Analysis Report: Marico Limited (BUY; Estimated Price: Rs. 630)

Marico Limited

About the Company

Marico Limited founded in 1987, is one of India's leading consumer products companies operating in the beauty and wellness space. Currently present in 25 countries across emerging markets of Asia and Africa, Marico has nurtured multiple brands in the categories of hair care, skin care, health foods, male grooming, and fabric care. Marico's India business markets household brands such as Parachute Advansed, Saffola,
Hair & Care, Nihar, Mediker, Revive, Manjal, Setwet, Zatak and Livon among others that add value to the life of 1 in every 3 Indians. During 2014–15, the company generated sales revenue of about Rs 5710 crore. Marico was the most awarded company in Asia at the APPIES 2015. Company won a Gold each for Nihar Shanti Amla, Saffola Oats and Saffola Oil, Silver for Parachute Advansed. Marico's own manufacturing facilities are located at Goa, Kanjikode, Jalgaon, Pondicherry, Dehradun, Baddi, Paonta Sahib, Perundurai and Daman.


                         

Shareholding Pattern :  

Cat  Code	Category of Shareholder	Total number of shares	Number of shares held in dematerialized form	Total shareholding as a percentage of total number of shares
A	SHAREHOLDING OF PROMOTER AND PROMOTER GROUP	38,40,27,520	38,40,27,520	59.68
B	Public Shareholding
1	INSTITUTIONS
A	MUTUAL FUNDS/UTI	2,05,51,709	2,05,51,709	3.19
B	Financial institutions/Banks	2,83,800	2,83,800	0.04
C	Central/state govt.	6,72,864	6,72,864	0.1
D	Foreign institutional investors	15,69,52,263	15,69,52,263	24.33
E	Insurance Companies	89,32,647	89,32,647	1.38
F	Foreign Venture Capital	95,41,299	95,41,299	1.48
G	Foreign Portfolio Investor (Corporate)	1,23,94,907	1,23,94,907	1.92
2	NON- INSTITUTIONS
A	Corporate Bodies (Indian/foreign/Overseas)	2,53,72,022	2,53,72,022	3.94
B	Individuals(Resident/ NRI/ Foreign National)	14,76,780	14,76,780	0.23
(i)	Individual shareholders holding Nominal share Capital up to Rs.1 lakh	1,91,34,639	1,91,34,639	3.07
(ii)	Individual shareholders holding Nominal share Capital above Rs.1 lakh	35,60,452	35,60,452	0.55
C	Any other-Clr-Mem	928392	928392	4.231
	OCB	1200	0	0.005
	NRI	1149996	370468	5.241
	Total Public Share Holding (B)	25,93,17,639	26,00,54,479	40.32
	TOTAL(A+B)	64,42,45,159	64,49,81,999	100

Note: The above shareholding pattern is as on 21^st Dec 2015. The company has gone for Stock         split 2:1 on 22^nd Dec 2015.

Top Management

Mr. Harsh C Mariwala leads Marico Limited as its chairman. Over the last three decades, he has transformed a traditional commodity business into a leading consumer good company, in the beauty and wellness space. He has received various awards in all functions of value chain. Some of them are -The NDTV Profit “Best Business Leadership” award in the FMCG (Personal Hygiene) category. He was conferred with the Ernst & Young “Entrepreneur of the year” award in the manufacturing category.

Mr. Sauagata Gupta is the CEO & MD of Marico Limited. He has 20 years of experience primarily in FMCG sector. He has an Engineering degree from IIT Kharagpur and is an alumnus of IIM Bangalore.

Products and Services

Marico has nurtured multiple brands in the categories of hair care, Hair oil, Edible oil & others (male grooming, and fabric care). Marico's India business markets household brands such as Parachute Advansed, Saffola, Hair & Care, Nihar, Mediker, Revive, Manjal, Setwet, Zatak and Livon among others that add value to the life of 1 in every 3 Indians. The International business offers unique brands such as Parachute, Hair Code, Fiancee, Caivil, Hercules, BlackChic, Code 10, Ingwe.

Hair Oil and Hair Care Industry Analysis

The hair care industry has grown a lot in the recent years. Of the estimated Rs 1,611 billion FMCG market in India, hair care products make up approximately Rs.91.5 billion, or 8%, of the total according the Nielsen Retail Audit Report. Out of the above hair-care industry hair oils commands close to 50% of the hair care market in India. As per industry estimates hair oil market size in India is pegged at around Rs 8,000 crore with coconut-based oils accounting for 46 per cent. Non coconut or perfumed oil segment has a market size of Rs 4,283 crore.

Major companies such as Hindustan Unilever, Marico, Dabur, Emami, P&G and Bajaj compete fiercely in the Indian market. With hair oil having one of the highest market penetrations at 90%, most companies had been playing to their strengths so far.

While coconut-based oils were dominated by Marico's Parachute, Bajaj and Dabur are traditionally focused on almond and amla, respectively.

                                               

Edible Oil Industry Analysis

India is one of the largest producer of oilseeds in the world. The edible oil industry in the India has grown at a CAGR of 13.1% in FY’2009 to FY’2014. The competition in India edible oil market is highly fragmented owing to the presence of a large number of organized as well as local and unorganized players. The major players are Marico, Cargill, Adani Wilmar, Ruchi Soya, Agrotech Foods, and others.

Market Analysis

Climatic conditions in India favour growing a variety of oil seeds. On the demand side, a growing population and vastly varied dietary habits have ensured a thriving market for edible oil in the country. In fact, there is a substantial demand overhang, which is expected to continue for some years. The edible oil industry in the India has grown at a CAGR of 13.1% from FY’2009 to FY’2014. At present, this is offset by imports that cater to almost half of the total domestic consumption. An average Indian's yearly edible oil requirement has gone up from 7.0 kg in 1996-97 to 11.8 kg in 2000-01 and expected to rise to 14.3 Kg in 2016-17 as per FICCI report.

India's Hair Care Market has been growing with a CAGR of 16.95% over the last five years and is projected to increase further by 2021 due to rising personal care, brand awareness, increasing disposable income, growing demand in middle class people and affordable price of hair care products in the form of mass shampoo, hair oil and other hair care products. The hair care market is considered a mature market in India. Due to increased hair regarding issues, the demand for hair care products like regular and expert shampoos, conditioners, hair colors and hair oils are increasing rapidly, thereby providing high impetus to the Indian hair care market.

Financial Analysis

Marico Limited has shown tremendous growth in the past 5 years. In the past 5 years, Reserves and surplus has increased by more than 100% from Rs. 854.04 Cr to Rs. 1760.28 Cr and Long Term Borrowing and Short term borrowings has reduced by more than half. The Net Tangible fixed asset has increased by 59% from Rs. 336.78 Cr to Rs. 537.68 Cr. The Current assets has increased by 54% from Rs. 1184.32 Cr to Rs. 1829.17 Cr. This reflects strong positioning of Marico Limited. However company’s Cash conversion cycle is 56.65 days, which is high for FMCG Company.

Consolidated Balance Sheet for Last 5 Years

(Rupee in crores)	Mar-11	Mar-12	Mar-13	Mar-14	Mar-15
EQUITY AND LIABILITIES
Share capital	61.44	61.49	64.48	64.49	64.50
Reserves and surplus	854.04	1081.52	1917.02	1296.00	1760.28
Long term borrowings	381.73	390.67	432.60	251.54	168.74
Other Long Term Liabilities	44.60	41.93	16.26	12.93	16.53
Short term borrowings	340.13	371.58	358.08	274.35	165.43
Trade payables	269.36	358.37	478.47	502.50	564.32
Other current liabilities	182.66	208.19	293.27	444.80	276.53
Short term provisions	76.72	77.74	110.90	82.37	95.30
TOTAL	2210.68	2591.49	3671.08	2928.98	3111.63
ASSETS
Net Tangible Assets	336.78	373.34	461.76	614.19	537.68
Net Intangible Assets	88.28	88.28	813.00	40.12	31.65
Other Non-current assets	615.54	336.44	447.72	524.73	709.34
Inventories	601.14	720.22	862.69	796.23	994.71
Trade receivables	199.97	208.28	196.55	223.19	176.75
Cash and cash equivalents	220.20	132.10	266.75	406.40	204.94
Other current assets	304.04	416.55	393.91	701.23	478.58
TOTAL	2210.68	2591.49	3671.08	2928.98	3111.63

               

Marico Limited has been growing phenomenally. Net Revenue has grown at CAGR 16.29% for past 5 years. Revenue from operating activities has increased by 22.23% from Rs. 4686.92 Cr in the previous year to Rs. 5732.98 Cr crores in 2014-15. This again shows that there is consistent growth in Marico Limited. Net profit has increased by 15.88% during the same period, from Rs. 504.70 crores to Rs. 584.88 crores. Net profit stands to 10.20% to total operating revenue. Such figures indicate a healthy growth rate for the company.

Consolidated Profit & Loss Statement for Last 5 Years

(Rupee in crores)	Mar-11	Mar-12	Mar-13	Mar-14	Mar-15
1] INCOME
Revenue from Operations (Net)	3134.99	3979.67	4596.18	4686.92	5732.98
Other income	21.22	32.57	37.53	58.20	58.89
TOTAL REVENUE	3156.21	4012.24	4633.71	4745.12	5791.87
2] EXPENSES
Operating Expense	2716.88	3495.19	3970.40	3938.63	4862.93
EBITDA	439.33	517.05	663.31	806.49	928.94
Finance costs	41.01	42.39	58.02	34.45	22.95
Depreciation and amortization expense	70.80	72.52	86.62	76.86	84.34
PBT	376.43	400.39	518.67	695.18	821.65
Total Tax Expenses	84.98	78.25	146.19	190.48	236.77
PAT	291.45	322.14	429.09	504.70	584.88

Seasonal factors have impact on this company. As can be seen from the last 8 quarterly profit & loss statement, revenue growth has increased drastically in June quarter by 51.35% and 45.39%. In the quarter of Dec Net revenue growth has also increased but in the quarter of March and September it has decreased. Overall it has positive impact in the growth of the company.

Consolidated Quarterly Profit & Loss Statement for Last 8 Quarters

This industry has a bright future as per our analysis and understanding. Given Marico Limited growth history, this forecasted bright future of this industry should only propel this company forward. We project the stock price of Marico Limited to be around Rs. 630. 

Consolidated Projected Balance Sheet for Next 5 Years

Consolidated Projected Profit & Loss Statement for Next 5 Years

Price Performance

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References

http://marico.com/india/investors/documentation/annual-reports

http://www.business-standard.com/article/companies/the-man-who-changed-the-game-at-marico-114041001382_1.html

http://articles.economictimes.indiatimes.com/2014-05-30/news/50211284_1_saffola-zatak-set-wet

https://in.finance.yahoo.com/q?s=MARICO.NS

http://www.researchandmarkets.com/reports/54545/edible_oil_industry_in_india

About the Author

This report has been prepared by Sahil Karodia and published by Aakash Raval who are pursuing MBA from Institute of Management, Nirma University located in Ahmedabad, India.

Disclaimer

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment.

The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidelines only.