For Q2FY09, Marico reported robust topline growth of 30.1% y-o-y on a consolidated basis to Rs603.5 crore (Rs463.8 crore), which was marginally above our expectations of 27% growth to Rs589crore.
This growth was driven by an organic volume growth of 11%, price led growth of 16% and 3% inorganic growth.
All Marico’s businesses - Consumer Products in India, International business and Kaya skin solutions recorded healthy growth.
However, bottomline growth was muted at 11.6% y-o-y to Rs47.1 crore (Rs42.2 crore) in line with our expectations. A one-time Forex MTM loss of Rs7 crore (included in other expenses) on account of rupee depreciation impacted the bottomline excluding which growth in bottomline stood at 24% y-o-y.
At the operating level, the company witnessed significant margin contraction of 171bp y-o-y owing to a 267bp rise in raw material costs (due to higher copra prices) and 216bp rise in other expenses (owing to forex loss and higher overheads due to Kaya rollout and addition of South African business).
However, lower advertising expenses, down 402bp yoy, on account of lack of new product launches and accounting policy change helped arrest further margin fall.
We maintain a BUY on the stock, with a target price of Rs66.