Marico gains after Q4 PAT rises 17% YoY

Marico rose 1.45% to Rs 415.90 after the company reported 17% jump in consolidated net profit to Rs 238 crore on 34% increase in revenue from operation to Rs 2,012 crore in Q4 FY21 over Q4 FY20.

During the quarter, the revenue growth was backed by robust volume growth of 25% in the domestic business and constant currency growth of 23% in the international business.

The company witnessed strong momentum in each of the core portfolios of the India business while steadily strengthening its play in Foods through innovation. However, a part of the optical growth was also due to a lockdown-affected base (however relatively stronger than most sectoral peers) and partial normalization of the historical skew in Q4 and Q1 revenues.

Rural continued to lead the way in traditional trade, growing at 1.8x of urban. E-Com and CSD also fared well, while Modern Trade dipped due to pantry loading in the base quarter.

Gross margin was down 517 bps owing to the severe input cost pressure, as pricing interventions in the core portfolios were not commensurate to the inflation.

EBITDA was up 13% YoY to Rs 319 crore in Q4 FY21, as tight cost controls and operating leverage kicked in to reduce the impact on EBITDA margins to 300 bps to 15.9% as on 31 March 2021.

Advertising & sales promotion expenses grew by 35% YoY as the company invested aggressively mainly on core franchises and the Foods innovations, while continuing to drive spend rationalization and channelize investment towards growing franchises.

Marico's India business delivered a turnover of Rs 1,574 crore, up 37% on a year-on-year (YoY) basis. The operating margin was lower YoY at 17.6% in Q4FY21 as compared to 22.8% in Q4FY20, owing to the input cost push, which was partly offset by pricing interventions in key portfolios and aggressive cost control initiatives that led to savings of more than Rs 150 crore on an annualized basis.

Parachute Rigids grew by 29% in volumes in Q4FY21 on a lockdown-affected base. The brand firmly held its ground, despite a pullback of consumer offers and MRP increase of 4% during the quarter, in response to the sharp inflation in copra prices. In H2, the cumulative increase in effective consumer prices has been approximately 9%.

Saffola refined edible oils grew 17% in volumes in Q4FY21. Value Added Hair Oils grew 22% in volume terms in Q4FY21. Most brands in the franchise double-digit volume growth in Q4. General Trade led the growth with rural outperforming urban. E-com and CSD also contributed positively.

The Premium Personal Care portfolio posted a modest decline in Q4 on a YoY basis. The Beardo franchise has been gradually regaining traction after the initial COVID-induced headwinds.

The International business posted broad-based growth of 23% in Q4FY21 in constant currency terms. The operating margin in the international business marginally expanded to 19.3% in Q4FY21 vs 18.0% in Q4FY20, given tighter overhead cost management across all geographies. The business grew by 7% in constant currency terms in FY21, with key markets exhibiting stability in an overall challenging global environment.

The Bangladesh business clocked 20% constant currency growth in Q4FY21. The South East Asia (SEA) business grew 13% in Q4FY21 in constant currency terms, after missing the double-digit mark for the last 8 quarters. The MENA business rebounded to 62% growth YoY in constant currency terms on a weak base. The South Africa business grew 48% YoY in cc terms in Q4FY21.

In Q4FY21, the average market price of domestic copra was up 25% on a YoY basis. Rice bran oil was up 39% YoY. Liquid Paraffin (LLP) and HDPE were up by 29% and 31% respectively on a YoY basis. The consumption prices may differ from market prices depending on the stock positions the company has taken.

Marico said that the estimated capital expenditure in FY22 is likely to be around Rs 125-150 crore.

During the current year, the company continued to generate steady cash. The net surplus of the Group as at 31 March 2021 was about Rs 1,355 crore.

Overall, the company holds its medium-term aspiration of delivering 8-10% domestic volume growth and 13-15% revenue growth. While the key portfolios of both the India and International businesses have rebounded strongly as the first COVID wave subsided, the near-term impact of the ongoing wave is difficult to foresee at this time, particularly on the domestic business. It expects a clearer picture to emerge in May.

The company said it would be comfortable maintaining its threshold operating margin of 19% plus over the medium term. However, operating margins will be lower in the immediate near term, given the unprecedented input cost pressure and COVID-related disruption, especially in Q1.

Marico is a leading Indian group in consumer products in the global beauty and wellness space.

Powered by Capital Market - Live News