Recommendation From Personal Products Sectors
This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year
GIVE YOUR INVESTMENT BASKET A MAKEOVER
Marico Ltd.
HERE IS WHY
Sturdy growth momentum across segments
Better performance than peers
Healthy product portfolio
Marico Ltd. is a prominent consumer products company which operates across the dimensions of global beauty and wellness. It offers an elaborate portfolio of products covering hair care, skin care, edible oils, health foods, male grooming and fabric care.
On the consolidated financial front, total income from operations rose 8.71 per cent to Rs1,609.00 crore in Q4FY19 from Rs1,480.09 crore in Q4FY18. EBITDA showcased a growth of 12.18 per cent to Rs283.00 crore in Q4FY19 from Rs252.27 crore in Q4FY18. EBITDA margin increased to 17.59 per cent in FY19 from 17.04 per cent in FY18. Net profit demonstrated tremendous improvement as it surged 122.39 per cent to Rs406.00 crore in FY19 from Rs182.56 crore in FY18. Net profit margin rose to 25.23 per cent in FY19 from 12.33 per cent in FY18. EPS climbed 122.14 per cent to Rs3.11 in FY19 from Rs1.40 in FY18.
On the consolidated financial front, total income from operations rose 16 per cent to Rs7,334.00 crore in FY19 from Rs6,322.18 crore in FY18. EBITDA grew 12.59 per cent to Rs1,281.00 crore in FY19 from Rs1,137.76 crore in FY18. EBITDA margin stood at 17.47 per cent in FY19 as against 18 per cent in FY18. Net profit climbed 37.27 per cent to Rs1,136.00 crore in FY19 from Rs827.57 crore in FY18. Net profit margin increased to 15.49 per cent in FY19 from 13.09 per cent in FY18. EPS soared 37.18 per cent to Rs8.67 in FY19 from Rs6.32 in FY18.
The company is exhibiting strong growth momentum across major categories in the domestic business. Its demand outlook is much more optimistic than its peers. Marico gets its international business from relatively stable economies such as Vietnam and Bangladesh. During the year, the international business grew 9 per cent in constant currency terms, while Bangladesh, Vietnam and MENA delivered double digit constant currency growth. The company intends to sustain the double digit volume growth through premiumisation and new product launches.
The cost pressures in the domestic business are easing and the company is gaining market share. It is focused on driving conversion of unbranded products to branded products. Copra costs declined nearly 24 per cent YoY in the initial months of FY20. This is a very positive sign as copra costs account for 40 to 50 per cent of the company’s raw material costs. Despite the subdued macroeconomic environment in India in FY19, we can expect recovery in FY20 due to pick-up in investment activity, rising consumption and an expansionary monetary policy.
The management has stated that new products are expected to double as a percentage of sales over the next couple of years. Since most of these new launches are urban-centric and premium-centric, they will drive gross margins. Although Marico is incurring substantial expenses as it is investing in brand building, lower input costs will translate into improved profit numbers. By virtue of these factors, we urge our reader-investors to BUY this stock.
