Marico Ltd. share price target

We value Marico based on P/E of 35x Jun-20, and arrive at a TP of Rs 388 (earlier Rs 388). Maintain BUY. Marico reported an in-line quarter, marked with the end of margin pressure in this copra cycle. Net revenues grew by 20% YoY to Rs 20.3bn (exp. 17%). We anticipated margin pressure owing to copra inflation, partially offset by rationalization of ASP and other expenses. EBITDA/PAT grew by 9/10% (exp. 6/8%).

Revenue fell by 8.88% to Rs. 1480.09 Cr in Q4FY18 when compared to the previous quarter. Marico Ltd Q4FY18 Results Comment

We maintain our Hold rating on Marico Ltd with an upward revised target price of Rs 342 (earlier Rs 333). During FY18, Marico registered revenue growth of 7% YoY with volume growth of 1.3%. Rural growth continued to outpace urban growth. Adjusted PAT rose 7% YoY. Persistent inflation in copra prices (up 75%) during the year continued to dent margins. EBITDA was down 1.8% in FY18 with a margin contraction of 170bps to 18%. In FY18, Marico undertook aggregated price hike of 22% in Parachute. Management expects copra prices to remain firm in H1FY19 and expects operating margin to be in the range of 17-18% over the medium term. Better monsoon, benefits of GST implementation, recovery in CSD channel, changing macros are expected...

We value Marico based on P/E of 35x Mar-20, and arrive at a TP of Rs 376. Maintain BUY. Maricos revenues grew by 13% YoY to Rs 14.8bn (in-line). EBITDA margin dip was more than expected due to higher gross margin pressure. EBITDA/PAT increased by (2)/4% vs. expectation of 4/10% respectively.

Marico's (MRCO) 4QFY18 sales grew 12.6% YoY to INR14.8b (est. of INR14.6b). Domestic volume growth stood at 1% YoY (est. of +5%), while overall volume growth was 2% YoY. Domestic revenue grew 12% YoY, while reported international revenue grew 13% YoY (+16% on a CC basis). Consol. gross margin contracted 550bp YoY to 46.6%, mainly as copra costs increased 61% YoY. Consol. A&P expenses declined 50bp YoY. Other expenditure declined by 190bp YoY and staff costs by 50bp YoY. EBITDA margin contracted 260bp YoY (est. of -20bp) to 17%

Delayed pricing for Parachute helped recover volume but, we view this move to be tactical. Consolidated net sales, EBITDA, and adj. PAT grew 15%, 11%, and 17% (vs. consensus estimate of 13%, 6%, and 7%). India volume grew 9% YoY (Parachute +15% and VAHO +8%).

We maintain BUY by valuing Marico based on P/E of 35x Dec-19, and derive a TP of Rs 380. Maricos consolidated net revenue on a comparable basis grew by 18% YoY to Rs 16.2bn (in-line). EBITDA/PAT were up by 11/17% vs. expectation of 10/9% respectively. Domestic business (77% of total) recovered strongly (-9% in Q3FY17) with 19/9% value/volume growth driven by urban/rural growing at 15/26% in value terms. We expected 17/11% value/volume growth, respectively.

Marico's 3QFY18 numbers were marginally ahead of our estimates. Consolidated revenue grew by 15.1% YoY to Rs16.2bn (vs. our estimate of Rs15.9bn), EBITDA rose by 10.7% YoY to Rs3bn (vs. our estimate of Rs2.9bn) and net profit surged by 16.5% YoY to Rs2.2bn (vs. our estimate of Rs2bn). While India business reported 19% YoY growth in revenue, international business reported flat growth. Higher growth in net profit is also attributable to lower tax rates due to tax concession for new Guwahati manufacturing facility. Although, higher input cost especially Copra remains a near-term challenge, we expect Marico to exercise its pricing power to maintain the gross margins. in coming quarters. Notably, volume...

Marico's 3QFY18 sales grew 15.1% YoY to INR16.2b (est. of INR16.1b). Domestic volume growth stood at 9.4% YoY (est. of +12%), while overall volume growth was 7% YoY. Domestic revenue grew 19% YoY, while reported international revenue increased 1% YoY (+9% on a constant currency basis). Consol. gross margin contracted 540bp YoY to 46.5%, mainly as copra costs were up 91% YoY. EBITDA increased 10.7% YoY to INR3b (est. of INR2.9b), with the margin shrinking 70bp YoY (est. of -100bp) to 18.6%. Adj. PAT rose 16.5% YoY to INR2.2b (est. of INR2.1b)