MOSL: MARICO (Downgrade to Neutral)-Uncertainty in volume growth a dampener
MARICO: Uncertainty in volume growth a dampener; Downgrade to Neutral
(MRCO IN, Mkt Cap USD7.2b, CMP INR393, TP INR420, 7% Upside, Downgrade to Neutral)
- 2QFY20 consol. net sales declined 0.4% YoY to INR18.3b (v/s est. INR20b). Domestic revenue decreased ~3% YoY with volume growth of only 1%. Consol. EBITDA grew 15.7% YoY to INR3.5b (v/s est. INR3.5b). PBT grew 16% to INR3.4b (v/s est. INR3.4b). Adj. PAT rose 17.1% YoY to INR2.5b (v/s est. INR2.5b). 1HFY20 sales/EBITDA/PAT grew 3.4%/ 21.3%/ 23.1% YoY.
- gross margin expanded 560bp YoY to 49.6%. EBITDA margin expanded 270bp YoY to 19.3% (v/s est. 17.7%) in the quarter as the company actively invested in brand building.
- Volume growth was muted across all segments; with Parachute declining 1%, 1% growth in Saffola and flat volumes for VAHO. Constant currency growth internationally was 9%.
- Concall highlights: (1) Seeing slowdown in some pockets on upgradation from the unorganized to the organized sector; also, there has been down-trading in some pockets in the organized sector due to a weak operating environment; (2) FITTIFY, Coco Soul, Kaya Youth, Parachute Advanced Aloe Vera oil and Dry Fruit Oil are likely to attain critical mass by the year-end; (3) Immediate consumer sentiment continues to be weak.
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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