Dear All,
Forwarding you the Result Update on Marico for 4QFY2011 with a Neutral recommendation.
Marico posted mix set of numbers for 4QFY2011. Overall volume growth of ~10% yoy coupled with price hike of 10–12% led to top-line growth of 24.1% yoy (above our estimates). Reported PAT grew by 40% yoy despite margin contraction. We maintain our Neutral recommendation on the stock.
Margins depressed; earnings window dressed with exceptional items: Marico witnessed a 905bp yoy contraction in gross margin; however, continuing with the company’s latest strategy, ad spends were kept low. In terms of earnings, Marico reported a slew of exceptional items skewing its numbers this quarter (refer Exhibit 5 for details). However, adjusting for the exceptional items, the depreciation cost, interest expense and tax rate came in higher by 92.2% yoy, 260.6% yoy and 1,878bp yoy, respectively, resulting in a loss of `3.9cr in terms of the company’s adjusted earnings.
Outlook and valuation: We have marginally revised our estimates post the results to factor in ammortisation of ~`10cr towards intangible assets in Marico’s subsidiaries, which has been reflected in this quarter, and as per the management is recurring going forward. We have also increased our interest expense estimates for the company in accordance with the recent RBI mandate of a 225bp yoy increase in repo rate to 7.25% (earlier 5%), resulting in higher interest rates.
We reiterate that the company faces near-term headwinds in terms of downtrading, and margin pressure as raw-material inflation is likely to continue. At the CMP of `137, the stock is trading at 22.5x FY2013E earnings, (in line with its historical valuations). Hence, we maintain our Neutral view on the stock with a fair value of `140 (`145 earlier).
Kindly click on the following link to view the Report.
If you have any further queries, feel free to call us on 022 39357600 Ext: 6864 ,6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,5th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600, Ext: 6864, 6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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