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Marico: Good work... - Views on News from Equitymaster
 
 
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  • Jul 19, 2002

    Marico: Good work...

    Marico Industries, the edible oil major, continues to display strength in financial performance. In June quarter the company has recorded a strong 19% growth in topline and 16% growth in net profit on a consolidated basis. The consolidated numbers include the performance of its 100% Bangladesh subsidiary.

      Consolidated picture Marico Industries
    (Rs m) 1QFY02 1QFY03 Change 1QFY02 1QFY03 Change
    Net Sales 1,521 1,817 19.4% 1,487 1,756 18.1%
    Other Income 8 5 -37.3% 7 5 -26.5%
    Expenditure 1,357 1,614 18.9% 1,323 1,560 17.9%
    Operating Profit (EBDIT) 164 203 23.6% 164 196 19.1%
    Operating Profit Margin (%) 10.8% 11.2%   11.0% 11.1%  
    Interest 8 5 -40.5% 8 5 -41.8%
    Depreciation 27 37 37.2% 27 36 37.0%
    Profit before Tax 138 167 20.9% 137 160 16.8%
    Tax 21 32 50.5% 21 30 42.1%
    Profit after Tax/(Loss) 117 135 15.5% 116 130 12.3%
    Net profit margin (%) 7.7% 7.4%   7.8% 7.4%  
    No. of Shares 14.5 14.5   14.5 14.5  
    Diluted Earnings per share* 32.2 37.2   31.9 35.9  
    P/E Ratio   8.5     8.8  
    *(annualised)            

    The strong growth in topline numbers has come about due to a hike in MRP prices, post strengthening of commodity prices. Marico actually saw an overall volume growth of 9% YoY during the quarter. The company expanded its operating margins by 40 basis points. Excluding deferred taxes in both comparative quarters, it would have finished 1QFY03 with an 18% net profit growth.

    The Bangladesh picture...
    (Rs m) 1QFY02 1QFY03 Change
    Sales 34 61 80.2%
    Operating profit 0 7 -
    OPM (%) - 12%  
    Net profit 1 5 487.5%
    NPM (%) 2.4% 7.7%  

    Marico Industries (excluding Bangladesh) reported an 18% growth in topline and 12% bottomline growth during June quarter. Here too, deferred tax deflated net profit growth. However, it is clear the the Bangladesh operations of the company are picking up and this helped the company report improved overall performance.

    Marico continues to be a zero debt company (i.e. it doesn't have interest bearing debt). The company improved its overall market share in almost all categories. Only in 'Sil' jams the company seems to have given away market share. The company's hair oil business continued to grow. Over the years, Marico has reduced its dependence on the 'Parachute' brand from around 70% a few years back to around 40% of turnover currently. New product share in turnover is up from 11% in 1QFY02 to 15% during 1QFY03. The company has successfully managed to fight off FMCG major, HLL's challenge and has infact consolidated its position.

    Brands snapshot...
    Brand Category Market Share % Current
    Market Rank
    Jun'00-May'01 Jun'01-May'02
    Parachute & Oil of Malabar Coconut Oils 54.0 55.8 1
    Saffola & Sweekar Refined Oils in Consumer Packs 12.4 12.3 2
    Total Hair Oils Hair Oils 7.9 12.4 2
    Hair & Care Non-Sticky Hair Oils 21.0 21.6 2
    Parachute Extensions Value Added Coconut Oils 10.8 20.5 3
    Shanti Amla Amla Hair Oils 1.6 9.5 2
    Source: ORG urban Retail Market Research and company release

    At Rs 317 the stock is trading at 8.5x annualised 1QFY03 earnings. The management has cautioned that topline growth may not be as strong as in 1QFY03, as MRP price hike effect may wane going forward. However, seeing the company's grit in holding its own in a difficult environment, the valuations look good.

     

     

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