple of new launches during the quarter, which include (a) Hair & Care Dry Fruit Oil - a light hair-oil enriched with almond and walnut oils. The product has been introduced at a price of INR55 (100 ml) in select markets of North and West India, (b) the company also rolled out a range of healthy food and beverage products under a new sub-brand - Saffola FITTIFY Gourmet - focused entirely on the modern trade and ecommerce channels. The portfolio includes Moringa green tea, green coffee instant beverage mix, hi-protein breakfast cereals, hi-protein meal soups and hi-protein slim meal shakes.