27 July 2020
1QFY21 Results Update | Sector: Consumer
Marico
Buy
Estimate change
TP change
Rating change
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CMP: INR350
TP: INR405 (+16%)
Significant beat on expectations, outlook improving
Brief overview of results and stock
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
MRCO IN
1,290
452.5 / 6.2
404 / 234
-6/11/-3
936
40.4
Significant beat on estimates
Marico (MRCO) reported a beat on all fronts, barring volumes, in 1QFY21
results, with a surprise on margins. Importantly, May and June witnessed
positive sales growth, and this trend has continued in July. Recovery has
been seen in Value-Added Hair Oils (VAHO) as well, along with Parachute
and Saffola continuing to do well. The base is also more favorable.
With earnings much better than previously feared EPS decline, valuations
still appear inexpensive at 36.8x FY22 EPS. Targeting 40x Jun’22 EPS, we
arrive at
TP of INR405, implying 16% upside.
Marico’s 1QFY21 consol. net sales declined 11% YoY
to INR19.3b (est.:
INR18.6b). EBITDA grew 1.3% YoY to INR4.7b (est.: INR4b). PBT was up 0.2%
YoY to INR4.4b (est.: INR3.8b). Adj. PAT declined 3.1% YoY to INR3.2b (est.:
INR2.7b).
Consol. gross margins expanded by 140bp YoY to 48.9%.
Lower A&P spends
as a percentage of sales (down 300bp YoY to 7.1%; absolute spends at -
37.4% YoY) were partially offset by higher staff cost (up 110bp YoY to 7%)
and other expenses (up 20bp YoY to 10.5%). EBITDA margins thus expanded
by 300bp YoY to 24.3%.
Domestic revenue/volumes declined
by 15%/14% YoY (est.: 12.5% domestic
volume decline). Within domestic business, Parachute Rigids’ volumes
decline by 11% YoY, VAHO volumes decline by 30% and Saffola (Refined
Edible Oil’s) volumes were up 16%.
Financials & Valuations (INR b)
Y/E March
2020 2021E 2022E
Sales
73.2 74.2 84.7
Sales Gr. (%)
-0.3
1.4 14.1
EBITDA
14.7 15.4 17.3
EBITDA Margin (%)
20.1 20.7 20.4
Adj. PAT
10.5 10.8 12.3
Adj. EPS (INR)
8.1
8.4
9.5
EPS Gr. (%)
13.4
2.9 13.8
Highlights from management commentary
BV/Sh.(INR)
23.4 30.5 31.2
Business has seen smart recovery, with 3% sales growth in May and June
Ratios
combined, and this momentum continues in July.
RoE (%)
34.9 31.1 30.9
MRCO has taken a 5–6% promotional pricing cut in Parachute and believes
RoCE (%)
31.9 28.0 28.0
market share gains (62% currently) from both organized and unorganized
Payout (%)
96.0 91.5 92.1
players may be significant and, more importantly, permanent.
Valuations
P/E (x)
43.1 41.9 36.8
The company targets flattish sales for the full year, with over 20% EBITDA
margins. From around INR2b sales in FY20, the Foods business’ sales are
P/BV (x)
15.0 11.5 11.2
targeted at INR3–3.5b in FY21 and INR5b in FY22.
EV/EBITDA (x)
30.5 28.5 25.4
Div. Yield (%)
2.2
2.2
2.5
Valuation and view
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Jun-20 Mar-20 Jun-19
59.6
59.6
59.7
10.0
10.7
6.0
23.8
22.8
25.8
6.6
6.9
8.5
FII Includes depository receipts
Changes to the model have resulted in a ~3% increase in FY21/FY22 EPS.
Recovery in the Non-Discretionary portfolio is extremely encouraging, and
ongoing momentum and significantly high growth targets in the Foods
portfolio are encouraging. As highlighted in
our management meet note last
month,
MRCO’s traction on both topline growth and margins is encouraging
v/s earlier fears of EPS decline in FY21.
While the jury is still out on the success achieved in new product
development, which would elevate the medium to longer term earnings
trajectory as well as valuation multiples, the stock at 36.8x FY22 EPS appears
to still provide healthy upside over the next year, with a superior outlook
than most peers and a far less volatile international business. We target 40x
Jun’22 EPS, giving us TP of INR405, implying 16% upside.
Krishnan Sambamoorthy – Research analyst
(Krishnan.Sambamoorthy@MotilalOswal.com); +912261291545
Research analyst: Pooja Doshi
(Pooja.Doshi@motilaloswal.com) |
Dhairya Dhruv
(Dhairya.Dhruv@MotilalOswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
3 September 2019
1
 Motilal Oswal Financial Services
Marico
Quarterly Performance
Y/E March
(INR Million)
FY21 Var.
1QE (%)
-12.5
18,628
3.3%
-14.0
8,887
47.7
3,983
17.2%
21.4
-13.6
364
126
300
3,793
16.8%
986
26.0
70
2,737
15.8%
-16.3
FY20
1Q
2Q
3Q
4Q
6.0
1.0
-1.0
-3.0
21,660 18,290 18,240 14,960
6.9
-0.4
-2.0
-7.0
10,290 9,080 8,960 7,370
47.5
49.6
49.1
49.3
4,610 3,530 3,730 2,820
21.3
19.3
20.4
18.9
26.0
15.7
3.9
-4.1
350
350
320
380
120
130
120
130
280
350
290
320
4,420 3,400 3,580 2,630
1,080
880
820
530
24.4
25.9
22.9
20.2
70
50
40
60
3,270 2,470 2,720 2,040
28.2
16.5
10.6
-3.3
FY21
FY20
FY21E
Domestic volume growth (%)
Net Sales
YoY Change (%)
Gross Profit
Gross margin (%)
EBITDA
Margins (%)
YoY Change (%)
Depreciation
Interest
Other Income
PBT
Tax
Rate (%)
Minority Interest
Adjusted PAT
YoY Change (%)
E: MOFSL Estimates
1Q
2QE
3QE
4QE
-14.0
3.5
4.8
11.1
0.8
1.3
19,250 19,022 19,426 16,493 73,150 74,190
-11.1
4.0
6.5
10.2
-0.3
1.4
9,410 9,291 9,426 8,004 35,700 36,131
48.9
48.8
48.5
48.5
48.8
48.7
4,670 3,633 3,934 3,131 14,690 15,368
24.3
19.1
20.2
19.0
20.1
20.7
1.3
2.9
5.5
11.0
10.9
4.6
340
361
374
375 1,400 1,450
90
131
133
139
500
493
190
354
392
367 1,240 1,302
4,430 3,495 3,817 2,984 14,030 14,726
1,170
926
993
618 3,310 3,707
26.4
26.5
26.0
20.7
23.6
25.2
90
50
40
40
220
220
3,170 2,519 2,785 2,326 10,500 10,800
-3.1
2.0
2.4
14.0
13.4
2.9
Key Performance Indicators
Y/E March
1Q
9.0
3.0
7.0
6.0
6.0
6.0
8.0
6.0
11.0
6.0
9.0
7.0
6.7
13.7
19.3
19.1
52.5
26.2
1.6
-2.8
15.7
16.7
27.2
Volume growth (%)
Parachute rigid
Saffola (Refined Edible Oil)
VAHO
Domestic
International
Overall
Value growth (%)
Parachute rigid
Saffola (Refined Edible Oil)
VAHO
Domestic
International
International cc
Overall
2Y average growth (%)
Sales
EBITDA
PAT
% of Sales
COGS
Operating Expenses
Depreciation
YoY change (%)
COGS
Operating Expenses
Other Income
EBIT
E: MOFSL Estimates
FY20
2Q
-1.0
1.0
0.0
1.0
10.0
3.0
-4.0
5.0
-6.0
-3.0
8.0
9.0
-0.6
9.6
16.7
16.7
50.4
30.3
1.9
-10.4
10.1
20.7
16.1
3Q
-2.0
11.0
-7.0
-1.0
12.5
2.0
-5.0
13.0
-17.0
-5.0
8.0
10.0
-2.2
6.3
11.5
11.1
50.9
28.7
1.8
-7.2
4.2
31.8
4.0
4Q
-8.0
25.0
-11.0
-3.0
-7.0
-4.0
-12.0
25.0
-18.0
-8.0
-5.0
-6.0
-7.3
0.8
6.2
6.8
50.7
30.4
2.5
-7.4
-8.1
14.3
-4.3
1Q
-11.0
16.0
-30.0
-14.0
-8.0
-12.6
-12.0
16.0
-32.0
-15.0
2.0
-4.0
-11.3
-2.1
13.6
12.6
51.1
24.6
1.8
-13.5
-16.5
-32.1
1.6
FY21
2QE
5.0
16.5
-11.0
3.5
8.0
4.5
6.0
18.5
-9.0
3.2
10.0
3.0
4.7
1.8
9.3
9.2
51.2
29.7
1.9
5.7
1.9
1.0
2.9
3QE
6.0
13.5
-5.0
4.8
10.0
6.0
8.0
15.5
-3.0
4.9
12.0
5.0
6.5
2.3
4.7
6.5
51.5
28.3
1.9
7.8
5.0
35.0
4.4
4QE
9.5
16.0
13.0
11.1
13.0
11.5
10.5
17.0
14.5
10.5
14.5
7.5
11.4
1.6
3.5
5.4
51.5
29.5
2.3
11.8
7.1
14.7
12.9
27 July 2020
2
 Motilal Oswal Financial Services
Marico
Exhibit 1: Overall volumes decline by 12.6% and India business volumes by 14% in 1QFY21
Marico India
Segment growth (%)
Parachute Rigid
Saffola (Refined Edible Oil)
Value added hair oils
Domestic Business
1QFY20
Volume Value
9.0
8.0
3.0
6.0
7.0
11.0
6.0
6.0
2QFY20
Volume Value
(1)
(4)
1
5
0
(6)
1
(3)
3QFY20
Volume Value
(2)
(5)
11
13
(7)
(17)
(1)
(5)
4QFY20
Volume Value
(8.0)
(12.0)
25.0
25.0
(11.0)
(18.0)
(3.0)
(8.0)
1QFY21
Volume Value
(11.0)
(12.0)
16.0
16.0
(30.0)
(32.0)
(14.0)
(15.0)
Source: Company, MOFSL
Exhibit 2: Domestic volumes decline by 14% in 1QFY21
Domestic volume growth (%)
Exhibit 3: Parachute Rigids’ volumes decline 11%
Parachute rigid volume growth (%)
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 4: Saffola (Refined Edible Oil) volumes up 16%
Saffola (Refined Edible Oil) volume growth (%)
Exhibit 5: VAHO volumes decline by 30%
VAHO volume growth (%)
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 6: Consolidated segmental details
Sales growth (%)
Domestic
International
Total
EBIT margins (%)
Domestic EBIT margins
International EBIT margins
Total
1QFY19
22.6
9.4
19.8
18.4
20.1
18.7
2QFY19
19.9
18.4
19.6
17.1
17.7
17.2
3QFY19
12.8
21.2
14.6
19.7
19.1
19.6
4QFY19
7.2
14.2
8.7
19.4
16.3
18.6
1QFY20
6.3
9.0
6.9
21.1
24.4
21.7
2QFY20
(2.8)
8.3
(0.4)
19.2
20.4
19.5
3QFY20
(4.8)
7.9
(2.0)
4QFY20
(7.6)
(5.1)
(7.0)
1QFY21
(14.5)
2.3
(11.1)
21.6
20.8
24.2
19.1
16.3
28.1
21.0
19.7
25.1
Source: Company, MOFSL
Key highlights on domestic business (77% of turnover)
In 1QFY21, the domestic business was severely impacted in April due to supply
chain disruptions following the extension of the national lockdown. However,
the company was able to scale the business sequentially in May and June as
restrictions had been eased relatively (volumes grew 3% over May–June on a
3
27 July 2020
 Motilal Oswal Financial Services
Marico
YoY basis). The domestic business clocked sales of 104% of the annual average
monthly run-rate of FY20. However, given the very significant revenue skew in
1QFY20 (~31%; unrelated to portfolio seasonality), underlying volume decline
was at 14% YoY. Secondary volume growth was in line with the reported
primary volume growth as the company continued to operate at lower
distributor inventory levels following the drop posted at the end of Q4FY20, to
protect channel partner ROIs in the current environment.
With social distancing becoming increasingly prevalent, consumers favored
neighborhood GT stores as well as e-commerce platforms over modern trade
during the quarter. The CSD business during the quarter was reduced to nearly
half, which had a meaningful impact on overall volume growth in the India
business.
Parachute Rigids
declined 11% in volume terms on a high base following a slow start
in April. In Q1FY21, the brand clocked sales at 111% of the annual average monthly
run-rate of FY20. The brand has seen very healthy traction in May and June and is
well-poised to gain on the back of its strong brand equity and accelerated upgrades
from loose coconut oil.
The volume market share of the Coconut Oil franchise (including Nihar Naturals
and Oil of Malabar) strengthened to 62%.
With mild deflation expected in copra prices, MRCO is expected to actively pass
on value to consumers to maximize market share gains from branded coconut
oil and accelerate upgrades from loose coconut oil.
Value-Added Hair Oils:
VAHO declined 30% in volume terms, sharply impacted by
the much-delayed resumption of billing in late April. Despite the slump in April,
during the quarter, the franchise clocked sales at ~94% of the annual average
monthly run-rate of FY20, primarily led by the bottom of the pyramid segment. As
demand trends improved, the franchise grew over May–June.
Nihar Shanti Amla Badam led recovery in May and June; among the newer
introductions, Parachute Advanced Aloe Vera Enriched Coconut Hair Oil
witnessed encouraging trends in June.
Also, as per June offtake data, the Hair Oils category is now tracking ahead of
pre-COVID-19 levels.
The volume market share of the franchise expanded by ~130bps to 36%, while
its value market share consolidated at 27%.
Saffola (Refined Edible Oil):
Continuing its growth journey, the category posted 16%
volume growth, building on strong brand credentials, a ramped-up presence, and
increased in-home consumption.
The brand’s volume market share in the Super Premium Refined Edible Oils
segment expanded by ~330bps to 77% in 1QFY21.
The Foods franchise posted value growth of 30% in 1QFY21, led by 41% growth
in the Saffola Oats franchise. Both the plain and savory offerings grew healthily.
In response to the heightened immunity-boosting needs of consumers, the
company launched Saffola Honey, a 100% pure honey with no added sugar.
Segmental performance:
27 July 2020
4
 Motilal Oswal Financial Services
Marico
Premium Hair Nourishment,
comprising Leave-in Hair Serums, Male Grooming, and
Premium Skin Care, bore the brunt of the ongoing COVID-19 crisis on account of its
discretionary nature, witnessing sharp declines.
However, June offtake trends signaled some recovery in personal care
categories, with e-commerce emerging as a key business driver in some of the
sub-categories. The company is expected to continue to lie low in these
categories, while closely monitoring offtake trends.
The Hygiene portfolio
started off well, with an encouraging response seen for
Mediker Hand Sanitizers and Veggie Clean. The company expanded the range with
the launch of indoor and outdoor surface disinfectants under the aegis of the brands
House Protect and Travel Protect, respectively. Separately, a digital-first premium
out-of-home hygiene range was also introduced under the brand KeepSafe.
Outlook for domestic business:
Parachute Rigids:
The company aims to grow volumes by 5–7% over the
medium term.
VAHO:
It aims to revive volume growth in this franchise in the near term.
Saffola:
Remain cautiously optimistic. The company aims to deliver high single
digit volume growth over the medium term.
Healthy Foods:
A 20% plus CAGR is expected over the medium term.
Premium Personal Care:
MRCO aims to build this category into a growth engine
of the future, and expects to deliver double digit value growth in the portfolios
over the medium term. Although, in the near term, expectations remain muted.
Key highlights on international business (23% of turnover)
The COVID-19 pandemic and subsequent partial/complete lockdowns impacted
the international markets in varying degrees. While the international business
de-grew by 4% in CC terms, Bangladesh continued to hold the fort by delivering
a commendable 10% constant currency growth, while other geographies
recorded double-digit declines.
Bangladesh (46% of international business)
revenues grew 10% in CC terms
during the quarter. The business in Bangladesh is likely to continue its
momentum as medium-term macro prospects look promising.
South East Asia, majorly Vietnam and Myanmar (26% of international),
sales
saw a decline of 14% in CC terms in 1QFY21.
Middle East and North Africa (12% of international)
revenues declined 27% in
CC terms in 1QFY21.
South Africa (7% of international)
sales declined 25% in CC terms in 1QFY21 on
continued macro headwinds, coupled with restrictions imposed to contain the
COVID-19 outbreak in the region. Macros continue to be weak. Some revival is
expected in the business over the medium term, led by a pipeline of new
products.
New Country Development & Exports (6% of the international)
de-grew by 16%
in CC terms in 1QFY21, led by lockdowns and restrictions across countries.
Outlook for international business:
Bangladesh
is likely to continue the momentum as medium-term macro
prospects look promising.
5
27 July 2020
 Motilal Oswal Financial Services
Marico
MENA:
The company remains cautious on the business outlook, but would
be aggressive on cost management to enable it to tide over challenging
macros.
South Africa:
MRCO is cautious on the near-term outlook for the business,
but expects to protect the core franchise of Ethnic Hair Care and Healthcare
over the medium term.
New Country Development & Exports:
The company remains positive on
future business prospects as it incubates new geographies to expand the
franchise.
Outlook for consolidated
The company holds the medium-term aspiration of delivering 8–10% volume
growth and 13–15% revenue growth.
Operating margin:
The company would be comfortable maintaining the
operating margin at 19% plus over the medium term. However, it expects
operating margins to be circa 20% for the rest of the year.
A&P spends:
These are expected to be 7.5–8% of sales on an annualized basis.
Capex:
FY20 is likely to be around INR1.25–1.5b.
Other expense:
This is likely to remain in the range of 11–13% of turnover in the
medium term.
Tax rate:
The ETR (excl. one-offs) was 23.1% for 1QFY21. In view of the recent
changes in corporate tax rates, MRCO would continue to recognize tax expense
after availing exemptions/deductions as per the existing provisions of the
Income Tax Act and not opt for the revised rate structure. However, from a cash
flow perspective, the company would utilize MAT credit accumulated over the
years. The current MAT credit stood at INR1.41b as of 30
th
June 2020.
Update on new launches
VAHO –
Parachute Naturale Shampoo would come in three variants: Nourishing
Care, Damage Repair, and Anti Hair Fall.
Personal Care and Hygiene –
New launches comprise Mediker SafeLife Hand
Sanitizer and Hand Wash, Mediker SafeLife Veggie Wash, Veggi Clean, Mediker
Hand Sanitizer, Protect surface disinfectant, the Keepsafe premium personal
and out-of-home hygiene range, and the Omex Go cleansing gel.
Foods
– New products consist of Saffola Honey and Saffola Healthy Snackathon.
Conference call highlights
Recovery is happening well
The business has seen smart recovery in May and June (~3% sales growth
combined), which continues in July. MRCO is confident of growth for the
remainder of the year, unless the COVID-19 situation worsens significantly. This
is despite a higher base in 1QFY20.
Market share gains were posted in 90% of the portfolio on a MAT basis. The
quarterly YoY trend is even higher.
Rural grew 120% of the FY20 run-rate, while urban growth was on par with FY20
levels.
MRCO targets flattish sales for the full year.
Operating margins are likely to be over 20% for the rest of the year.
27 July 2020
6
 Motilal Oswal Financial Services
Marico
Key products and channels
Parachute and Saffola are doing well. The ‘untouched by hand’ campaign for
Parachute has received a good response. MRCO has taken a 5–6% promotional
pricing cut in Parachute and believes market share gains (62% currently) from
both organized and unorganized players may be highly significant and, more
importantly, permanent. The company launched Saffola Honey, with high purity.
Even VAHO sales were at 94% of prior-year levels for the recent month. The Hair
Oils category is recovering. Only the small Discretionary portfolio is seeing slow
offtake.
The CSD channel declined by 48% YoY in 1QFY21. Modern trade sales are
recovering, but expected to be sub-optimal in the near future. The
kirana
channel is expected to continue to do well.
Owing to an increase in direct distribution (currently 0.9–1m), MRCO now has a
critical mass of portfolio, particularly in VAHO with Sarson (mustard), in addition
to Shanti Amla.
E-Commerce was 7% of sales in 1QFY21.
Other points
Ad spends were at 90% of normal levels for the core portfolio. Cuts were
implemented on non-core products. The remainder of the year would also
witness a 100–150bps decline YoY.
The New Hygiene portfolio would be INR800m–1b for MRCO in FY21 (Veggie
Clean, Sanitizer, Home and Travel Protect, etc., launched recently).
Foods – INR3–3.5b sales are targeted in FY21 and INR5b in FY22. They were at
INR2b in FY20. Margins in Foods would also increase despite remaining lower
than the overall portfolio.
Expect copra prices to see mild deflation from a full-year perspective.
Cost savings are targeted in all areas, barring innovation, safety, and employee
costs (jobs and salaries).
Among the newer categories, virgin coconut oil, green coffee, and Coco Soul
offer promise.
Valuation and view
What has happened in the last 10 years?
In key categories such as Coconut Oil and VAHO, MRCO reported healthy sales
growth, with volume growth in Parachute actually improving in recent years.
In Saffola Foods (oats), the company was able to establish strength and grow
significantly in the Masala Oats category.
Growth in Saffola (edible oil brand) has tapered off in recent years, partly as a
result of strategic mistakes in terms of pricing and partly due to the company
being unable to cater to the recently emerged Super Premium market segment.
Similarly, the brands acquired from Paras/Reckitt – Livon, Set Wet, and Zatak –
have not scaled up as expected despite high category growth potential.
Topline and earnings growth have, nevertheless, been healthy over the past 10
years, with a ~11% topline CAGR, 15% EBITDA CAGR, and 16% PAT CAGR. Over
the past five years, growth has been healthy, but has tapered off compared with
the past, at ~5% sales growth, 11% EBITDA growth, and ~13% PAT growth.
27 July 2020
7
 Motilal Oswal Financial Services
Marico
Our view on the stock
Changes to the model have resulted in a ~3% increase in FY21/FY22 EPS.
Recovery in the Non-Discretionary portfolio is extremely encouraging, as are the
ongoing momentum and significantly high growth targets in the Foods portfolio.
As highlighted in
our management meet note last month,
MRCO’s traction on
both topline growth and margin is optimistic v/s prior fears of EPS decline in
FY21.
While the jury is still out on success achieved in terms of new product
development, which would elevate the medium to longer term earnings
trajectory as well as valuation multiples, the stock at 36.8x FY22 EPS appears to
still provide healthy upside over the next year, with superior outlook than most
peers and a far less volatile international business. We target 40x Jun’22 EPS,
giving us TP of INR405, implying 16% upside.
Exhibit 7: 2.7%/2.1% upgrade in FY21/FY22E EPS
INR m
Old
FY21E
73,824
14,749
10,520
FY22E
84,265
16,812
12,037
FY21E
74,190
15,368
10,800
New
FY22E
84,687
17,265
12,292
FY21E
0.5%
4.2%
2.7%
Change
FY22E
0.5%
2.7%
2.1%
Source: Company, MOFSL
Sales
EBITDA
PAT
Exhibit 8: Marico P/E (x)
65.0
50.0
35.0
20.0
5.0
35.6
27.3
22.4
P/E (x)
Min (x)
Avg (x)
+1SD
50.5
43.9
Max (x)
-1SD
Exhibit 9: Consumer sector P/E (x)
P/E (x)
Min (x)
51.0
40.9
41.0
31.0
21.0
42.5
36.4
25.1
47.8
44.6
30.2
Avg (x)
+1SD
Max (x)
-1SD
Source: Company, MOFSL
Source: Company, MOFSL
27 July 2020
8
 Motilal Oswal Financial Services
Marico
Financials and Valuations
Income Statement
Y/E March
Net Sales
Change (%)
COGS
Gross Profit
Margin (%)
Operating Expenses
EBITDA
Change (%)
Margin (%)
Depreciation
Int. and Fin. Charges
Other Income - Recurring
Profit before Taxes
Change (%)
Margin (%)
Current Tax (excl MAT Ent)
Deferred Tax
Tax Rate (%)
Minority Interest
Profit after Taxes
Change (%)
Margin (%)
Extraordinary items
Reported PAT
2015
57,330
22.3
31,356
25,974
45.3
17,274
8,701
16.4
15.2
843
230
589
8,217
18.2
14.3
2,383
-15
28.8
-114
5,735
18.1
10.0
0
5,735
2015
1,290
16,958
18,248
137
4,279
22,664
8,807
1,034
-3,973
5,868
30
4,892
2,838
17,625
9,947
1,768
2,049
3,861
8,511
7,471
5,643
1,040
9,115
-79
22,664
2016
60,173
5.0
30,887
29,286
48.7
18,773
10,514
20.8
17.5
949
206
933
10,292
27.2
17.1
2,503
551
29.7
-5
7,233
26.1
12.0
-5
7,228
2016
1,290
18,884
20,174
143
3,313
23,630
6,119
328
-917
5,531
367
4,974
5,439
16,852
9,256
2,521
3,171
1,904
9,953
8,395
6,690
1,558
6,899
421
23,630
2017
59,178
-1.7
28,472
30,706
51.9
19,113
11,593
10.3
19.6
903
166
973
11,497
11.7
19.4
2,922
455
29.4
-10
8,110
12.1
13.7
0
8,110
2017
1,291
21,966
23,257
133
2,388
25,778
7,440
361
-1,749
6,053
112
4,795
6,082
19,191
12,534
2,470
2,360
1,828
10,329
9,040
6,966
1,289
8,862
-125
25,778
2018
63,220
6.8
33,720
29,500
46.7
18,130
11,370
-1.9
18.0
890
160
850
11,170
-2.8
17.7
2,840
60
26.0
-130
8,140
0.4
12.9
0
8,140
2018
1,290
24,140
25,430
120
3,090
28,640
8,120
600
-2,480
6,240
270
4,860
5,430
23,920
15,110
3,400
2,010
3,400
11,880
10,560
8,220
1,320
12,040
-200
28,640
2019
73,340
16.0
40,170
33,170
45.2
19,920
13,250
16.5
18.1
1,310
400
1,030
12,570
12.5
17.1
3,310
-180
24.9
-180
9,260
13.8
12.6
1,880
11,140
2019
1,290
28,700
29,990
110
3,490
33,590
9,140
550
-3,250
6,440
450
5,030
4,500
29,120
14,110
5,170
5,520
4,320
13,710
12,260
9,440
1,450
15,410
1,760
33,590
2020
73,150
-0.3
37,450
35,700
48.8
21,010
14,690
10.9
20.1
1,400
500
1,240
14,030
11.6
19.2
3,470
-160
23.6
-220
10,500
13.4
14.4
-290
10,210
2020
1,290
28,940
30,230
130
5,580
35,940
13,110
410
-4,650
8,870
580
5,380
7,040
26,560
13,800
5,390
2,790
4,580
14,020
12,690
9,780
1,330
12,540
1,530
35,940
2021E
74,190
1.4
38,059
36,131
48.7
20,763
15,368
4.6
20.7
1,450
493
1,302
14,726
5.0
19.8
3,633
74
25.2
-220
10,800
2.9
14.6
0
10,800
2021E
1,290
38,035
39,325
130
6,030
45,485
11,790
605
-6,100
6,295
580
5,480
13,000
34,894
15,580
6,306
7,329
5,678
14,763
13,248
10,082
1,515
20,130
0
45,485
(INR M)
2022E
84,687
14.1
43,580
41,107
48.5
23,842
17,265
12.3
20.4
1,571
563
1,589
16,720
13.5
19.7
4,125
84
25.2
-220
12,292
13.8
14.5
0
12,292
2022E
1,290
39,007
40,297
130
6,480
46,907
13,090
605
-7,671
6,024
580
5,580
12,000
39,114
17,446
6,775
8,311
6,583
16,392
14,743
11,325
1,649
22,722
0
46,906
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Minority Interest
Loans
Capital Employed
Gross Fixed Assets
Intangibles
Less: Accum. Depn.
Net Fixed Assets
Capital WIP
Goodwill
Investments
Curr. Assets, L&A
Inventory
Account Receivables
Cash and Bank Balance
Others
Curr. Liab. and Prov.
Current Liabilities
Accounts Payable
Provisions
Net Current Assets
Deferred Tax Liability
Application of Funds
E: MOSL Estimates
(INR M)
27 July 2020
9
 Motilal Oswal Financial Services
Marico
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout %
Valuation (x)
P/E
Cash P/E
EV/Sales
EV/EBITDA
P/BV
Dividend Yield (%)
Return Ratios (%)
RoE
RoCE
RoIC
Leverage Ratio
Debt/Equity (x)
2015
4.4
5.0
14.1
1.2
28.1
2016
5.6
6.3
15.6
3.5
62.4
2017
6.3
6.8
18.0
4.3
67.6
2018
6.3
7.0
19.7
4.6
72.4
2019
7.2
9.7
23.2
6.6
76.3
2020
8.1
9.0
23.4
7.6
96.0
2021E
8.4
9.5
30.5
7.7
91.5
2022E
9.5
10.7
31.2
8.8
92.1
78.8
70.1
7.9
51.9
24.8
0.4
62.5
55.3
7.4
42.5
22.4
1.0
55.8
51.2
7.5
38.5
19.4
1.2
55.5
50.1
7.1
39.4
17.8
1.3
48.8
36.3
6.1
33.6
15.1
1.9
43.1
38.9
6.1
30.5
15.0
2.2
41.9
36.9
5.9
28.5
11.5
2.2
36.8
32.6
5.2
25.4
11.2
2.5
36.0
27.7
35.7
37.7
31.9
41.5
37.3
33.3
47.4
33.4
30.8
40.7
33.4
31.3
40.7
34.9
31.9
41.7
31.1
28.0
41.6
30.9
28.0
46.4
0.2
0.2
0.1
0.1
0.1
0.2
0.2
0.2
Cash Flow Statement
Y/E March
OP/(loss) before Tax
Int./Div. Received
Depreciation
Interest Paid
Direct Taxes Paid
(Incr)/Decr in WC
CF from Operations
2015
8,217
-185
843
39
-2,097
-169
6,648
-581
6,068
410
-2,238
-2,408
6
-437
-3,001
-2,824
-6,255
-2,015
4,064
2,049
2016
10,287
-594
949
206
-2,474
-197
8,176
-864
7,312
-1,180
1,000
-1,044
5
0
-5,023
-992
-6,010
1,122
2,049
3,171
2017
11,487
-43
903
-197
-2,964
-2,698
6,487
-815
5,673
15
-760
-1,560
0
0
-5,088
-652
-5,740
-812
3,171
2,360
2018
11,170
-280
890
-180
-2,950
-3,490
5,160
-1,280
3,880
700
740
160
0
0
-6,360
690
-5,670
-350
2,360
2,010
2019
12,630
320
960
-300
-3,200
210
10,620
-1,430
9,190
1,030
-180
-580
0
0
-6,820
290
-6,530
3,510
2,010
5,520
2020
13,740
-1,000
1,500
500
-2,890
330
12,180
-1,860
10,320
-2,540
-4,125
-8,525
0
2,090
-8,495
20
-6,385
-2,730
5,520
2,790
2021E
14,726
-1,302
1,450
493
-3,633
-3,051
8,684
1,125
9,809
-5,960
10,013
5,178
0
450
-9,799
27
-9,322
4,540
2,790
7,330
(INR M)
2022E
16,720
-1,589
1,571
563
-4,125
-1,611
11,529
(Incr)/Decr in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Invest.
Issue of Shares
(Incr)/Decr in Debt
Dividend Paid
Others
CF from Fin. Activity
Incr/Decr of Cash
Add: Opening Balance
Closing Balance
E: MOSL Estimates
-1,300
10,229
1,000
-770
-1,070
0
450
-9,886
-43
-9,479
980
7,330
8,310
27 July 2020
10
 Motilal Oswal Financial Services
Marico
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial
products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are
available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a
registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and
National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National
Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance
Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.
Details of associate entities of Motilal Oswal Financial Services Limited are
available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and
buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have
any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report
should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific
merchant banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the
website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated
from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability
or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong
Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst
Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of
research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity
to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these
securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not
located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under
applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers
Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any
brokerage and investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is
intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as
"major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which
this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration
provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange
Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-
dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this
chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL
in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,
of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the
SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
27 July 2020
11
 Motilal Oswal Financial Services
Marico
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
********************************************************************************************************************************
The associates of MOFSL may have:
-
financial interest in the subject company
-
actual/beneficial ownership of 1% or more securities in the subject company
-
received compensation/other benefits from the subject company in the past 12 months
-
other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on
the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL
even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
-
acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
-
be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)
-
received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and
may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent
of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in
nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,
representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The
report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or
distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for
informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing
in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.
The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this
document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this
document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views
expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade
securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of
the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and
should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make
modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from
time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to
perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of
information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or
may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,
directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or
entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,
regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in
all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost
revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its
affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such
misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,
expenses that may be suffered by the person
accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;
Website www.motilaloswal.com.CIN no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,
Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:
INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company
Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth
Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is
a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.
Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.
Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no
assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance
Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.
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