Hold Marico: PPFAS Research

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Hold Marico: PPFAS Research

Parag Parikh Financial Advisory Services (PPFAS) has recommended hold rating on Marico with a target of Rs 414, in its February 7, 2012 research report.

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Parag Parikh Financial Advisory Services (PPFAS) has recommended hold rating on Marico with a target of Rs 414, in its February 7, 2012 research report.

"Marico Ltd reported a decent set of numbers for the quarter ended Dec 2011. On a quarterly consolidated basis, YoY, the topline grew by 29.4%, from Rs 8,177.4 Mn to Rs 10,578.2 Mn. The numbers are not fully comparable due to acquisitions & divestments made during the course of the year as well as certain accounting changes. Volume growth (organic) was strong at 13%. Inflation has started showing signs of cooling down. Raw material prices were lower by 114 bps as compared to Q3FY11. However Advertising spends and Staff costs raised the total expenditure to Rs 9,360.7 Mn, 30.4% higher than the same period a year ago. Operating margins stood at 11.5%. Profit after Tax increased by 21% to Rs 841.2 Mn. PAT too is not comparable due to the various accounting changes. On a like to like basis, it would have been about 25% higher. EPS stood at Rs 1.37."

"Parachute coconut oil (rigid packs) grew by 13% in volume over the corresponding period last year. Market share in the branded coconut oil segment as of Dec 2011 (12 months, volume) stood at 54%. The Company's other flagship brand, Saffola registered a volume growth of 15%. It continues to be the leader in the category with a market share of 57% (12 mths, Dec 11). Oats, introduced under the Saffola brand, continue to grow well. They have now been extended to Kerala. The hair oil portfolio (rigid packs) experienced a strong 20% volume increase. Market share was 24% (12 months Dec 2011, volume). Kaya skin clinic business reported same store growth of 15%. Total revenue from Kaya business grew by 21% over Q3FY11. EBIT however showed a loss of Rs 145 Mn. This is primarily due to some misstatement of expenses for earlier years (in Middle East) that have come to the Managements notice. These expenses aggregated to Rs 130 Mn. Again, the numbers are not comparable due to accounting changes. On the operational side, the business is working on changing its positioning from 'cure' to 'cure + care'. Newly launched body lotion (mass skin care category) continues to do well. International business grew satisfactorily with organic growth at 16%."

"The CMP of Marico is Rs 160.8. It trades at a PE(TTM) of 31 times. Volume growth continues to be decent. Input costs are showing signs of cooling. Fundamentals for the business remain steady. Recommend continuing 'Holding' the stock," says Parag Parikh Financial Advisory Services research report.   

Public holding more than 90% in Indian cos

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To read the full report click on the attachment