february 3, 2017 marico (marlim) | 255 - icici...

February 3, 2017

ICICI Securities Ltd | Retail Equity Research

Result Update

Quarterly blip; growth story stays intact… • Marico reported 7.5% YoY decline in consolidated sales for the

quarter to | 1414 crore (I-direct estimate: | 1324.5 crore) marred by demonetisation in the domestic market and a subdued performance of the international business. India business witnessed a 4% volume on account of a) consumption impact due to currency crunch and b) significant pipeline reduction due to disruption in wholesale channel. Despite an adverse environment, Saffola clocked 6% YoY volume growth during the quarter. However, Parachute, value added hair oil segment reported volume decline of 1% and 12% YoY, respectively

• Due to sustained low copra prices, raw material to sales witnessed a 70 bps decline. The company undertook a marginal reduction in advertisement expense to 10.7% (down 40 bps YoY) which got offset by higher employee & overhead expenditure. Thus, operating margin was at 19.2%, up 30 bps YoY vs. our estimate of 17.3%

• Net profit de-grew 6.8% to | 191.9 crore in-line with sales against our expectation of | 167.3 crore)

Volume growth across segments to drive revenue Led by Marico’s strong brand equity, volume growth across its key product portfolio, Parachute coconut oil rigid packs (27% of sales), Saffola refined oil (14% of sales) & value added hair oils (20% of sales) remained elevated during FY08-12. However, it was impacted Q3FY13 onwards, witnessed constant stress due to slowdown in consumption demand in the economy and a steep decline in urban discretionary demand. However, with increase in the growing health consciousness among consumers, Saffola’s volume clocked 6% growth for the quarter. Though demonetisation impacted volume growth for Parachute and VAHO portfolio during the quarter, we remain upbeat on the segments going forward supported by end of deflationary cycle, premiumisation and product innovation. We believe Marico’s growth would largely be driven by volumes, going forward with the large opportunity in the under-penetrated refined edible oil segment. We believe a revival in discretionary demand and improving economic scenario would drive growth in all segments in FY18-19E. Strengthening in higher growth categories Led by Marico’s strong brand equity in its two flagship brands, Parachute (associated with nourishment & purity) and Saffola (associated with health & wellness), the company has successfully extended its brands into higher growth and underpenetrated categories, like, VAHO (Parachute Advansed), body lotions (Parachute body lotion) and breakfast cereals (Saffola Oats and muesli). Further, the company’s acquisition of youth brands, Set Wet and Zatak (deodorants) and Livon (hair care) provide it a platform to grow in the segments of future through already established brand equity. Marico has also extended the presence of Livon to the hair colour segment that is experiencing robust growth in India. Thus, led by Marico’s strong brand equity & entry into higher growth segments, the growth outlook remains promising for the company. Earnings growth momentum continues; maintain BUY We expect Marico to report healthy revenue and PAT CAGR of 8.6% and 12.2%, receptively, in FY16-19E. We remain optimistic on the company’s growth outlook and reiterate our BUY recommendation on the stock with a target price of | 303.

Marico (MARLIM) | 255 Rating matrix Rating : BuyTarget : | 303Target Period : 12-15 monthsPotential Upside : 19%

What’s changed?

Target UnchangedEPS FY17E Changed from | 6.6 to | 6.3EPS FY18E Changed from | 7.9 to | 6.8EPS FY19E | 7.9Rating Unchanged

Quarterly performance

Q3FY17 Q3FY16 YoY (%) Q4FY16 QoQ (%)Sales 1414.0 1528.5 -7.5 1439.0 -1.7EBITDA 272.4 289.9 -6.1 253.1 7.6EBITDA (%) 19.2 18.9 28 bps 17.5 169 bpsPAT 191.9 205.8 -6.8 180.5 6.3

Key financials

| Crore FY16 FY17E FY18E FY19ENet Sales 6,014.8 6,035.1 6,814.6 7,694.7 EBITDA 1,051.4 1,145.1 1,199.1 1,396.6 Net Profit 723.3 810.8 876.2 1,022.8 EPS (|) 5.6 6.3 6.8 7.9

Valuation summary

FY16 FY17E FY18E FY19EP/E 45.5 40.6 37.6 32.2 Target P/E 54.0 48.2 44.6 38.2 Div. Yield 1.5 1.8 2.0 2.0 Mcap/Sales 5.5 5.5 4.8 4.3 RoNW (%) 34.5 34.8 34.3 34.8 RoCE (%) 46.1 46.0 44.1 45.2

Stock data Particular AmountMarket Capitalization (| Crore) 32,913.0Total Debt (FY16) (| Crore) 153.2Cash and Investments (FY16) (| Crore) 656.7EV (| Crore) 32,409.552 week H/L 307 / 216Equity capital | 129 CroreFace value | 1 Price performance Marico 0.6 -4.9 -14.7 14.0Dabur -1.2 -7.0 -9.2 13.4GCPL 4.8 2.1 0.0 28.7HUL 2.5 0.4 -9.0 5.6 Research Analyst

Sanjay Manyal [email protected]

Tejashwini Kumari

[email protected]


Variance analysis Q3FY17 Q3FY17E Q3FY16 YoY (%) Q2FY17 QoQ (%) Comments

Net Sales 1,414.0 1,324.5 1,528.5 -7.5 1,439.0 -1.7 Revenue declined by 7.5% YoY led by 9% YoY decline in the domestic busienss. International segment remained flat

Operating Income 2.7 3.9 1.8 50.0 3.8 -27.6

Raw Material Expenses 685.9 654.6 752.6 -8.9 684.7 0.2 RM costs reduced by 74 bps YoY to 48.5% of net sales led by lower copra prices

Employee Expenses 96.0 99.3 95.8 0.1 104.9 -8.5SG&A Expenses 150.8 158.9 169.5 -11.0 188.9 -20.2 Advertisement expense was down 40 bps YoY to 10.7% Other operating Expenses 211.8 185.4 222.4 -4.8 211.2 0.3 Increased by 52 bps YoYEBITDA 272.4 230.1 289.9 -6.1 253.1 7.6 Lower sales led to sharp decline in EBITDAEBITDA Margin (%) 19.2 17.3 18.9 28 bps 17.5 169 bps Lower RM and advertisment cost offset by higher employee and overhead

expenseDepreciation 21.3 20.3 22.9 -7.0 20.9 1.6Interest 4.4 4.3 5.7 -21.9 2.1 115.0Other Income 23.3 23.8 16.2 44.0 24.7 -5.7Exceptional Income/(Expenses) 0.0 0.0 0.0 NA 0.0 NAMinority Interest 0.0 0.0 0.0 NA 0.0 NA

PBT 270.0 229.2 277.6 -2.7 254.7 6.0Tax Outgo 78.1 61.9 71.7 8.9 74.0 5.5PAT 191.9 167.3 205.8 -6.8 180.5 6.3 Net profit declined in sync with the decline in revenueKey Metrics (%)

Domestic Volume Growth -4.0 10.5 3.4 De-stocking and liquidity crunch amid demonetisation impacted the domestic growth

Parachute Volume Growth -1.0 4.0 -6.0Saffola Volume Growth 6.0 17.0 8.0 Continued traction due to large exposure to modern tradeVAHO Volume Growth -12.0 21.0 11.0 Discretionery nature of products and significant de-stocking led to sharp

decline in volumesSource: Company, ICICIdirect.com Research Change in estimates

Introduction(| Crore) Old New % Change Old New % change FY19E Comments

Sales 6,577.4 6,035.1 -8.2 7,588.3 6,814.6 -10.2 7,694.7 Revising sales downwards considering the adverse impact of demonetisation on the company.

EBITDA 1,285.3 1,145.1 -10.9 1,494.4 1,199.1 -19.8 1,396.6 EBITDA getting revised downwards on account of Increasing input cost and advertisment expense

EBITDA Margin (%) 19.5 18.9 -57 bps 19.7 17.6 -210 bps 18.1PAT 899.6 810.8 -9.9 1,084.0 876.2 -19.2 1,022.8 Lower EBITDA leads to downwards revision in the PATEPS (|) 7.0 6.3 -9.9 8.4 6.8 -19.2 7.9

FY17E FY18E

Source: Company, ICICIdirect.com Research Assumptions

FY16 FY17E FY18E FY19E FY17E FY18EStd. Sales (| crore) 4,858.8 4,903.8 5,650.7 6,470.8 5,076.3 5,946.4Subs. Sales (| crore) 1,156.0 1,131.3 1,163.9 1,223.9 1,058.8 1,094.7Edible Oils vol. gr (%) 1.4 2.7 10.4 9.4 1.3 12.5Edible Oils value gr (%) 3.3 5.7 15.9 14.9 3.9 18.1Hair Oils vol. gr (%) 8.3 -7.7 12.5 11.1 3.8 11.1Hair Oils value gr (%) 16.6 -10.5 15.9 15.6 -6.1 15.6

EarlierCurrent

Source: Company, ICICIdirect.com Research


Quarterly highlights • Significant product pipeline reduction in the wake of demonetisation

led to 9.0% decline in the domestic business. The volume for the domestic segment declined 4%. Rural and wholesale were the worst affected by this, mainly in northern and eastern India. The company witnessed a recovery in December post the major impact in November

• Dented by demonetisation, rural and urban sales declined 20% and 5%, respectively. On the contrary, the modern trade segment and the CSD & institutional sales for the company grew 8% and 4%, respectively

• Though volumes grew 2% for the quarter, the same was offset by the exchange rate differential resulting into flat business from the international segment (2% constant currency growth). Price cuts taken in the parachute rigid portfolio in Bangladesh on count of softening in copra prices led to a muted performance, flat sales on constant currency term. South East Asia and South Africa grew 6% and 4%, respectively. However, macro economic headwinds in the MENA region led to a decline of 11% there

• Parachute rigid portfolio witnessed volume decline of 1% YoY (recovered well vs. 6% decline in Q2FY17). Prices were up 12% YoY for the category amid soft copra prices. Though sequentially the prices were up 17% the company decided not to take any hikes in order to gain lost volumes

• Saffola segment was strong despite demonetisation on account of exposure to modern trade. It reported volume growth of 6% YoY & 7% value growth while gaining 303 bps market share in the super premium refined edible oil to 65% during Q3FY17

• VAHO segment was the worst affected segment for the company due to demonetisation as it witnessed inventory correction across trade channel. Volumes declined 12% and valued de-growth was 13% for the segment. Despite this, it gained volume market share by 141 bps in the category to 33%

• The youth brand portfolio also declined 15% in volume terms because of the discretionary nature of products in the wake of demonetisation

• Copra prices for the quarter were down 5% YoY (up 17% QoQ). Additionally, other key inputs like rice bran oil was up 15%, liquid paraffin (LLP) was up 7% during the quarter. The management expects copra prices to further strengthen. In order to gain lost volumes in last quarter, the company deliberately did not take any price hike despite inching copra prices. However, company remains vigilant and would take price hikes going forward.

• Bangladesh, which contributes to 45% of international sales, declined was flat during the quarter. Though volumes grew 7% YoY, lower prices in the Parachute segment on account of benign raw material prices led to flat revenues. MENA region declined 11% mainly due to the unfavourable economic situation there. South East Asia grew by 6% YoY and South Africa grew by 4% YoY in constant currency term.

• Though the quarterly performance was impacted by demonetisation, the company remains optimistic of 8-10% volume growth driven expected recovery in consumption, continuous new product launches and their rapid scaling and expected end of deflationary cycle (by Q4FY17). Additionally, it plans to remain invested in the brand building and increase in its reach and maintain its advertisement spend in the range of 11-12% of net sales and EBITDA margin in the range of 17-18%, going forward


Company Analysis Demonetisation a blip; expect revenue back on track, going forward Marico’s revenue growth of 7% in FY16 was entirely led by volume growth. Volume growth for the company dipped from an average of ~14% in FY11-13 to 6% in FY15 following the significant increase in input costs that were driving up the contribution of price led growth in revenues (~20% price led growth in FY15) in an already subdued economic scenario. Marico’s increasing marketing activity, reach & strong brand equity aided in a revival of Parachute’s volume growth to ~7% in FY16. However, YTD FY17, the segment has witnessed marginal growth of 1% mainly on account of a) lower copra prices which led to less competitiveness in the local market and b) the untimely price hike during Q2FY17 leading to 6% volume decline. However, with copra prices inching up, we believe the company would be a beneficiary of the inflationary situation and witness both volume and value growth, going forward. In FY16, the company forayed into the hair fall control segment with the launch of Parachute Advansed Ayurvedic oil in southern states and extended it to other non-southern states (mainly North and East). Though the performance in the non-southern region is not very encouraging, the company expects the segment to cross | 100 crore by FY18E (| 60 crore in FY16) led by brand building and expansion initiatives. During the quarter, demonetisation impacted the VAHO segment significantly and led to volume decline of 12% YoY. On the bright side, Saffola maintained its traction as it reported 6% growth in Q3FY17 despite the adverse environment. We estimate the segment to post 6% and 4% volume & value CARG over FY16-19E. Tapping the inflationary situation, going forward, coupled with initiatives like a) increasing reach in rural India, b) increasing innovations in food portfolio (Saffola flavoured oats segment extended to Chinese & Italian variants to cater to younger population) and c) new launches in VAHO & youth brands portfolio, we expect revenue growth at 8.6% CAGR in FY16-19E. Exhibit 1: Sales & sales growth trend

2661 3135 4008 4584 4676 5720 6015 6035 6815 7695

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Exhibit 2: Domestic business volume growth (%)

15.014.0

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Exhibit 3: Volume growth in % (YoY) for Marico’s key brands and products

Q1FY14 Q2Y14 Q3FY14 Q4FY14 FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17

Parachute 4.0 1.0 2.0 10.0 4.0 6.0 7.0 8.0 5.0 8.0 11.0 4.0 6.0 7.0 6.0 -1.0

Saffola 10.0 7.0 9.0 11.0 9.0 10.0 9.0 3.0 -1.0 4.0 4.0 17.0 13.0 11.0 8.0 6.0

VAHO 16.0 15.0 8.0 5.0 11.0 11.0 13.0 10.0 5.0 14.0 8.0 21.0 11.0 9.0 11.0 -12.0


Increasing RM cost & advertisement expense to restrict EBITDA growth

EBITDA margins have hovered in the range of 13-14% in FY08-13. In FY14, Marico witnessed a significant jump in margins to 15.9% following the de-merger of its loss-making Kaya business. The de-merger of Kaya has significantly lowered the employee expenses and other operating expenses resulting in up tick in margins. Marico’s margins are highly susceptible to copra and coconut oil prices (key raw materials). Hence, any fluctuation in prices of these commodities impacts margins significantly. In FY14, in spite of the de-merger of Kaya business margins in H2FY14 were stressed following the ~70% increase in copra prices to ~| 105/kg and ~85% increase in coconut oil prices to ~| 145/kg. Further, the slowing demand scenario during the period limited the company from passing on the entire input cost inflation thereby straining margins. However, copra prices have bottomed out and would witness YoY increase form the next quarter. During the quarter it was down 5% YoY but up 17% sequentially. However, we do not expect any significant impact on margins as we believe Marico’s focus towards improving its sales mix and premium products would offset the stress on its margins due to RM costs. On account of lower copra prices, we expect the company to enjoy higher operating margin for FY17E to 18.9%. However, going forward, with rising input cost and advertisement expense, we expect it to be 17.6% and 18.1% for FY18E and FY19E, respectively


Exhibit 4: Raw material cost (%) & EBITDA margin (%)

51.3 51.6 52.451.1 51.3

54.5

51.2

48.349.5 49.2

14.1 13.912.8

14.116.0 15.2

17.518.9

17.6 18.1

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60


02468101214161820

Raw Material Cost to Sales % EBITDA Margins


Healthy sales growth & lower taxes to lead 12.3% PAT CAGR Due to the company’s factories in India and Vietnam coming out of tax benefits, the tax rate increased from an average of 22-24% until FY13 and to 29.7% in FY16. However, going forward, with the corporate tax rate expected to witness a decline in India, we estimate PAT will grow at CAGR of 12.2% in FY16-19E to | 1123.4 crore in FY19E. Exhibit 5: PAT (| crore) - LHS and PAT growth YoY (%) - RHS

231.7 286.5 317.1 395.9 485.4 573.5 723.3 810.8 876.2 1022.8

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Source: Company, ICICIdirect.com Research Chart includes Kaya numbers from FY08-13 however FY14-FY18E does not include Kaya numbers.


Cautious on international business growth outlook Marico’s international business (22% of revenues in FY16) comprises Marico’s operations in Bangladesh, Middle East and North Africa (MENA), South Africa and South East Asia. International business revenues have remained subdued since H2FY13 following the constant political disturbances in these regions, pulling down growth from 25-40% to 7% in FY16. Going ahead, though we believe that Marico’s increasing focus in Bangladesh markets is encouraging but the persistent macros headwinds in Middle East and North Africa (MENA) to remain a drag on the international business in the near term. Exhibit 6: International revenue growth YoY (%)

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Outlook & Valuation Marico’s largely urban centric portfolio (~66% of revenues are from urban India) has impacted growth rates from H2FY13 onwards following the slowing urban consumption demand in the economy. Following this, the company is actively expanding its presence in the higher growth rural markets. Post demonetisation, the company is geared to increase direct reach and reduce wholesale dependence.

In the hair oils segment, we believe near term growth in pure coconut hair oil (Parachute) revenues would be largely volume driven along with modest realisation growth on the back of premiumisation. There could, however, be traction in VAHO revenue growth led by innovations in the segment.

In the health foods segment, Marico’s expansion in oats and muesli would continue to witness market share gains and strong volume growth led by innovations and new launches (Saffola flavoured oats extended to Chinese & Italian variants to cater to young population). Saffola oats crossed | 100 crore sales in FY16. Further, the successful integration of Paras’ youth brands (Set Wet, Zatak and Livon) and entry into hair colours segment would keep revenues from this portfolio also healthy.

Hence, we expect Marico’s revenue growth from FY16-19E to grow at a CAGR of 8.6%. Though the company is focusing on changing sales mix towards premium products, we believe that the increasing input cost and stable advertisement expense towards the existing and new product portfolio will limit the operating margin expansion. We are estimating the EBITDA margin at 17.6% and 18.1% for FY18E and FY19E, respectively. Led by healthy sales growth and lower tax rate, we estimate the PAT to grow at 12.2% CAGR over FY16-19E. We remain optimistic on company’s growth outlook and continue to value the stock at a premium to its five-year average P/E at 38x FY19E EPS of | 7.9 and reiterate our BUY recommendation on the stock with a target price of | 303.

Exhibit 7: Valuations

Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE (| cr) (%) (|) (%) (x) (x) (%) (%)

FY16 6014.8 5.1 5.6 26.1 45.5 31.0 34.5 46.1FY17E 6035.1 0.3 6.3 12.1 40.6 28.5 34.8 46.0FY18E 6814.6 12.9 6.8 8.1 37.6 27.2 34.3 44.1FY19E 7694.7 12.9 7.9 16.7 32.2 23.3 34.8 45.2



Recommendation history vs. Consensus

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Source: Bloomberg, Company, ICICIdirect.com Research Key events Date EventJun-08 Highest copra prices (|4140/quintal, ~10% higher YTD) ; a threat to margins in a softening consumption demand scenarioJul-09 Strong revenue growth of ~25%YoY and by market share gains. Preference of defensives (FMCG Index return - ~12% YTD) further boosts stock priceMay-10 Declining copra intensifies competition with unbranded players. Revenue growth fell to 8-10% YoY however margins and profitability improved.Sep-10 FMCG Index return - ~40% (YTD); Copra prices started uptrendingFeb-11 Acquires 85% stake in Vietnam's 'International Consumer Products' with its leading men's brand 'X-men' Jun-11 Robust revenue and volume growth of ~33% and 21%, respectively. Copra prices higher ~97% YooY resulting in market share gains in hair oilsNov-11 Copra prices peaked in May,2011 (|6865/qtl);FMCG Index return - 32% (YTD); Marico storck return - 30%; Revenue growth back on 25-30% May-12 Copra prices decline ~40% YoY; Revenue growth starts declining to 10-15% led by increasing competition from unbranded playersMay-13 Stock price supported by run up in FMCG Index as investors park funds in defensives. Jun-13 Earnings growth of ~34% alongwith significant improvement in margins; Revival in volume growth following price cutsSep-13 Kaya business de-merged; volume growth remains muted after price cuts taken back; Expanding presence in rural marketsDec-13 Copra prices uptrending from September 2013 onwards; FMCG Index YTD return ~8%

Source: Company, ICICIdirect.com Research Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m)1 Aquarius Family Trust 30-Sep-16 11.37 146.8 0.02 Gemini Family Trust 30-Sep-16 11.37 146.8 0.03 Taurus Family Trust 30-Sep-16 11.37 146.8 0.04 Valentine Family Trust 30-Sep-16 11.37 146.8 0.05 Stewart Investors 31-Dec-16 6.22 80.3 31.26 ARISAIG Partners (Asia) Pte. Ltd. 31-Dec-16 3.50 45.2 -21.47 Mariwala (Rajvi Harsh) 30-Sep-16 2.26 29.2 0.08 Mariwala (Rishabh Harsh) 30-Sep-16 2.03 26.2 0.09 Mariwala (Archana H) 30-Sep-16 1.91 24.6 0.010 Mariwala (Harsh C) 8-Dec-16 1.56 20.1 0.2

(in %) Dec-15 Mar-16 Jun-16 Sep-16 Dec-16Promoter 59.7 59.7 59.7 59.7 59.7FII 27.8 30.0 29.0 29.3 28.8DII 3.4 2.2 3.2 3.2 3.9Others 9.1 8.2 8.2 7.8 7.6

Source: Reuters, ICICIdirect.com Research

Recent Activity

Investor name Value Shares Investor name Value SharesStewart Investors 119.51m 31.18m ARISAIG Partners (Asia) Pte. Ltd. -82.03m -21.4mInvesco Hong Kong Limited 7.55m 1.93m Matthews International Capital Management, L.L.C. -6.42m -1.55mBlackRock Institutional Trust Company, N.A. 6.98m 1.82m Kotak Mahindra (UK) Ltd -6.02m -1.46mUnion Investment Luxembourg S.A. 4.84m 1.17m Robeco Institutional Asset Management B.V. -1.61m -0.44mFirst State Investments (HK) Ltd. 3.26m 0.88m Morgan Stanley Investment Management Inc. (US) -1.35m -0.35m

Buys Sells

Source: Reuters, ICICIdirect.com Research


.

Financial summary Profit and loss statement | Crore (Year-end March) FY16 FY17E FY18E FY19ETotal operating Income 6024.5 6047.7 6828.4 7709.9Growth (%) 5.1 0.4 12.9 12.9Raw Material Expenses 3,077.7 2,917.0 3,373.6 3,789.4Employee Expenses 373.4 410.4 449.8 507.9Marketing Expenses 692.7 718.2 817.8 923.4Administrative Expenses 0.0 0.0 0.0 0.0Other expenses 829.3 857.0 988.1 1,092.7Total Operating Expenditure 4,973.1 4,902.5 5,629.3 6,313.3EBITDA 1051.4 1145.1 1199.1 1396.6Growth (%) 20.8 8.9 4.7 16.5Depreciation 94.9 92.6 103.5 113.4Interest 20.6 16.6 14.6 14.1Other Income 93.3 98.0 107.8 118.6PBT 1,029.2 1,134.0 1,188.8 1,387.8Others 0.0 0.0 0.0 0.0Total Tax 305.4 323.2 312.7 365.0PAT 723.9 810.8 876.2 1022.8Growth (%) 26.2 12.0 8.1 16.7Adjusted EPS (|) 5.6 6.3 6.8 7.9


Cash flow statement | Crore (Year-end March) FY16 FY17E FY18E FY19EProfit before Tax 1,033.8 1,134.0 1,188.8 1,387.8Add: Depreciation 101.8 92.6 103.5 113.4(Inc)/dec in Current Assets -133.8 -150.5 -287.3 -296.7Inc/(dec) in CL and Provisions 133.7 -43.8 88.2 114.4Others -303.0 -323.2 -312.7 -365.0CF from operating activities 832.6 709.1 780.6 953.9(Inc)/dec in Investments -203.3 -35.0 -35.0 -35.0(Inc)/dec in Fixed Assets -85.8 -27.4 -26.5 -16.6Others 53.4 -92.6 -103.5 -113.4CF from investing activities -235.7 -155.0 -165.0 -165.0Issue/(Buy back) of Equity 0.5 0.0 0.0 0.0Inc/(dec) in loan funds -57.5 -35.0 -35.0 -35.0Dividend paid & dividend tax -502.5 -580.6 -645.1 -645.1Interest Paid -20.4 0.0 0.0 0.0Others -1.4 0.0 0.0 0.0CF from financing activities -581.3 -615.6 -680.1 -680.1Net Cash flow 15.6 -61.5 -64.5 108.8Opening Cash 205.0 309.7 248.3 183.8Closing Cash 309.7 248.3 183.8 292.6


Balance sheet | Crore (Year-end March) FY16 FY17E FY18E FY19ELiabilitiesShare Capital 129.0 129.0 129.0 129.0Reserve and Surplus 1,967.8 2,198.1 2,429.1 2,806.8Total Shareholders funds 2,096.8 2,327.1 2,558.1 2,935.8Long Term Borrowings 0.4 -19.6 -39.6 -59.6Provisions & other LTL 11.5 11.5 11.5 11.5Minority Interest / Others 14.3 14.3 14.3 14.3Total Liabilities 2123.1 2333.3 2544.3 2902.0AssetsGross Block 1,032.6 1,142.6 1,262.6 1,382.6Less: Acc Depreciation 486.8 579.3 682.9 796.2Net Block 545.8 563.3 579.8 586.4Capital WIP 36.7 46.7 56.7 66.7Goodwill on Consolidation 498.0 498.0 498.0 498.0Non Current Investments 69.4 94.4 119.4 144.4Other Non CA 158.7 183.7 208.7 233.7Current Investments 347.0 377.0 437.0 497.0Inventory 925.8 1,041.7 1,194.9 1,349.2Debtors 252.4 231.5 261.4 295.1Cash 309.7 248.3 183.8 292.6Other CA 279.7 305.2 349.4 398.0Total Current Assets 2,114.6 2,203.6 2,426.4 2,831.8Creditors 669.0 595.2 653.5 737.9Short Term Borrowings 152.8 167.8 182.8 197.8Other Current Liabilities 478.3 493.3 508.3 523.3Total Current Liabilities 1,300.1 1,256.4 1,344.6 1,459.0Net Current Assets 814.4 947.2 1,081.8 1,372.9Application of Funds 2123.0 2333.3 2544.3 2902.0


Key ratios

(Year-end March) FY16 FY17E FY18E FY19EPer share data (|)EPS (Adjusted) 5.6 6.3 6.8 7.9Cash EPS 6.3 7.0 7.6 8.8BV 16.3 18.0 19.8 22.8DPS 3.9 4.5 5.0 5.0Cash Per Share 2.4 1.9 1.4 2.3Operating Ratios (%)EBITDA Margin 17.5 18.9 17.6 18.1PBT / Total Operating income 17.1 18.8 17.4 18.0PAT Margin 12.0 13.4 12.9 13.3Inventory days 56 63 64 64Debtor days 15 14 14 14Creditor days 41 36 35 35Return Ratios (%)RoE 34.5 34.8 34.3 34.8RoCE 46.1 46.0 44.1 45.2RoIC 54.0 52.0 48.1 51.2Valuation Ratios (x)P/E 45.5 40.6 37.6 32.2EV / EBITDA 31.0 28.5 27.2 23.3EV / Net Sales 5.4 5.4 4.8 4.2Market Cap / Sales 5.5 5.5 4.8 4.3Price to Book Value 15.7 14.1 12.9 11.2Solvency RatiosDebt/EBITDA 0.1 0.1 0.1 0.1Debt / Equity 0.1 0.1 0.1 0.0Current Ratio 1.6 1.8 1.9 2.0Quick Ratio 0.8 0.8 0.9 0.9



ICICIdirect.com coverage universe (FMCG) CMP M Cap(|) TP(|) Rating (| Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E

Colgate (COLPAL) 906 950 Hold 23,905 21.2 21.9 23.4 42.7 41.4 38.8 5.8 5.3 4.9 77.6 69.8 70.7 58.7 49.8 49.5Dabur India (DABIND) 274 324 Buy 48,479 7.1 7.2 7.9 38.5 37.8 34.6 6.2 5.8 5.3 31.1 27.5 27.0 30.1 26.0 25.3GSK CH (GLACON) 5,116 6,765 Buy 24,030 163.3 171.8 195.7 31.3 29.8 26.1 5.6 5.4 4.6 39.4 36.4 36.5 28.1 26.3 26.6Hindustan Unilever (HINLEV) 845 978 Buy 186,615 19.1 20.3 21.9 44.2 41.6 38.6 6.1 6.0 5.5 106.8 177.7 195.4 111.1 154.9 177.3ITC Limited (ITC) 274 300 Buy 311,547 7.7 8.5 9.6 35.6 32.5 28.6 6.0 5.7 5.3 42.2 44.4 49.0 28.7 31.0 34.6Jyothy Lab (JYOLAB) 348 397 Buy 6,248 4.2 8.8 10.9 82.9 39.4 32.0 3.9 3.7 3.3 17.8 16.4 17.8 7.4 14.7 17.4Marico (MARLIM) 255 303 Buy 32,913 5.6 6.3 6.8 45.5 40.6 37.6 5.5 5.5 4.8 46.1 46.0 44.1 34.5 34.8 34.3Nestle (NESIND) 5,994 7,658 Buy 66,915 58.4 107.8 138.6 102.6 55.6 43.2 8.2 7.1 6.1 29.7 35.1 38.3 32.3 36.2 42.2Tata Global Bev (TATGLO) 138 147 Hold 8,687 5.2 8.2 8.8 26.7 16.7 15.6 1.1 1.2 1.1 7.7 9.5 9.9 5.6 8.0 8.7VST Industries (VSTIND) 2,505 2,792 Buy 3,733 99.2 112.4 133.9 25.3 22.3 18.7 4.2 3.9 3.5 59.7 65.0 74.5 41.3 44.4 51.9

Sector / CompanyRoE (%)EPS (|) P/E (x) Price/Sales (x) RoCE (%)



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february 3, 2017 marico (marlim) | 255 - icici...

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