Marico - Result Update 1QFY2014 - Angel Broking

For 1QFY2014, Marico posted a strong 25.4% yoy growth in its consolidated net profit to Rs. 155cr, aided by an 187bp yoy increase in OPM to 16.5%. The OPM increased on account of use of low-cost copra inventory. Domestic volume growth stood at 10%.

Key highlights during the quarter: The domestic consumer business posted a growth of 7% despite a 10% volume growth, due to the price cuts undertaken by the company particularly in Parachute. While volume growth in Parachute stood at 4% yoy, revenue of the brand declined by 3%. Saffola posted a volume growth of 10%, with the revenue growth coming in lower at 6%. The international business posted a top-line growth of 15% yoy with constant currency growth coming in at 13% yoy. The company continued to perform well in geographies such as Egypt, Vietnam and Bangladesh. However, business in GCC continued to report a decline. The company's performance in this region was affected due to certain execution challenges. The OPM rose by 187bp on a yoy basis aided by higher gross margin and decline in other expenses as a percentage of sales.

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 24.6x FY2015E EPS. We believe the stock is fairly priced and hence, maintain our Neutral rating on the stock.

Source : Equity Bulls

Keywords