Marico - 2QFY2013 Result Update - Angel Broking

For 2QFY2013, Marico posted an 18.6% yoy growth in its consolidated net sales to Rs.1,156cr, aided by a healthy 14% volume growth. The highlight of the quarter is the healthy 619bp yoy expansion in gross margin to 51.5% due to substantial decline in the prices of copra, a major raw material in the manufacture of coconut oil. However, advertising expenses as a percentage of sales too rose by 402bp yoy resulting in the OPM expansion getting restricted to 80bp yoy.

Key highlights during the quarter: The Indian consumer products business posted a growth of 18% yoy, with volume growth coming at 17%. International business posted a growth of 16% yoy. Organic volume growth (adjusted for the acquired personal care business of Paras Pharmaceuticals, consisting of brands such as Set Wet, Zatak and Livon) stood at 9% yoy. The Kaya business grew by 38%. The OPM stood at 12.8%. Interest costs rose by 59.6% yoy due to acquisition of new businesses and an office building. Tax rates too went up by 435bp yoy for the quarter as the company's production from non-tax holiday units went up due to higher demand. The net profit for the quarter grew by 9.7% yoy to Rs.86cr.

Outlook and valuation: Going ahead, we expect Marico to post a healthy growth in the domestic business aided by its strong brands. The recent acquisitions made by the company too are expected to fuel growth in the future. At the current market price, the stock is trading at 26.4x FY2014E EPS. We believe the stock is fairly priced and hence, recommend a Neutral rating on the stock.

Source : Equity Bulls

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