Marico Industries is set to announce its results today. Let us analyse the company’s performance in the year that has gone by and evaluate its future.
The company is the market leader in the Indian coconut oil and branded refined oil segment. Its brand Parachute dominates the branded coconut oil market with a 54% market share. Marico's presence in the refined oil category is marked by two brands, namely, Saffola (safflower oil) and Sweekar (sunflower oil). These command a combined market share of 13% in the branded edible oil market.
Market Share (%)
Hair & Care
Non-sticky hair oils
Value added coconut oils
Souce: ORG Marg retail data in November 2000
In the nine months ended December 2000 Marico posted a 36% growth in its bottomline. However its turnover growth was negligible (up 0.2%) in value terms. However, the company improved its performance in volume terms. For nine months ended FY01, volumes of Marico’s coconut oil franchise (Parachute and Oil of Malabar) grew by 11%, while the refined edible oil franchise (Saffola and Sweekar) grew by 24% YoY.
According to the company, the growth in volumes was, however, not reflected in a similar growth in turnover because of two reasons. Firstly, during the nine months ended December 2000, maximum retail prices (MRPs) of most Marico products were lowered following considerably lower raw material prices. Secondly, the turnover value excludes the turnover recorded by Marico Bangladesh Limited (MBL), a wholly owned subsidiary. During FY00, turnover in Bangladesh was recorded in Marico right until December 1999, when MBL commenced its operations.
9 m FY01
Sales & Services
Profit before Tax
Net Profit (PAT)
Net Cash Profit (PAT + Depreciation)
Earning per share- Annualised (Rs)
Book value Rs. per share
Marico improved its bottomline helped by significantly higher gross margins. Lower raw material costs and improved cost management across the value chain helped the company improve its gross margins (PBDIT) to 21.5% in 9m FY01 from 16.8% during 9m FY00. Its advertisement expenses to sales increased to 11.8% from 8.7% YoY.
Marico is likely to continue put in a similar performance in FY01 as it did in the 9m FY01. On the subject of hike in import duties during the Budget 2001-02 Marico has stated that it will be able to pass on most of this increase to the consumers. However, the increase in prices may cause the growth rate of edible oil industry to slow down a little from the current level of over 20%.
At the current price of Rs 235, the stock trades at a P/e multiple of 7.3 times its annualised 9m FY01 earnings. The P/e multiple is on the lower side for FMCG companies.
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