Marico reported a strong set of numbers with 11% domestic volume growth led by continued robust growth in Saffola. Revenues increased 8.7% to Rs. 1989 crore with domestic, international business seeing growth of 8%, 12%, respectively. Parachute brand grew 8% with volume increase of 10% supported by constant pricing despite copra prices rising sharply. Saffola witnessed growth of 16% led by 20% volume growth with trend of consumption shifting from unbranded to healthier proposition brands. Value added hair oil (VAHO) sales fell 1% with 4% increase in volumes. The slower growth was impacted by continued double digit sales decline of CSD channel. Gross margins contracted 163 bps given copra & rice bran prices have increased 11% & 26%, respectively. Marico has not taken any price hikes in Q2. However, gross margin decline was offset by 127 bps, 56 bps savings in advertisement, overhead spends, respectively. We believe larger part of savings has come from lower ad-rates. This resulted in operating profit growth of 10.2% to Rs. 389 crore & operating margin expansion of 25 bps to 19.6%. Net profit grew 7.9% to Rs. 273 crore.
Valuation & Outlook
We believe the company is aggressive in its approach to grow foods & other new age product portfolio. With single digit growth in hair oil & high growth in foods and new launches, the company would be able to grow volumes by 8-10%, going forward. The stock is trading at 37x FY23E earnings. We upgrade our rating on Marico from HOLD to BUY with a revised target price of Rs. 440 per share, valuing at 45x FY23E PE.
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Marico_Q2FY21.pdf
Shares of MARICO LTD. was last trading in BSE at Rs.362.15 as compared to the previous close of Rs. 363.1. The total number of shares traded during the day was 122655 in over 4119 trades.
The stock hit an intraday high of Rs. 364.8 and intraday low of 355.4. The net turnover during the day was Rs. 44261413.