Escorts Securities Ltd.

Oct. 29, 2012

MARICO LIMITED Q213 Earnings Estimate

ACCUMULATE
CMP (INR)

207

Target (INR)

235

Nominal Value (INR)

BSE Sensex

18,636

Market Cap (Crore)

INR 13,342 ($2.5bn)

52 Wk High/Low (Rs.)

212.55 / 137

Avg Daily Vol

233,400

Shareholding Pattern (%)

30-Sep-12

Promoters

59.78

MFs, DIIs, Banks, Insurance

FIIs & Foreign VC Investors

3.32
29.8

Indian Public

3.57

NRIs/OCBs/Corporates/ Others

3.53

3m

6m

Absolute

4%

6%

16%

Relative

4%

-5%

7%

In FY13, we expect Marico to grow by 34.82% to INR 5,418 crore, and net profit to
grow by 52% to INR 489 crore. On 5-year (FY09-FY13E) CAGR basis, we expect
revenues would grow by 17.8% and net profit by 21%. We expect margin to improve
by 99bps on account of continue growth in the coconut oils market, new products
launched, and on robust rural markets. In the international markets, the successful
integration of the leading FMCG Company in Vietnam and improving market in Egypt
on political stability will provide the impetus to its sales growth. The company would
also be able to control some of its input prices as its copra crushing facility in

160

Marico

Sensex

120

80

Bangladesh is expected to commence commercial production in FY13.

40

0
Oct-11

Q213 Earning Estimate growth momentum to continue, on lower margins

Marico has a robust performance in the first quarter, with sales growth achieving
21.68% and net profit witnessing better growth of 45.4% on YoY basis. The net
margins also jump by 228bps, all due to lower input cost. Going ahead, we expect
growth to continue on account of more sales coming from its acquisition of the Paras
personal care brands from Reckitt Benckiser and also from Kaya business. Besides
this, margin would be on a lower side on QoQ basis, but on YoY basis, it would still be
higher by around 40bps in Q213. We expect sales to grow by 38.04% to INR 1,348
crore and net profit to grow by 45.1% to INR 116 crore. We expect that, the company
policy of growing on inorganic strategy would pay off well in this emerging growing
demand for branded products and quality conscious consumers.
FY12 and FY13E earnings expectations
In FY12, Marico grew by 27.86% to INR 4,008 crore, and net profit growing by 10.5%
to INR 322 crore. On 5 year (FY08-FY12) CAGR basis, revenues grew by 21%, while
net profit grew by 23%. The domestic consumer business grew by 37%, driven by a
strong 14% volume growth, whereas the International business grew by 30%, on
robust volume growth and market share gain in all geographies.

Stock Performance
1m

Marico Ltd (Marico), is a leading Indian Group, which has presence in consumer
products & services in the global beauty and wellness industries. Marico markets its
products mainly in India, Bangladesh, the Middle East, Egypt, South Africa,
Singapore, Malaysia and Vietnam. Marico markets its products under its well-known
brands, such as Parachute, Saffola, Hair & Care, Nihar, Shanti, Mediker, Revive,
Manjal, Setwet, Zatak, Livon, Kaya, Derma Rx, Aromatic, Fiance, HairCode, Caivil,
Black Chic, Code 10, Ingwe, X-Men, LOvite and Thuan Phat.

Jan-12

Mar-12

May-12

Particulars (INR Crore)

Revenues
QoQ growth
YoY growth
Cost of Sales
Gross profit
Margin
EBITDA
Margin
YoY growth
Net profit
Net Margin
YoY
EPS (INR)
PER (x)

Aug-12

Oct-12

Q2'13E
1,348
6.15%
38.04%
835
513
38.06%
189
14.04%
62.31%
116
8.60%
45.1%
1.80

The company is trading at a PER of 27.13x on FY13x earnings. Marico is a strong

player and one of the market leaders in consumer products in India, while leading in
the rural market in India. Marico has also strategically position itself as an integrated
company providing solution in beauty and wellness space. The company is adopting a
aggressive policy to grow inorganically, which we feel would do well in this fast
growing market, as sufficient growth will be compensate to fuel the acquisition costs at
this time, which later on can be enjoy as a passive income from the growing brands.
Thus, we recommend to ACCUMULATE on the stock around INR 195 - INR 210
level, for a target price of INR 235. Our target price is on the basis of 31x PER on
FY13x earnings.
Q1'13
1,270
39.35%
21.68%
797
473
37.26%
188
14.79%
147.99%
126
9.90%
45.4%
1.95

Q2'12
974
-6.43%
-31.73%
627
347
35.65%
117
11.97%
-60.88%
80
8.21%
-61.0%
1.24

FY11
3,135

FY12
4,008

FY13E
5,418

25.40%
1,618
1,517
48.40%
418
13.34%
11.45%
291
9.30%
24.8%
4.52
45.56

27.86%
2,099
1,910
47.64%
484
12.08%
15.85%
322
8.03%
10.5%
5.00
41.23

34.82%
3,356
2,061
38.04%
782
14.43%
61.42%
489
9.04%
52.0%
7.59
27.13

Escorts Securities Ltd.

(COME, GROW WITH US)

Institutional Research

MARICO LTD.

RK Suranjoy Singh - Manager- Inst. Relationship

suranjoy@escortssecurities.com

(91) 9167391577

Pranav Datar Institutional Sales

(91) 9819054746

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