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Marico: Strong topline show

Apr 21, 2004

Edible and hair oil major, Marico, has reported a strong topline growth numbers for both the March quarter as well as FY04. The company has clocked 12% growth in March quarter and nearly 15% growth in FY04. The rate of growth is similar for both the consolidated entity (that includes Bangladesh subsidiary as well as Kaya and Sundari ventures) as well as Marico Industries (standalone).

Consolidated picture...
(Rs m) 4QFY03 4QFY04 Change FY03 FY04 Change
Net sales 2,014 2,254 11.9% 7,755 8,888 14.6%
Other income 7 8 16.7% 112 29 -74.0%
Expenditure 1,846 2,087 13.0% 6,998 8,142 16.4%
Operating profit (EBDITA) 168 168 -0.1% 758 745 -1.6%
Operating profit margin (%) 8.3% 7.4%   9.8% 8.4%  
Interest -1 4 - 11 12 6.4%
Depreciation 34 32 -6.3% 220 130 -41.0%
Profit before Tax and minority interest 142 140 -1.2% 639 633 -0.8%
Minority interest 1 4 200% 1 18 -
Tax -15 -21 - 78 61 -21.1%
Profit after tax/(loss) 158 164 4.2% 562 590 4.9%
Net profit margin (%) 7.8% 7.3%   7.2% 6.6%  
No. of shares (m) 29.0 29.0   29.0 29.0  
Diluted earnings per share (Rs)* 21.8 22.7   19.4 20.3  
P/E ratio (x)         12.7  
(* annualised)            

The company's coconut oil franchisee displayed strength in FY04 and its market share went up to 57% (55.4% in Feb'03). However, volumes were up only 3% during the year. Similarly, its hair oil franchisee (excluding coconut) was also up to 17.8% share as compared to 16.6% in February 2003 last year (volume growth was a strong 21%). Its edible oil business (Sweekar, Saffola) however, lost market share to low cost competition during the year. Both brands however grew 6% each (volume terms) during the year.

Bangladesh/Kaya Clinic and Sundari picture...
(Rs m) 4QFY03 4QFY04 Change FY03 FY04 Change
Sales 110 113 3.2% 373 412 10.5%
Operating profit 12 25 98.4% 50 37 -26.0%
OPM (%) 11.3% 21.8%   13.5% 9.1%  
Net profit 7 1 -84.3% 31 10 -69.3%
NPM (%) 6.4% 1.0%   8.4% 2.3%  

Its Kaya Skin Care business clocked Rs 52 m and Sundari recorded Rs 40 m as revenues during FY04. Both businesses however, ate away Rs 83 m from the consolidated entity's net profit. It will be some time before these ventures turn profitable. However, the topline performance of both businesses looks encouraging. The company's board has approved the 1:1 bonus issue to shareholders. This is the company's second bonus issue in as many years. Apart from this, the company had also given out preference shares in the ratio of 1:1 to its shareholders.

At Rs 259 the stock trades at 12.7x FY04 consolidated earnings, market cap to sales of 0.8x. Marico's ability to create successful brands, strong existing portfolio and its export thrust qualify it as a company with good growth potential. Valuations will reflect this potential going forward though declining margins is a concern.


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