29 October 2021
2QFY22 Results Update | Sector: Consumer
Marico
Buy
Estimate changes
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
CMP: INR564
MRCO IN
1,290
728.3 / 9.7
606 / 350
2/17/5
1301
TP: INR655 (+16% )
Result broadly in line; gross margin said to improve
Sales in 2QFY22 came in line with our estimate, while margin was slightly
below our expectation. With copra prices under control and the recent
price hikes, the management is confident of gross margin expanding in
2HFY22.
MRCO maintained its positive trajectory in the Foods business. The
management reiterated its sales target at INR5b by the end of FY22. Honey,
Oodles, and Soya Chunks continue to do well, with strong market share and
leadership position within their categories.
With a sales target of INR4.5-5b by FY24 from digital first brands, there is a
much required diversification in the portfolio, boosting its medium-to-long-
term topline growth prospects.
With sustained healthy topline momentum in its core brands now allied
with newer revenue streams, higher P/E multiples compared to the past are
justified. We maintain our
Buy
rating on the stock.
Financials & Valuations (INR b)
Y/E March
2021 2022E 2023E
Sales
80.5
92.5 103.3
Sales Gr. (%)
10.0
15.0
11.7
EBITDA
15.9
17.0
20.6
EBITDA Margin. %
19.8
18.4
19.9
Adj. PAT
11.6
12.4
15.2
Adj. EPS (INR)
9.0
9.6
11.8
EPS Gr. (%)
10.4
7.2
22.2
BV/Sh.(INR)
25.1
35.0
37.1
Ratios
RoE (%)
37.0
32.1
32.7
RoCE (%)
34.2
29.5
30.1
Payout (%)
84.4
86.2
82.0
Valuations
P/E (x)
62.8
58.5
47.9
P/BV (x)
22.5
16.1
15.2
EV/EBITDA (x)
44.9
41.8
34.5
Div. Yield (%)
1.4
1.5
1.7
Shareholding pattern (%)
As On
Sep-21 Jun-21
Promoter
59.5
59.6
DII
8.6
9.7
FII
26.0
25.1
Others
5.9
5.7
FII Includes depository receipts
Sales in line, margin lower than expected
Sep-20
59.6
10.4
23.7
Highlights from the management commentary
6.2
The management views the slightly slower growth in rural India as
Consolidated net sales grew 21.6% YoY to INR24.2b (in line with our
estimate) in 2QFY22.
The domestic business grew 23.6% YoY. Consolidated
EBITDA grew 8.7% YoY to INR4.2b (est. INR4.4b). PBT grew 8% YoY to
INR4.1b (est. INR4.3b). Adjusted PAT grew 4% YoY to INR3.1b (est. INR3.2b).
Consolidated gross margin contracted by 560bp YoY to 42.5%
(est. 43%).
As a percentage of sales, lower staff (-60bp to 6.3%), other expenditure (-
140bp to 10.6%), and A&P expenses (-150bp to 8%) resulted in a 210bp
contraction in EBITDA margin to 17.5% in 2QFY22.
Business segments:
Sales for Parachute/VAHO/Saffola grew 18%/16%/46%
YoY in 2QFY22. Parachute volumes grew 7% YoY.
The board of directors declared an interim dividend of INR3/share.
temporary as fundamentals remain intact.
It has guided at double-digit revenue growth, with mid-to-single digit
volume growth YoY in 2HFY22.
Copra prices are under control (down 11% sequentially) and are likely to
remain range bound.
Vegetable oil prices remained at elevated levels, with the impact of import
duty reduction not yet visible.
Gross margin will expand in 3Q and 4Q, though EBITDA margin is likely to
improve significantly in 4QFY22 as advertising spends are on a sequentially
increasing trend.
Capex is pegged at INR1.5b in FY22.
Krishnan Sambamoorthy – Research analyst
(Krishnan.Sambamoorthy@MotilalOswal.com)
Research analyst: Dhairya Dhruv
(Dhairya.Dhruv@motilaloswal.com) /
Kaiwan Jal Olia
(kaiwan.o@motilaloswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.