Company Introduction: 

Marico Limited is one of India’s leading consumer goods companies  operating in global beauty and wellness categories. With its headquarters  in Mumbai, Marico is present in over 25 countries across emerging markets  of Asia and Africa. It nurtures leading brands across categories of hair care,  skin care, edible oils, healthy foods, male grooming and fabric care. The  company has eight factories in India, located at Puducherry, Jalgaon, Guwahati, Baddi, Paonta Sahib and Sanand. The company has a  pan-India distribution network with a reach of 5.3 million outlets out of a  total of ~10.2 million outlets in India. Marico touches the lives of 1 out of every  3 Indians, through its portfolio of brands such as Parachute, Saffola, Set Wet,  etc. Currently, the promoter group, Mr. Mariwala and his family members,  owns about 60% stake in Marico. 


It has several Brands spread across several segments in Domestic  & International Markets. Domestic Brands – Parachute and Nihar Naturals in Coconut Oil Segment;  Saffola in Super-premium Refined edible oil Segment; Parachute advanced,  Nihar naturals and Hair & Care in Value added hair oil Segment; Saffola  oats, Coco Soul and Saffola FITTIFY Gourmet Range in Healthy foods; Livon  Serums and Hair & Care in Premium Hair Nourishment Segment; Set  Wet, Beardo and Parachute in Male Grooming & Styling Segment; Kaya Youth  and Parachute advanced in Skin Care Segment; Mediker, Veggie Clean in  Hygiene Segment. International Brands – Parachute, Hair Code, Nihar Naturals, Mediker SafeLife,  Fiancee, caivil, Hercules, Black Chic, Code 10, Ingwe, X-Men, Sedure, Hercules,  Just for Baby, Just for kids, Thuan Phat and Isoplus


The Company has 10+ subsidiary companies namely Marico  Bangladesh Ltd., MBL Industries Ltd., Marico Middle East FZE, MEL Consumer  Care SAE, etc. 

 Key Rationale :

Parachute’s Dominant presence – Marico’s coconut oil segment  continues to be the leader with 61% of market share in terms of volume. In  that, Parachute, the world’s largest coconut oil brand, has a market share of  54% in terms of volume. It is the only brand with nation wide reach and  dominates the coconut oil market. Coconut oil segment contributes a  whopping 43% of overall domestic revenue. 1 out of 10 coconuts grown in  India are used by Marico. The last 10-year Volume CAGR of Parachute rigid  packs is around 6%. Parachute segment witnessed sales growth of 20% led  by 12% volume growth in Q1FY22. The brand gained 80 bps market share in  rigid pack in the same period. Healthy operating efficiency – Return on capital employed was a robust  44% in fiscal 2021, with a strong network of 25 clearing and forwarding  agents and about 7,300 stockists and distributors providing a retail reach  of about 53 lakh outlets in India and direct reach of nearly 10 lakh  outlets. Expected increase in rural reach and focus on direct reach and  modern trade (including E-commerce) will help sustain healthy volume  growth in the future. The Company has maintained profitability despite  volatility in raw material prices driven by controlled costs, pan India  distribution network and strong pricing power. Entry in hygiene segment – After COVID-19,  Marico forayed into hygiene category by launching (i) Mediker  Sanitizer (Rs.50/100/250 price points) and (ii) Veggie Clean (Rs.150/290  price point) (iii) House Protect (indoor disinfectant) and Travel  Protect (out-door disinfectant). In food portfolio, Marico launched  Honey under the brand Saffola in June’20. MRCO is also aggressively  broadening and scaling up its existing food portfolio; oats, soup, green tea,  green coffee etc. Hygiene and food will help Marico to reduce dependency  on non-essential products 

Ratios :

 Outlook :

 Management expects gradual sequential improvements in gross margins  from Q2FY22 onwards and to eventually settle down in the second half. The  company aims to grow (i) its volume in the range of 8-10% with sustainable  gains in market shares (ii) its international business in double digits (iii) its  food business to Rs.500crs in current year. Newly launched Saffola Honey  gained 25% market share on e-commerce channel & double-digit market  share in modern trade. Saffola Soya Chunks garnered the market share of  14% in modern trade. The company is expanding the products reach to East &  North India. It also aims to generate Rs.450-500crs of sales by FY24 through  digital first brand only. The company has invested in digital brands like  Beardo, Pure Sense, Just Herbs & Coco Soul in Male grooming & Skin care  products. 

Margins : 

Our View:

Company benefited from a 13% sequential drop in prices of one of its major inputs (i.e., copra) during Q1FY22. With impact of second wave seen to be reducing in the domestic market, along with demand revival, we expect margins to improve further in the coming quarters. Hence, we recommend a BUY rating for the stock with the target price (TP) of Rs.626, 61x FY22E EPS.

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