Marico reported an 11% decline in revenue with domestic business de-growing 15%. Manufacturing & supply chain operations only started in end-April for Parachute & value added hair oil (VAHO) resulting in substantial loss of sales for the month. Domestic volumes fell 14% with Parachute, VAHO down 11%, 30%, respectively. Saffola edible oil grew by 16% benefited by increase in-home consumption. The foods business, which contributes ~3% of revenues, saw 30% growth with Saffola Masala oats sales growing 41%. On the other hand, personal care category (hair serum, male grooming & Premium Skin care) was significantly impacted by discretionary nature of category. Within international business, except Bangladesh that saw 10% growth, all other major regions saw double digit sales decline. Operating margins expanded 300 bps largely due to the similar cut in A&P spends. PAT (before exceptional income) grew 2.8% to Rs. 324 crore.
Valuation & Outlook
Though growth prospects in Saffola edible oil & foods remain strong, it contributes only 20% to sales. A large part of portfolio (hair oils) remains a saturated category with limited growth opportunity. Also, edible oil remains a low margin category with extensive competition. The stock is trading at 37x FY22E earnings. We maintain HOLD with a revised TP of Rs. 380.
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Marico_Q1FY21.pdf
Shares of MARICO LTD. was last trading in BSE at Rs.362.05 as compared to the previous close of Rs. 350.45. The total number of shares traded during the day was 247618 in over 5527 trades.
The stock hit an intraday high of Rs. 368.75 and intraday low of 355.6. The net turnover during the day was Rs. 89889306.