Marico Ltd - Q2FY21 First Cut - ICICI Securities

(CMP - Rs. 363, MCap - Rs. 46,023 crore)

Marico's Q2FY21 numbers were in line with our expectations on the revenue & earnings front.

Q2FY21 Earnings Summary

- Consolidate revenues grew by 8.7% to Rs. 1989 crore (I-direct Estimate: Rs. 1966 crore) led by 12% growth in international business & 8% growth in domestic business. Domestic volume growth was 11% on account of slower growth in base quarter. Parachute witnessed 8% sales growth led by 10% volume growth & 2% price cut / mix change. Saffola continue to witness strong sales growth of 16% led by 20% volume growth whereas value added hair oil (VAHO) sales declined by 1% with volume growing by 4%. There has been price cut or down trading across segments

- Gross margin contracted by 163 bps given Copra prices have increased by 11% & rice bran prices have surged by 26%. The company has not taken any price hike to pass on this increase to consumers. However, contraction in gross margins was offset by 127 bps savings due to lower advertisement spends & 56 bps saving in other overheads. We believe larger part of the savings has come from lower advertisement rates during the quarter. This resulted in operating profit growth of 10.2% to Rs. 389 crore. Operating margins expanded by 25 bps to 19.6%

- Net profit increased by 7.9% to Rs. 273 crore (I-direct estimate: Rs. 285.8 crore) led by revenue growth & stable margins. The company incurred an exceptional expense for the impairment of certain unusable assets worth Rs. 33 crore. The company announced interim dividend of Rs. 3/share

Marico witnessed strong volume growth of 11% during the quarter however, It must be noted that base quarter volume growth was merely 1%. We believe the company cautiously has not increased the prices, despite certain raw material price increase, mainly to drive volume growth & capture the market share of unorganised sector. However, strong growth momentum continued in Saffola largely led by continued higher 'at home' consumption given restaurants were largely shut during the quarter & norms for HORECA (hotels, restaurants & cafes) have been only been relaxed at the end of quarter. We believe hair oil category has saturated in India & next level of growth for the company would only come from newer categories like Foods & personal care. The company has launched many new products in immunity boosting category like Honey & Chyawanprash. It is necessary to see the success of foods category to measure revenue growth & margins potential.

We will be coming out with detailed update after the conference call with the management.

Shares of MARICO LTD. was last trading in BSE at Rs.364.7 as compared to the previous close of Rs. 356.8. The total number of shares traded during the day was 225237 in over 7903 trades.

The stock hit an intraday high of Rs. 365 and intraday low of 350.1. The net turnover during the day was Rs. 80821933.

Source : Equity Bulls

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