Marico: Brand power

Since March, the Marico stock has gained 47 per cent and currently trades at Rs 87. At this level, the stock is valued at 18 times 2010-11 estimated earnings and analysts believe this is a fair price. The argument is that, while net profits are expected to grow by about 30 per cent in the current year on a subdued 12 per cent rise in 2008-09, the increase could be a far more sedate 15-16 per cent in 2010-11.

Revenues this year are expected to rise by about 13 per cent over the Rs 2,389 crore reported last year. The company turned in some good numbers for the June 2009 quarter and with volumes up a strong 14 per cent, the top line rose 17 per cent to Rs 697 crore. Falling prices of inputs — copra prices down 19 per cent year-on-year — helped push gross margins up by nearly 400 basis points. However, higher ad spends and other expenses including the rollout of several Kaya clinics, resulted in ebitda (earnings before interest, tax and depreciation) margins going up by just 117 basis points to just under 14 per cent.

Both the key brands Parachute and Saffola continue to grow at a fast pace — volumes for Parachute grew a remarkable 14 per cent driven by some consumer schemes while a price reduction in Saffola helped volumes grow 13 per cent.

It was the international business though that did particularly well, posting an increase in revenues of 63 per cent though some of it was due to currency translation.The Kaya clinics chain is being expanded and now has a 100 clinics with a dozen clinics having been opened during the quarter. Sales for the chain were up 26 per cent compared with 10 per cent in the second half of 2008-09.

However, the rise in same-clinic-sales remains muted.