05 may 2020 results review 4qfy20 marico - 4qfy20 - hsie-202005050658052659270.pdfvisual...
Post on 14-Jul-2020
1 Views
Preview:
TRANSCRIPT
05 May 2020 Results Review 4QFY20
Marico
HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters
Saffola saves the day
Marico’s performance in 4QFY20 was broadly in line with our estimates
driven by a surge in Saffola. The rest of the co’s portfolio remained under
pressure and lockdown decelerated PCNO/VAHO by 12/18% respectively. Co
had witnessed marginal recovery in PCNO and VAHO in Jan-Feb, but it was
short lived as it impacted by lockdown. Although supply side issues will be
resolved in the coming months (as of now 70-80% utilisation) but demand
side pressure will impact FY21 (particularly to VAHO/PC). International
business (22% of total) was impacted (5% decline) by restrictions in MENA
and lockdown in Bangladesh. It is expected to remain weak in FY21. Co is
focusing on various cost controls and along with softness in copra in FY21 to
support EBITDA margin. We cut our EPS estimates by 1% for FY20/FY21 (4/6%
cut in our thematic report in April). We value Marico at 30x on Mar-22E EPS,
our TP is at Rs 287. Maintain REDUCE.
Saffola drives revenues: Revenues declined by 7% (+9% in 4QFY19 and -2%
in 3QFY20) vs exp of 6% decline. India volume dipped 3% (+8% in 4QFY19
and -1% in 3QFY20) while the overall volume dipped 4%. PCNO witnessed
a 12/8% val/vol dip while VAHO saw a sharp decline of 18/11% in val/vol.
Saffola sustain surge in demand in Jan-Feb that further supported by pantry
loading in March, val/vol grew by 25/25%.
Margins in-line: GM expanded by 23bps to 49.3% (+239bps in 4QFY19 and
+282bps in 3QFY20) vs. exp of +126bps. Employee/A&P/Other expenses
declined by 8/18/2%. The dip in A&P was driven by a reduction in new
product launches during the quarter and curtailment of A&P in the last
week of March. EBITDA margin was up 58bps to 18.9% (+125bps in 4QFY19
and +170bps in 3QFY20) vs expectation of +59 bps. EBITDA declined by 4%
YoY. EBIT margins for Domestic/International expanded by 141/3bps.
Call & other takeaways: (1) 90-95% of Marico’s portfolio saw market share
gains, (2) Co expects the impact of Covid-19 to be sharper at the bottom of
pyramid in urban markets than in rural (3) International biz is expected to
recover in the near term as key markets for the co, like Bangladesh, are
opening up, (4) Co is working at 70-80% of capacity. However, restocking at
the distributor level has been a challenge, (5) Co believes growth in Saffola
will remain strong due to the increase in home cooking, (6) Co has launched
sanitizer and Veggie clean to boost its hygiene portfolio. Sanitizer has been
launched in Bangladesh and Vietnam as well.
Maintain REDUCE: Marico’s business will be less volatile than some of
its peers. Despite FY21 performance will be muted and we do not see any
re-rating drivers in the near term. We maintain REDUCE rating.
Financial Summary
YE Mar (Rs mn) Q4
FY20
Q4
FY19
YoY
(%)
Q3
FY20
QoQ
(%) FY19 FY20E FY21E FY22E
Net Sales 14,960 16,090 (7.0) 18,240 (18.0) 73,336 73,150 73,579 79,649
EBITDA 2,820 2,940 (4.1) 3,730 (24.4) 12,919 14,690 15,454 16,859
APAT 1,950 2,114 (7.7) 2,720 (28.3) 9,285 10,364 10,886 12,197
Diluted EPS (Rs) 1.51 1.64 (7.7) 2.11 (28.3) 7.19 8.03 8.43 9.45
P/E (x)
39.5 35.4 33.7 30.1
EV / EBITDA (x)
28.3 24.9 23.7 21.8
RoCE (%)
47.5 41.8 43.2 46.5
Source: Company, HSIE Research
REDUCE
CMP (as on 4 May 2020) Rs 284
Target Price Rs 287
NIFTY 9,294
KEY
CHANGES OLD NEW
Rating REDUCE REDUCE
Price Target Rs 287 Rs 287
EPS % FY21E FY22E
-1% -1%
KEY STOCK DATA
Bloomberg code MRCO IN
No. of Shares (mn) 1,291
MCap (Rs bn) / ($ mn) 367/4,855
6m avg traded value (Rs mn) 881
52 Week high / low Rs 404/234
STOCK PERFORMANCE (%)
3M 6M 12M
Absolute (%) (7.5) (22.2) (20.1)
Relative (%) 12.7 (1.2) (1.4)
SHAREHOLDING PATTERN (%)
Dec-19 Mar-20
Promoters 59.60 59.60
FIs & Local MFs 9.54 10.50
FPIs 23.84 22.70
Public & Others 7.02 7.20
Pledged Shares 0.0 0.0
Source : BSE
Varun Lohchab
varun.lohchab@hdfcsec.com
+91-22-6171-7334
Naveen Trivedi
naveen.trivedi@hdfcsec.com
+91-22-6171-7324
Aditya Sane
aditya.sane@hdfcsec.com
+91-22-6171-7336
Page | 2
Marico: Results Review 4QFY20
Marico Quarterly Commentary Particulars 1QFY20 2QFY20 3QFY20 4QFY20
Industry/ Co
Strategy
- Demand environment
continued to remain
challenging
- Channel liquidity was
constrained, but it is expected
to improve in 2HFY20
- Rural growth was ahead of
urban for the co
- Co is focusing on improving
direct reach and rural
distribution
- Consumption slowed down in
rural and channel liquidity was
constrained in wholesale
- Rural slowdown was most
prominent in the North and
East
- Urban GT systems were under
stress which aggravated the
slowdown
- Over the long term, the co is
worried about the wholesale
channel and has added 1,500+
stockists
- Mgt expects recovery in
demand by 2QFY21
- Demand trend saw no
significant change in 3Q vs 2Q
but the deceleration rate has
come down
- Co witnessed reverse
migration from branded to
loose in rural
- Direct reach for urban and
rural stands at 1mn outlets.
Overall reach is 5mn outlets
- MT & Ecomm contribution to
sales stands at 19-20%
- Demand remained weak pre-
Covid. While, co was on track
for mid single digit growth
- 90-95% of co’s portfolio gained
market share
- Co is currently functioning at
70-80% of capacity. However, it
is struggling to restock in rural
areas and wholesale
- Impact on offtake is expected
to be higher at the bottom of
pyramid among urban markets
than in rural
Revenue
Coconut Oil &
VAHO
- Parachute continued to do
well
- Usually Copra deflation
results in slowdown in volume.
However, smaller players have
limited ability to load channels
due to liquidity constrains right
now. Hence, Marico could
benefit
- Mid to low range VAHO did
well but growth in premium
was slow. However, co guides
for double digit growth in
remainder of FY20
- Aloe continued to do well
with DFO showing positive
traction
- Both cononut oil and VAHO
saw significant slowdown in
growth, primarily driven by
rural
- Focus in Parachute is on
pricing calls and making
conversion packs more attractiv
- Despite the slowdown, Amla,
Aloe Vera and Almond Plus
Walnut oil saw mkt share gains
- Rural slowdown has severely
impacted revenues of PCNO
- Pricing interventions by the co
hit shelves towards in Dec
- Mgt believes that the
degrowth is a oneoff and
decline will reduce over the
next 2-3 quarters
- Co saw Aloe vera and DFO
deliver strong performance
- Marico's is targeting double
digit growth by end of FY21.
Mid-high single digit growth
will be visible from 2QFY21
- Participation in hair fall and
other premium categories will
be ramped up over the next 2-3
quarters
- PCNO saw long low single
digit volume growth while
VAHO was mildly positive in
Jan/Feb
- PCNO gained market share of
>250bps
- Bottom of pyramid products
saw good traction within
VAHO, with Shanti Amla
gaining market share of 90bps.
- Co expects impact of
lockdown to be felt in premium
non sticky oils. However, core
portfolio is not expected to be
impacted.
- Top of pyramid products in
VAHO saw good traction in MT
and Ecomm
Saffola - Despite efforts by the co,
Saffola did well only in MT and
Ecomm. Co continued to
struggle in GT
- Co is now launching
differentiated packs across
channels in order to drive
volumes
- Saffola continued to struggle.
The co is focusing on
reassessing its strategy across
channels
- Plans are being made for a
significant distribution drive in
1-litre packs
- Saffola performed well across
all trade channels
- Co guides for mid-high single
digit growth in near-med term
- Medium term growth is
expected to be around 8-10%
- Mgt does not want to dilute its
competitive position and price
premium to chase volumes
- Ecomm B-B has seen
significant correction in
assortment
- Performance in Jan/Feb was
strong. Co was able to build
inventory in channels prior to
lockdown
- Increase in home cooking will
benefit Saffola
- Saffola was on track for
double digit growth even
without Covid-19 boost.
- Co is focusing its efforts on
Gold & Total due to higher
realisation. It is also focusing on
larger SKUs
- Co expects double digit
growth for Saffola in near term
Page | 3
Marico: Results Review 4QFY20
Particulars 1QFY20 2QFY20 3QFY20 4QFY20
Others - Food and Premium Hair
Nourishment continued to do
well with growth > 20%
- Male grooming struggled due
to Deos, but ex-Deos growth
was in double digits
- Male grooming was impacted,
especially in the LUP packs
- Focus on premiumization
with wax and male serums
should lead it back to growth in
2HFY20
- Foods and Premium Hair
Nourishment performed well
- In Kaya skin care, capabilities
like top end premium skin care
visual merchandising and
beauty adviser/promoter based
selling will be developed over
the next 6 months
- Other products saw 20-25%
growth on value terms
- Co is witnessing traction in
the new foods category with
brands like FITTIFY
- Perfect Nashta was expanded
to NCR and will be launched in
Mumbai in 4Q
- Co expects the foods to cross
Rs 2.5bn in FY21
- Livon is expected to growt in
double digits in FY21
- Kaya youth has started getting
critical mass
- Oats saw value growth of 23%
- Fittify and Coco Soul
performed well in Jan/Feb.
However, Fittify has posted
underwhelming performance in
its first year.
- Premium skin care and male
grooming continued to struggle
- Co launched hand sanitizers
and veggie clean to boost its
hygiene portfolio
International - Bangaldesh and Vietnam
delivered a stable quarter
- Diversification is ongoing in
Bangladesh where co has
launche Male Grooming, Skin
care, baby products and will
continue to expand
- MENA biz saw a decine due
to one time distribution
correction in preparation of
localization of production
- Bangladesh exhibited robust
growth driven by portfolio
diversification while other
geographies were flattish
- MENA and South Africa faced
demand issues
- Internation business saw
healthy operating margins
- Growth in Bangladesh was
broad based. Coconut oil is
being ramped up in that market
- HPC growth in Vietnam was
healthy
- Co remains positive on
Vietnam and Bangladesh due to
encouraging macros
- High single digit-low double
digit CC growth is expected
going forward
- Bangladesh witnessed the
impact of Covid-19 only for the
last 4-5 days. Hence,
performance in the market was
strong. SE Asia also saw low
impact
- MENA and South Africa were
severely impacted
- Marico is 2nd placed FMCG co
in Bangladesh with a growing
non-PCNO portfolio
- Co expects International biz to
recovery in the near term
Margin
Gross Margin - Co continued to enjoy copra
deflation. However, Mgt
expects copra prices to rise
from 3QFY20
- Co guides for gross margin
expansion of ~300bps for FY20
- Copra prices were the lowest
in July which helped expand
gross margins
- However, this accelerated the
downgradation as co did not
take any price correction
- Input cost inflation is expected
to remain tepid throughout the
year
- Mild inflation expected is in
COPRA and inflation in edible
oil could put pressure on GM in
FY21
- Co expects margin in FY20 to
be above 20%
- Benign RM inflation helped co
improve GM
- Co is focusing on providing
consumers value through
Saffola
- Dip in coconut demand will
keep copra prices deflationary
in FY21
EBITDA
Margin
- Co plans to continue investing
aggressively behind innovation
- A&P spend will also be
maintained at a competitive
level
- International margin is
expected to remain around 18-
20% which will boost
EBITDAM for FY20
- The co continued to invest in
A&P, which is expected to
grow, and is on course on the
strategy for the year
- Overall EBITDA performance
was satisfactory and recovery is
expected in 2HFY20 owing to
good monsoon and thrust on
govt spending
- Marico is controlling its
overall ad spend in order to
invest behind growth initiatives
- EBITDA margins could see a
minor reduction in FY21 as a
result of these investments
- A&P decline was led by lower
new product launches in
4QFY20. Co also curtailed A&P
in last week of March.
However, International A&P
did not see any dip.
- A&P is expected to dip by
~100bps in FY21.
Page | 4
Marico: Results Review 4QFY20
Quarterly standalone Financial Snapshot
Particulars (Rs mn) Q4FY20 Q4FY19 YoY (%) Q3FY20 QoQ(%) FY20 FY19 YoY(%)
Net Revenue 14,960 16,090 (7.0) 18,240 (18.0) 73,353 73,336 0.0
Material Expenses 7,590 8,200 (7.4) 9,280 (18.2) 37,450 40,177 (6.8)
Employee Expenses 1,080 1,170 (7.7) 1,160 (6.9) 4,780 4,666 2.4
ASP Expenses 1,260 1,530 (17.6) 1,850 (31.9) 7,270 6,589 10.3
Other Expenses 2,210 2,250 (1.8) 2,220 (0.5) 8,960 8,985 (0.3)
EBITDA 2,820 2,940 (4.1) 3,730 (24.4) 14,690 12,919 13.7
EBITDA (IND-AS 116) 2,700 2,940 (8.2) 3,730 (27.6) 14,210 12,919 10.0
Depreciation 380 390 (2.6) 320 18.8 1,400 1,064 31.6
EBIT 2,440 2,550 (4.3) 3,410 (28.4) 13,290 11,855 12.1
Other Income 320 280 14.3 290 10.3 1,259 1,028 22.5
Interest Cost 130 120 8.3 120 8.3 500 278 80.2
PBT 2,530 2,710 (6.6) 3,580 (29.3) 13,740 12,605 9.0
Tax 530 (1,330) (139.8) 820 (35.4) 3,435 1,274 169.7
PAT 1,950 3,990 (51.1) 2,720 (28.3) 10,220 11,162 (8.4)
Exceptional Items - (1,876) na - na 144 (1,876) na
APAT 1,950 2,114 (7.7) 2,720 (28.3) 10,364 9,285 11.6
EPS 1.5 1.6 (7.7) 2.1 (28.3) 8.0 7.2 11.6
Source: Company, HSIE Research
Quarterly Performance Analysis
As a % of net sales Q4FY20 Q4FY19 YoY(bps) Q3FY20 QoQ(bps) FY20 FY19 YoY(bps)
Material Expenses 50.7 51.0 (23) 50.9 (14) 51.1 54.8 (373)
Employee Expenses 7.2 7.3 (5) 6.4 86 6.5 6.4 15
A&P Expenses 8.4 9.5 (109) 10.1 (172) 9.9 9.0 93
Other Expenses 14.8 14.0 79 12.2 260 12.2 12.3 (4)
EBITDA Margin (%) 18.9 18.3 58 20.4 (160) 20.0 17.6 241
Adj EBITDA Margin (%) 18.0 18.3 (22) 20.4 (240) 37.9 32.2 579
Tax Rate (%) 20.9 (49.1) 7,003 22.9 (196) 25.0 10.1 1,490
APAT Margin (%) 13.0 13.1 (10) 14.9 (188) 14.1 12.7 147
Source: Company, HSIE Research
Domestic revenue declined
7% with overall volume
decline of 4%
Employee/A&P/Other
expenses decreased by
8/18/2%
GM was up 23bps to 49.3%
(+239bps in 4QFY19 and
+282bps in 3QFY20) vs
expectation of +126bps
EBITDA margin expanded
58bps, in-line with
expectations
Page | 5
Marico: Results Review 4QFY20
Segmental Performance
(Rs mn) Q4FY20 Q4FY19 YoY (%) Q3FY20 QoQ(%) FY20 FY19 YoY(%)
Segmental Revenues
Domestic 11,460 12,400 (7.6) 13,800 (17.0) 56,550 57,559 (1.8)
International 3,500 3,690 (5.1) 4,440 (21.2) 16,600 15,780 5.2
Total 14,960 16,090 (7.0) 18,240 (18.0) 73,150 73,338 (0.3)
Segmental EBIT
Domestic 2,380 2,400 (0.8) 2,980 (20.1) 11,700 10,687 9.5
International 570 600 (5.0) 850 (32.9) 3,360 2,885 16.5
Total 2,950 3,000 (1.7) 3,830 (23.0) 15,060 13,572 11.0
Capital Employed
Domestic 14,320 13,920 2.9 12,380 15.7 14,320 13,920 2.9
International 7,330 6,930 5.8 7,530 (2.7) 7,330 6,930 5.8
Total 21,650 20,850 3.8 19,910 8.7 21,650 20,850 3.8
Source: Company, HSIE Research
EBIT Margin
EBIT Margin Q4FY20 Q4FY19 YoY(bps) Q3FY20 QoQ(bps) FY20 FY19 YoY(bps)
Domestic 20.8 19.4 141 21.6 (83) 20.7 18.6 212
International 16.3 16.3 3 19.1 (286) 20.2 18.3 196
Total 19.7 18.6 107 21.0 (128) 20.6 18.5 208
Source: Company, HSIE Research
Business Performance
Value Growth (%) Q1
FY18
Q2
FY18
Q3
FY18
Q4
FY18
Q1
FY19
Q2
FY19
Q3
FY19
Q4
FY19
Q1
FY20
Q2
FY20
Q3
FY20
Q4
FY20
Total (4) 6 15 12 20 20 15 9 7 (0) (2) (7)
India (4) 12 19 12 23 20 13 7 6 (3) (4) (4)
International (1) (8) 1 13 9 18 21 14 9 8 8 (5)
Source: Company, HSIE Research
Segment Performance
Particulars (%) Q1
FY18
Q2
FY18
Q3
FY18
Q4
FY18
Q1
FY19
Q2
FY19
Q3
FY19
Q4
FY19
Q1
FY20
Q2
FY20
Q3
FY20
Q4
FY20
FMCG Business
(India)
Value Growth (4) 12 19 12 23 20 13 7 6 (3) (5) (8)
Volume Growth (9) 8 9 1 12 6 5 8 6 1 (1) (3)
Parachute Coconut
Oil
Value Growth 3 26 41 24 38 32 19 4 8 (4) (5) (12)
Volume Growth (9) 12 15 (5) 9 8 9 6 9 (1) (2) (8)
VAHO
Value Growth (7) 12 7 9 12 12 19 7 11 (6) (17) (18)
Volume Growth (8) 12 8 11 15 5 7 1 7 - (7) (11)
Saffola (Refined
Edible Oil)
Value Growth (8) 1 (4) (3) 9 9 8 15 6 5 13 25
Volume Growth (9) 3 - (1) 10 5 2 18 3 1 11 25
Source: Company, HSIE Research
Page | 6
Marico: Results Review 4QFY20
Market Share Trend Particulars (%) Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20
India
Coconut Oils 58 59 59 59 59 59 59 59 60 60 61 62
Saffola 66 67 68 69 70 71 72 73 73 75 76 76
Value added Hair Oils 33 34 34 34 34 34 34 34 34 35 35 35
Livon and Silk & Shine 83 83 83 82 81 78 76 75 63 64 65 65
Hair Creams/Gels 62 62 63 63 63 62 61 60 na na na na
Saffola Oats 27 27 28 28 29 29 29 29 30 31 32 33
Overseas
VAHO (Bangladesh) 18 20 21 21 21 22 23 23 22 22 22 23
PCNO (Bangladesh) 86 87 87 87 87 87 87 86 84 84 82 82
X-Men Men’s Shampoo (Vietnam) 38 39 40 39 39 39 40 39 38 37 37 37
Hair Code & Fiancée (Egypt) 54 54 53 na na na na na na na na na
Source: Company, HSIE Research
Geographical Performance (constant currency) Geography Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20
Bangladesh 12 11 12 17 9 10 16 12 11 15 15 6
MENA (14) - 15 61 17 19 8 5 ~ -10 (3) (4) (50)
South Africa 5 1 32 32 7 18 - 3 6 (2) 3 (26)
South East Asia 7 (8) (4) (3) - 14 13 4 8 1 3 5
Source: Company, HSIE Research
Consolidated Revenue Breakup (FY20) International Revenue Breakup (F20)
Source: Company, HSIE Research
Source: Company, HSIE Research
Parachute (Rigid pack)
29
VAHO18Saffola
15
Intl.23
Others14
(%)
Bangladesh49
MENA12
South Africa
7
South East
Asia
26
Others
6(%)
Page | 7
Marico: Results Review 4QFY20
Long term performance trends
Urban GT Growth (YoY) Rural Growth (YoY)
Source: Company, HSIE Research Source: Company, HSIE Research
Modern Trade Growth (YoY) CSD Growth (YoY)
Source: Company, HSIE Research Source: Company, HSIE Research
Copra Inflation Gross Margin Change
Source: Company, HSIE Research Source: Company, HSIE Research
9
0
10
15
5
16
11
2
(2)
(5)
(11)
(7)
(12)(14)
(10)
(6)
(2)
2
6
10
14
18
Q4F
Y17
Q1F
Y18
Q2F
Y18
Q3F
Y18
Q4F
Y18
Q1F
Y19
Q2F
Y19
Q3F
Y19
Q4F
Y19
Q1F
Y20
Q2F
Y20
Q3F
Y20
Q4F
Y20
(%)
4
(11)
14
26
12
28 24
12
4 6
(3) (2)
(15)(24)
(13)
(2)
9
20
31
Q4F
Y17
Q1F
Y18
Q2F
Y18
Q3F
Y18
Q4F
Y18
Q1F
Y19
Q2F
Y19
Q3F
Y19
Q4F
Y19
Q1F
Y20
Q2F
Y20
Q3F
Y20
Q4F
Y20
(%)
17
11
27 27 23
39 39
46
28 30 29
12
44
-
6
11
17
22
28
33
39
44
50
Q4F
Y17
Q1F
Y18
Q2F
Y18
Q3F
Y18
Q4F
Y18
Q1F
Y19
Q2F
Y19
Q3F
Y19
Q4F
Y19
Q1F
Y20
Q2F
Y20
Q3F
Y20
Q4F
Y20
(%)
(13) (15)
(1) (1)
32
15
(3)
12 12
na 5 5
(18)
(30)
(20)
(10)
-
10
20
30
40
Q4F
Y17
Q1F
Y18
Q2F
Y18
Q3F
Y18
Q4F
Y18
Q1F
Y19
Q2F
Y19
Q3F
Y19
Q4F
Y19
Q1F
Y20
Q2F
Y20
Q3F
Y20
Q4F
Y20
(%)
-50%
0%
50%
100%
150%
Q4
FY1
1
Q3
FY1
2
Q2
FY1
3
Q1
FY1
4
Q4
FY1
4
Q3
FY1
5
Q2
FY1
6
Q1
FY1
7
Q4
FY1
7
Q3
FY1
8
Q2
FY1
9
Q1
FY2
0
Q4
FY2
0
(800)
(400)
-
400
800
Q4
FY1
1
Q2
FY1
2
Q4
FY1
2
Q2
FY1
3
Q4
FY1
3
Q2
FY1
4
Q4
FY1
4
Q2
FY1
5
Q4
FY1
5
Q2
FY1
6
Q4
FY1
6
Q2
FY1
7
Q4
FY1
7
Q2
FY1
8
Q4
FY1
8
Q2
FY1
9
Q4
FY1
9
Q2
FY2
0
Q4
FY2
0
(bps)
Page | 8
Marico: Results Review 4QFY20
Change in Raw Material Prices (Index) Change in Product MRP (Index)
Source: Company, HSIE Research Source: Company, HSIE Research
Assumptions
Particulars FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E
Revenue Growth (%)
Domestic Business 22.9 7.9 (2.1) 8.6 15.9 (1.7) 0.5 8.6
Parachute Coconut 29.3 7.7 (11.6) 10.0 23.0 (2.4) (0.3) 9.1
VAHO 25.6 11.3 6.8 10.6 12.2 (6.4) (6.0) 9.4
Saffola Oil 10.7 10.1 6.1 (3.9) 10.0 11.7 8.5 8.0
IBD 9.9 5.6 2.0 2.0 10.0 (2.0) (5.0) 10.0
Gross Margin (%) 45.6 49.0 52.2 47.0 45.2 48.8 49.0 49.3
ASP (% of sales) 11.3 11.5 11.0 9.3 9.0 9.9 8.7 8.8
Distribution (% of sales) 3.8 4.2 4.0 3.8 3.9 4.0 4.0 4.0
EBITDA Margin (%) 15.2 17.5 19.6 18.0 17.6 20.1 21.0 21.2
Tax Rate (%) 28.8 29.7 29.4 25.9 10.1 24.9 25.1 25.1
Source: Company, HSIE Research
10
0
10
0
10
0
10
0
10
0
10
0
97
10
0
127
10
7
96
85
65
80
95
110
125
140
Cochin
Coconut
OIL
Copra
Calicut
Kardi Oil
Jalna
Rice Bran Liquid
Paraffin
HDPE
Mar-19 Mar-20
100
100
100
100
100
100
100
100
100
100
100
100
100
93
80
90
100
110
PCNO -
50 ml
PCNO -
100 ml
PCNO -
250 ml
Saffola
Total
Saffola
Tasty
Blend -1ltr
Saffola
Gold -
1ltr
Saffola
Active -
1ltr
Mar-19 Mar-20
Page | 9
Marico: Results Review 4QFY20
Change in Estimates
FY20 FY21E FY22E
OLD NEW Chg (%) OLD NEW Chg (%) OLD NEW Chg (%)
Net Sales 73,150 73,376 (0.3) 73,579 75,265 (2.2) 79,649 82,241 (3.2)
EBITDA 14,690 14,630 0.4 15,454 15,381 0.5 16,859 16,972 (0.7)
APAT 10,364 10,392 (0.3) 10,886 11,012 (1.1) 12,197 12,345 (1.2)
EPS 8.0 8.1 (0.3) 8.4 8.5 (1.1) 9.4 9.6 (1.2)
Peer Set Comparison
Company Mcap
(Rs bn)
CMP
(Rs/sh) Reco TP
EPS (Rs) P/E (x) EV/EBITDA (x) Core RoCE (%)
FY20E/
CY19P
FY21E/
CY20E
FY22E/
CY21E
FY20E/
CY19P
FY21E/
CY20E
FY22E/
CY21E
FY20E/
CY19P
FY21E/
CY20E
FY22E/
CY21E
FY20E/
CY19P
FY21E/
CY20E
FY22E/
CY21E
HUL 4,517 2,087 REDUCE 1,969 31.7 37.1 41.9 69.3 59.2 52.4 47.5 40.8 36.3 230.7 46.5 28.8
ITC 2,127 174 BUY 221 12.5 11.9 13.0 13.8 14.6 13.3 9.3 10.1 9.0 44.5 43.4 48.0
Nestle 1,683 17,457 REDUCE 14,042 206.2 237.7 279.0 84.7 73.4 62.6 56.5 50.6 44.2 74.9 70.3 68.7
Dabur 822 467 REDUCE 447 9.0 10.0 11.2 51.8 46.6 41.7 41.6 38.5 34.2 51.4 52.7 55.9
Britannia 744 3,096 REDUCE 2,711 56.4 61.9 71.4 54.9 50.0 43.4 40.0 36.0 31.6 41.1 43.4 47.2
GCPL 537 526 REDUCE 529 14.5 15.9 17.6 36.3 33.1 29.9 25.9 24.9 23.0 18.5 20.0 22.1
Marico 367 284 REDUCE 283 8.0 8.4 9.4 35.4 33.7 30.1 24.9 23.7 21.8 41.8 43.2 46.5
United Spirits 394 543 ADD 586 11.9 13.7 16.1 47.4 39.7 33.7 27.1 24.7 21.5 17.9 19.1 20.8
Colgate 374 1,375 ADD 1,372 29.8 32.0 36.1 46.1 43.0 38.1 29.2 27.3 24.4 69.6 72.7 80.5
Jubilant 204 1,550 ADD 1,502 30.1 21.9 37.5 51.5 70.9 41.3 31.2 39.0 24.4 31.4 12.0 22.6
Emami 86 189 REDUCE 221 11.7 11.6 13.0 16.2 16.3 14.5 11.5 11.5 10.3 23.2 24.1 29.9
Radico
Khaitan 42 316 BUY 371 16.1 19.6 23.2 19.6 16.2 13.6 11.9 10.1 8.5 14.9 14.3 15.8
Source: Company, HSIE Research
Page | 10
Marico: Results Review 4QFY20
Financials Consolidated Income Statement
(Rs mn) FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E
Net Revenues 57,330 60,173 59,178 63,222 73,336 73,150 73,579 79,649
Growth (%) 22.3 7.0 (1.7) 6.8 16.0 (0.3) 0.6 8.2
Material Expenses 31,190 30,706 28,259 33,482 40,177 37,450 37,553 40,417
Employee Expense 3,251 3,734 4,042 4,222 4,666 4,780 4,948 5,391
ASP Expense 6,498 6,927 6,510 5,856 6,589 7,270 6,372 6,989
Distribution Expense 2,193 2,541 2,386 2,408 2,870 2,926 2,943 3,186
Other Expenses 5,497 5,752 6,389 5,877 6,115 6,034 6,309 6,807
EBITDA 8,700 10,514 11,593 11,378 12,919 14,690 15,454 16,859
EBITDA Growth (%) 16.4 20.8 10.3 (1.9) 13.5 13.7 5.2 9.1
EBITDA Margin (%) 15.2 17.5 19.6 18.0 17.6 20.1 21.0 21.2
Depreciation 843 949 903 891 1,064 1,400 1,507 1,613
EBIT 7,857 9,565 10,690 10,487 11,855 13,290 13,947 15,245
Other Income (Including EO Items) 589 932 973 846 1,028 1,012 1,158 1,487
Interest 230 206 166 162 278 500 398 293
PBT 8,216 10,292 11,497 11,171 12,605 13,802 14,707 16,440
Total Tax 2,368 3,053 3,377 2,896 1,274 3,435 3,692 4,126
Minority Interest & Share of JVs 114 124 134 131 170 152 130 117
RPAT 5,735 7,114 7,986 8,145 11,162 10,214 10,886 12,197
Adjusted PAT 5,735 7,197 8,026 8,142 9,285 10,364 10,886 12,197
APAT Growth (%) 18.1 25.5 11.5 1.4 14.0 11.6 5.0 12.0
Adjusted EPS (Rs) 4.45 5.58 6.22 6.31 7.19 8.03 8.43 9.45
EPS Growth (%) 18.1 25.5 11.5 1.4 14.0 11.6 5.0 12.0
Source: Company, HSIE Research
Consolidated Balance Sheet (Rs mn) FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E
SOURCES OF FUNDS
Share Capital - Equity 645 1,290 1,291 1,291 1,291 1,291 1,291 1,291
Reserves 17,603 18,884 21,966 24,138 27,065 29,947 30,734 33,895
Total Shareholders Funds 18,248 20,174 23,257 25,429 28,356 31,238 32,025 35,185
Minority Interest 137 143 133 125 295 447 577 694
Long Term Debt 1,687 - 1,225 1,224 1,721 1,621 1,421 1,221
Short Term Debt 1,654 1,528 1,163 1,869 1,769 1,619 1,419 1,219
Total Debt 3,342 1,528 2,388 3,093 3,490 3,240 2,840 2,440
Net Deferred Taxes 79 (421) 125 202 (1,760) (1,760) (1,760) (1,760)
Non Current Liabilities 87 128 225 192 221 254 292 336
TOTAL SOURCES OF FUNDS 21,891 21,552 26,128 29,041 30,602 33,420 33,974 36,895
APPLICATION OF FUNDS
Net Block 10,759 10,811 10,847 11,103 13,000 13,960 13,803 13,540
CWIP 30 367 112 268 450 580 580 580
LT Loans & Advances 506 175 194 190 221 220 221 240
Other Non Current Assets 1,198 426 437 656 656 656 656 656
Total Non-current Assets 12,494 11,779 11,590 12,218 14,327 15,416 15,261 15,016
Inventories 9,947 9,256 12,534 15,109 14,110 13,800 14,049 15,254
Debtors 1,768 2,524 2,470 3,406 5,170 5,390 5,298 5,735
Other Current Assets 2,147 1,299 1,196 2,561 3,150 3,142 3,161 3,421
Cash & Equivalents 4,897 8,303 8,442 7,429 8,041 10,548 10,438 12,992
Total Current Assets 18,759 21,382 24,642 28,505 30,471 32,880 32,945 37,402
Creditors 5,643 6,690 6,966 8,217 9,440 9,780 8,543 9,166
Current Liabilities 3,718 4,920 3,138 3,465 4,756 5,097 5,689 6,357
Total Current Liabilities 9,362 11,610 10,104 11,682 14,196 14,877 14,232 15,522
Net Current Assets 9,398 9,772 14,538 16,823 16,275 18,003 18,713 21,879
TOTAL APPLICATION OF FUNDS 21,891 21,552 26,128 29,041 30,602 33,420 33,974 36,895
Source: Company, HSIE Research
Page | 11
Marico: Results Review 4QFY20
Consolidated Cash Flow (Rs mn) FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E
Reported PBT 8,217 10,338 11,487 11,170 12,605 13,802 14,707 16,440
Non-operating & EO Items (185) (433) (53) (329) (1,876) 149 - -
Interest Expenses 39 (135) (197) (174) 278 500 398 293
Depreciation 843 1,018 903 891 1,064 1,400 1,507 1,613
Working Capital Change (169) (1) (2,698) (3,065) 2,107 (1,591) (2,320) (2,112)
Tax Paid (2,097) (2,462) (2,964) (2,949) (1,274) (3,435) (3,692) (4,126)
OPERATING CASH FLOW ( a ) 6,648 8,326 6,477 5,544 12,904 10,825 10,600 12,107
Capex (579) (856) (815) (1,231) (3,143) (2,490) (1,350) (1,350)
Free Cash Flow (FCF) 6,070 7,469 5,663 4,313 9,762 8,335 9,250 10,757
Investments & Acquisition 410 (1,179) (441) 1,047 230 (420) - -
Non-operating Income (1,623) (321) 340 353 (1,992) 1 (1) (18)
INVESTING CASH FLOW ( b ) (1,792) (2,357) (915) 169 (4,905) (2,909) (1,351) (1,368)
Debt Issuance/(Repaid) (437) - (670) 692 397 (250) (400) (400)
Interest Expenses (233) (204) (172) (162) (278) (500) (398) (293)
FCFE 4,187 5,765 4,720 6,243 8,119 7,165 8,451 10,046
Share Capital Issuance 6 5 0 0 0 - - 0
Dividend (3,001) (5,025) (5,088) (6,357) (6,358) (7,481) (10,099) (9,036)
Others (2,660) (589) 190 152 29 33 38 44
FINANCING CASH FLOW ( c ) (6,324) (5,813) (5,740) (5,675) (6,210) (8,198) (10,859) (9,685)
NET CASH FLOW (a+b+c) (1,468) 156 (177) 38 1,790 (283) (1,610) 1,054
EO Items, Others 547 (966) 634 397 (0) - - (0)
Closing Cash & Equivalents 2,049 3,171 2,360 2,001 3,791 3,508 1,898 2,952
Key Ratios
FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E
PROFITABILITY (%)
GPM 45.6 49.0 52.2 47.0 45.2 48.8 49.0 49.3
EBITDA Margin 15.2 17.5 19.6 18.0 17.6 20.1 21.0 21.2
EBIT Margin 13.7 15.9 18.1 16.6 16.2 18.2 19.0 19.1
APAT Margin 10.0 12.0 13.6 12.9 12.7 14.2 14.8 15.3
RoE 36.0 37.5 37.0 33.4 34.5 34.8 34.4 36.3
RoIC (or Core RoCE) 38.7 44.7 49.3 40.6 47.5 41.8 43.2 46.5
RoCE 29.2 33.9 34.4 30.5 31.6 32.4 32.3 34.3
EFFICIENCY
Tax Rate (%) 28.8 29.7 29.4 25.9 10.1 24.9 25.1 25.1
Fixed Asset Turnover (x) 5.8 5.6 5.0 4.9 4.7 4.1 3.9 3.9
Inventory (days) 63.3 56.1 77.3 87.2 70.2 68.9 69.7 69.9
Debtors (days) 11.3 15.3 15.2 19.7 25.7 26.9 26.3 26.3
Other Current Assets (days) 13.7 7.9 7.4 14.8 15.7 15.7 15.7 15.7
Payables (days) 35.9 40.6 43.0 47.4 47.0 48.8 42.4 42.0
Other Current Liab & Provns (days) 23.7 29.8 19.4 20.0 23.7 25.4 28.2 29.1
Cash Conversion Cycle (days) 28.7 8.9 37.6 54.2 41.0 37.2 41.1 40.7
Net D/E (x) (0.1) (0.3) (0.3) (0.2) (0.2) (0.2) (0.2) (0.3)
PER SHARE DATA (Rs)
EPS 4.4 5.6 6.2 6.3 7.2 8.0 8.4 9.4
CEPS 10.2 6.3 6.9 7.0 8.0 9.1 9.6 10.7
Dividend 1.2 3.4 3.5 4.2 5.0 6.8 7.0 8.0
Book Value 14.1 15.6 18.0 19.7 22.0 24.2 24.8 27.3
VALUATION
P/E (x) 63.9 50.9 45.7 45.0 39.5 35.4 33.7 30.1
P/BV (x) 20.1 18.2 15.8 14.4 12.9 11.7 11.4 10.4
EV/EBITDA (x) 42.2 34.7 31.6 32.3 28.3 24.9 23.7 21.8
EV/Revenues (x) 6.4 6.1 6.2 5.8 5.0 5.0 5.0 4.6
OCF/EV (%) 1.8 2.3 1.8 1.5 3.5 3.0 2.9 3.3
FCF/EV (%) 1.3 1.6 1.5 1.6 2.2 2.2 2.5 2.9
FCFE/Mkt Cap (%) 1.1 1.6 1.3 1.7 2.2 2.0 2.3 2.7
Dividend Yield (%) 0.4 1.2 1.2 1.5 1.8 2.4 2.5 2.8
Source: Company, HSIE Research
Page | 12
Marico: Results Review 4QFY20
Rating Criteria
BUY: >+15% return potential
ADD: +5% to +15% return potential
REDUCE: -10% to +5% return potential
SELL: >10% Downside return potential
Date CMP Reco Target
7-May-19 340 BUY 386
9-Jul-19 370 BUY 384
2-Aug-19 363 BUY 395
22-Sep-19 379 NEU 395
11-Oct-19 385 NEU 400
27-Oct-19 393 NEU 391
9-Jan-20 333 NEU 370
31-Jan-20 315 NEU 350
2-Mar-20 299 REDUCE 304
13-Apr-20 295 REDUCE 287
14-Apr-20 291 REDUCE 287
5-May-20 284 REDUCE 287
From 2nd March 2020, we have moved to new rating system
RECOMMENDATION HISTORY
200
250
300
350
400
May
-19
Jun
-19
Jul-
19
Au
g-1
9
Sep
-19
Oct
-19
No
v-1
9
Dec
-19
Jan
-20
Feb
-20
Mar
-20
Ap
r-20
May
-20
Marico TP
Page | 13
Marico: Results Review 4QFY20
HDFC securities
Institutional Equities
Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park,
Senapati Bapat Marg, Lower Parel, Mumbai - 400 013
Board: +91-22-6171-7330 www.hdfcsec.com
Disclosure:
We, Varun Lohchab, PGDM, Naveen Trivedi, MBA & Aditya Sane, CA, authors and the names subscribed to this report, hereby certify that all of the views
expressed in this research report accurately reflect our views about the subject issuer(s) or securities. HSL has no material adverse disciplinary history as on the
date of publication of this report. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific
recommendation(s) or view(s) in this report.
Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative
or HDFC Securities Ltd. or its Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding
the date of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material
conflict of interest.
Any holding in stock –NO
HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475.
Disclaimer:
This report has been prepared by HDFC Securities Ltd and is solely for information of the recipient only. The report must not be used as a singular basis of any
investment decision. The views herein are of a general nature and do not consider the risk appetite or the particular circumstances of an individual investor;
readers are requested to take professional advice before investing. Nothing in this document should be construed as investment advice. Each recipient of this
document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in securities of the companies
referred to in this document (including merits and risks) and should consult their own advisors to determine merits and risks of such investment. The
information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be
reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy,
completeness or correctness. All such information and opinions are subject to change without notice. Descriptions of any company or companies or their
securities mentioned herein are not intended to be complete. HSL is not obliged to update this report for such changes. HSL has the right to make changes and
modifications at any time.
This report is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity who is a citizen
or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be
contrary to law or regulation or what would subject HSL or its affiliates to any registration or licensing requirement within such jurisdiction.
If this report is inadvertently sent or has reached any person in such country, especially, United States of America, the same should be ignored and brought to
the attention of the sender. This document may not be reproduced, distributed or published in whole or in part, directly or indirectly, for any purposes or in
any manner.
Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or
price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively
assume currency risk. It should not be considered to be taken as an offer to sell or a solicitation to buy any security.
This document is not, and should not, be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report
should not be construed as an invitation or solicitation to do business with HSL. HSL may from time to time solicit from, or perform broking, or other services
for, any company mentioned in this mail and/or its attachments.
HSL and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of
the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a
market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any
other potential conflict of interests with respect to any recommendation and other related information and opinions.
HSL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments
made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates,
diminution in the NAVs, reduction in the dividend or income, etc.
HSL and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt
in the report, or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies / organizations
described in this report.
HSL or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject
company for any other assignment in the past twelve months.
HSL or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from t
date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage
services or other advisory service in a merger or specific transaction in the normal course of business.
HSL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with
preparation of the research report. Accordingly, neither HSL nor Research Analysts have any material conflict of interest at the time of publication of this
report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. HSL may
have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of
the subject company. We have not received any compensation/benefits from the subject company or third party in connection with the Research Report.
HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg
(East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Compliance Officer: Binkle R. Oza Email: complianceofficer@hdfcsec.com Phone: (022)
3045 3600 HDFC Securities Limited, SEBI Reg. No.: NSE, BSE, MSEI, MCX: INZ000186937; AMFI Reg. No. ARN: 13549; PFRDA Reg. No. POP: 11092018;
IRDA Corporate Agent License No.: CA0062; SEBI Research Analyst Reg. No.: INH000002475; SEBI Investment Adviser Reg. No.: INA000011538; CIN -
U67120MH2000PLC152193
top related