Marico Ltd Q2FY20 Result Update

About Marico:

• Leading consumer products group in the global beauty and wellness space.
• Popular Brands: Parachute, Saffola, Hair & Care, Nihar, Set Wet, Mediker

Quarterly Update: Q2 FY20

• Weak demand and consumer sentiments during the quarter. Facing distress in traditional channels while modern channels and e-commerce stayed on course.
• The price corrected to Rs. 366.60 (29 Oct 2019 closing). Analysts remain bullish with target price ranging between Rs. 410 to Rs. 475 apiece.
• The company expects recovery on the back of good monsoon and government-led stimulus. Improvement in rural consumption would be a key growth driver going forward.

Lower Input Costs help margins

During the quarter, the average market price of domestic copra was down 10% Y-o-Y. Other key input prices for the India business- Rice Bran Oil, Liquid Paraffin (LLP) and HDPE were down 12%, 9% and 27% respectively on a Y-o-Y basis.

Product Category wise

Key Observations:

Coconut Oil: Parachute being a leading coconut oil brand, Indian markets expected to benefit from the shift from unorganised (35%) to organised space. Internationally, markets seemed to have matured. In both cases, single-digit growth is expected in the medium term.

Value-added hair oils: Expect double-digit growth through leveraging of strong distribution network, both in India and internationally.

Edible Oils: Marketing activities around Saffola Gold has helped strengthen the brand recall and helped increase sales. Cautiously optimistic view.

Concluding Remarks:

The company has maintained high market share in majority segments (in some cases as high as 60-75%). This has allowed the company to maintain dominant position in FMCG space, which would contribute to long term advantage. Morningstar currently classifies Marico as a Wide Moat Stock (a company whose economic advantage is expected to last for a period more than 20 years) and having Strong financial health.

Source:

Investor Update,

Economic Times