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Marico 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, Marico posted a 10% yoy growth in its consolidated net sales to Rs.1,164cr, aided by a 9% volume growth. The OPM rose by 241bp on a yoy basis to 13.9% aided by a 353bp yoy expansion in gross margins. The net profit rose by 21.6% yoy to Rs.102cr, aided by superior operating performance.

Key highlights during the quarter: The domestic consumer business posted value and volume growth of 16% yoy and 15% yoy respectively. The organic domestic consumer business’ volume growth was 9%. The international business posted a flat performance on the top-line front due to challenging business environment in some of the countries in which the company has operations. On a constant currency basis the company posted a de-growth of 3% yoy on the top-line front due to de-growth in Middle East and strikes in Bangaladesh. The OPM rose by 241bp on a yoy basis to 13.9% aided by 353bp yoy expansion in gross margins due to lower copra prices. Average copra prices in 3QFY2013 were about 23% lower on a yoy basis. The company’s advertising expenses (as a % of sales) went up by 90bp on a yoy basis, which offset the decline in copra prices to some extent.

Outlook and valuation: Going ahead, we expect Marico to post a healthy growth in the domestic business aided by its strong brands. The recent acquisitions made by the company too are expected to fuel growth in the future. At the current market price, the stock is trading at 28.1x FY2014E EPS. We believe the stock is fairly priced and hence, recommend a Neutral rating on the stock.