Marico - Robust Volume Growth Across Segments ; Maintain 'REDUCE' - TP Rs150 - PINC Research

Q3FY12 Result Review – Marico

Robust Volume Growth Across Segments

Marico reported better than expected net sales growth of 29% led by 20% volume growth during the quarter. Parachute coconut oil clocked 40% sales growth which includes 13% volume growth. The benefit of price during Q3FY11 was only partially available during that quarter and hence the realisation growth in Q3FY12 is higher than our anticipation. Higher A&P spending impacted the profitability and resulted into 68bps YoY and 45bps QoQ decline in EBITDA margin. PAT grew by 21% to Rs842mn (PINCe Rs801mn).

We slightly increase Parachute hair oil volume growth assumption for FY13 and FY14 owing to strong consumer response for newly introduced 45ml and 175ml packs. We raise FY13 and FY14 estimates by 4% and 5% respectively. We retain our 24x P/E on 12-month forward earnings and increase TP to Rs150 (earlier Rs144) while maintain our 'REDUCE' rating on the stock.

- Encouraging Volume Growth
- International Business (IBD) Maintain Strong Growth
- EBITDA margin under pressure

VALUATIONS AND RECOMMENDATION

On account of limited product portfolio, higher exposure to commodity prices and moderate scope for further price hike on key brands, we maintain Marico's P/E discount over FMCG sector. We retain our 24x multiple on 12-month forward earnings and raise TP to Rs150 (earlier Rs144). We maintain our 'REDUCE' rating on the stock.

Source : Equity Bulls

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