Marico - Q3FY21 First Cut - ICICI Direct

(CMP - Rs. 412, MCap - Rs. 53,271 crore)

Marico Q3FY21 results were above our estimate on revenue front & below our estimates on margin & earnings front

Q3FY21 Earnings Summary

- Revenue witnessed a growth of 16.3% on account of similar growth in domestic as well as international business. The company reported 15% domestic volume growth & 8% constant currency growth in international business. Parachute brand saw 9% revenue growth aided by 8% volume growth & value added hair oil (VAHO) reported strong 21% revenue growth contributed entirely by volumes. The growth in both the segment was mainly on account of negative growth in base quarter

- Saffola continued its growth momentum in post pandemic world with 26% jump in revenue contributed by 17% volume increase. The growth in the segment was also contributed by 74% revenue increase in foods portfolio. The robust growth in foods portfolio was aided by foray in newer segments like Honey, Chyawanprash & Soya Chunks. Moreover, existing oats segment saw 50% growth through increasing household penetration

- With the 26% increase in copra prices, 28% increase in rice bran oil prices, Gross margins contracted by 223 bps. Further employee spends to sales also increased by 61 bps. The savings in overhead spends & marketing cost by 105 bps & 81 bps restricted the operating margin contraction by 99 bps to 19.5%. Operating profit grew by 10.7% to Rs. 413 crore. Led by higher operating profit & lower interest cost, net profit increase by 13% to Rs. 312 crore

Marico saw strong growth across categories. However, Hair Oil category is mature, saturated categories & the growth opportunity remains limited. On the other hand, Saffola Edible Oil & foods portfolio saw continuation of strong growth momentum on the back of consumption shift towards healthier oil & acceleration of unbranded to branded in packaged foods category. The company is also leveraging strong growth momentum in immunity boosting categories by foraying in Honey & Chyawanprash. We believe foods portfolio can be much bigger for the company & would drive growth specifically when larger part of revenues (hair oil) is saturating. Further, the company has the ability to absorb abrupt short term raw material price movement without hurting its margins. It is important to note that it has not taken any price increase despite sharp raw material price increase in last 3-4 months. We remain positive on the stock.

We will be coming out with a detailed update after the conference call with the management.

Shares of MARICO LTD. was last trading in BSE at Rs.412.5 as compared to the previous close of Rs. 410.35. The total number of shares traded during the day was 129979 in over 4424 trades.

The stock hit an intraday high of Rs. 417.4 and intraday low of 402.65. The net turnover during the day was Rs. 53509482.

Source : Equity Bulls

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