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SHARETIPSINFO >>Research Reports >> MARICO LTD . (27-03-2009)
LISTING |
|
|
Rs 59 |
|
Rs 74/Rs46 |
|
Rs 1 |
PE RATIO |
19.3 |
DIV |
30% |
VOLUME |
307396 |
MKT CAP |
Rs 3853 crore |
COMPANY OVERVIEW:
Marico is leading player in the Indian FMCG space. Marico product and services in Hair care, Skin care and Healthy Food reach out to more than 20 countries in the Middle East, Asian sub-continent, Australia and USA.
The company’s key management strategies are built around differentiation and a way of thinking called ‘uncommon sense’. These form the strongest pillar of growth in all walks of Marico`s business-be it a line or a staff function, consumer centricity or pioneer ship.
Management Structure:
Marico has flat organizational structure, with just five levels between the Managing Director and the Shop floor operator.
Distribution Network:
Distribution network of more than 2.5 million outlets in India and overseas, one in every eight Indian and six Egyptian is Marico consumer, while over 70 million consumer packs from Marico reach approximately 130 million consumers in about 23 million household every month.
Product Line:
1.Parachute
2.Nihar
3.Maha Thanda
4.Silk n Shine
5.Parachute Advansed Starz
6.Parachute Night Repair Crème
7.Safflola (Edible Oil)
8.Saffola (Functional Food)
Marico Strategic Business unit:
The Marico Group business organization is structured into three Strategic Business Units (SBU).
Consumer Product Business (India)
Personal & Natural Care.
Wellness New Product.
International Business Group.
International FMCG Business.
Sundari Business.
Kaya (Branched out to form separate company Kaya Ltd. A wholly owned subsidiary of Marico)
Kaya Skin Clinics.
Kaya Life.
INVESTMENT LOGIC:
Recession proof sector.
Good and consistent growth shown by the company over a period of time.
Inorganic approach to grow.
Strong brand and good product mix in the company portfolio.
KAYA clinic doing good business and is in high profit margin segment.
SHAREHOLDING PATTERN:
|
|
NO. OF SHARES |
% OF TOTAL |
PROMOTER |
386406520 |
|
63.45% |
|
INSTITUTION |
169636333 |
|
27.85% |
|
GENERAL PUBLIC |
52957147 |
|
8.70% |
|
GRAND TOTAL |
609000000 |
|
100% |
|
Promoter holding remained same for last 3 quarters.
FINANCIAL:
|
|
31/03/05 |
31/03/06 |
31/03/07 |
31/03/08 |
TOTAL INCOME |
953.69 |
1048.62 |
1375.89 |
1578.85 |
EXPENDITURE |
-864.07 |
-905.81 |
-1178.31 |
-1372.6 |
OPERATING PROFIT |
89.62 |
142.81 |
197.58 |
206.25 |
DEPRECIATION |
-11.6 |
-33.23 |
-35.19 |
-18.93 |
PBIT |
|
78.02 |
109.58 |
162.39 |
187.32 |
INTEREST |
|
-0.43 |
-0.61 |
-11.6 |
-15.29 |
PBT |
|
77.59 |
108.97 |
150.79 |
172.03 |
TAX |
|
-5.85 |
-7.87 |
-28.43 |
-29.85 |
PAT |
|
71.74 |
101.1 |
122.36 |
142.18 |
CHANGE IN TOTAL INCOME: CAGR IN TOTAL INCOME IS 18.29%.
CHANGE IN OPERATING PROFIT: CAGR IN OPERATING INCOME 32.02%.
CHANGE IN NET PROFIT: CAGR IN NET PROFIT 25.76%.
KEY RATIO:
|
|
31/03/05 |
31/03/06 |
31/03/07 |
31/03/08 |
EPS |
|
1.177997 |
1.660099 |
2.009195 |
2.334647 |
OPM |
|
9.397184 |
13.61885 |
14.36016 |
13.06331 |
NPM |
|
7.522361 |
9.641243 |
8.893153 |
9.005289 |
INTEREST COVER |
181.4419 |
179.6393 |
13.99914 |
12.25114 |
KEY HIGHLIGHTS:
EPS increasing at CAGR of 25.75. Up from Rs1.17 in 2005 to Rs2.33 in 2008.
OPM improved 3.7 percentage points. Improved from 9.39% in 2005 to 13% in 2008.
NPM improved 1.5 percentage points/ improved from 7.5% in 2005 to 9% in 2008.
Interest coverage declines from 181 to 12, due to increase in debt servicing.
COMAPRISION OF Q3FY2009 WITH Q3FY2008:
|
|
31/12/07 |
% CHANGE |
31/12/08 |
TOTAL INCOME |
418.61 |
20.24% |
|
503.34 |
EXPENDITURE |
-361.68 |
|
|
-429.32 |
OPERATING INCOME |
56.93 |
30.01% |
|
74.02 |
DEPRECIATION |
-7.92 |
|
|
-4.64 |
PBIT |
|
49.01 |
|
|
69.38 |
INTEREST |
|
-2.89 |
|
|
-5.59 |
PBT |
|
46.12 |
|
|
63.79 |
TAX |
|
-5.89 |
|
|
-12.07 |
PAT |
|
40.23 |
28.56% |
|
51.72 |
KEY HIGHLIGHTS:
TOTAL INCOME UP BY 20.24%.
OPERATING PROFIT UP BY 30.01%.
PROFIT AFTER TAX UP BY 28.56%.
VALUATION:
We expect the company to close the year with EPS of Rs3 per share. So the stock is trading at 19.3x to 2009E earning. We value the company at 23x to the expected 2009 earnings, this translate the fair price to Rs69 per share. The stock has upside potential of 16%.
The valuation we arrived is by PEG (PE to Growth) ratio. Since the company is leader in the sector we feel the PEG to be around 1. At current market price PEG is 0.84, taking growth in earning at 23% annually.
CONCLUSION:
The stock has very limited downside risk. We feel risk adverse investor should accumulate the stock on every dip. The risk associated with the counter is limited.
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