MOSL: MARICO (Neutral)-Rural outlook encouraging; expect further softening of copra prices
Marico: Rural outlook encouraging; expect further softening of copra prices
(MRCO IN, Mkt Cap USD6.6b, CMP INR352, TP INR370, 5% Upside, Neutral)
- 1QFY19 consol. net sales grew 20.5% YoY to INR20.3b (est. of INR19.7b). Domestic volume growth stood at 12.4% YoY (est. of +12%), while overall volume growth was 10.4% YoY. Domestic revenue grew 23% YoY, while reported international revenue increased 9% YoY (+7% on a CC basis).
- Rural growth of 28% YoY outpaced urban growth of 16% in 1QFY19; this was the fourth straight quarter of higher rural sales growth.
- gross margin shrank 550bp YoY to 42.3%, mainly as copra costs were up 40% YoY. However, consol. A&P expenses declined by 160bp YoY to 8.2%, other expenditure by 130bp YoY to 10.9% and staff costs by 80bp YoY to 5.7%. EBITDA margin contraction was, thus, restricted to 180bp YoY to 17.5% (est. of 17.8%).
- EBITDA grew 9.2% YoY to INR3.5b (est. INR 3.5b). Adj. PAT rose 10.2% YoY to INR2.6b (est. of INR2.5b).
- Concall highlights: (1) Copra prices are expected to see further softening in 2HFY19; some gains are also expected to be seen in 2QFY19. (2) Ad spends are likely to be at ~10% of sales in FY19.
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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