MARICO LTD Result Update (CONSOLIDATED BASIS): Q4 FY18

Transcription

1 MARICO LTD Result Update (CONSOLIDATED BASIS): Q4 FY18 Index Details Stock Data Sector Personal Products BSE Code Face Value wk. High / Low (Rs.) / Volume (2wk. Avg.) Market Cap (Rs. in mn.) Annual Estimated Results(A*: Actual / E*: Estimated) Years(Rs in mn) FY18A FY19E FY20E Net Sales EBITDA Net Profit EPS P/E Shareholding Pattern (%) As on Mar 2018 As on Dec 2017 Promoter Public Others Year Comparative Graph MARICO LTD S&P BSE SENSEX CMP: JUNE 4 th, 2018 Overweight SYNOPSIS ISIN: INE196A01026 Marico Ltd is a leading Indian Group in Consumer Products in the Global Beauty and Wellness space. Consolidated Revenue for the 4 th quarter rose by 11.95% to Rs mn from Rs mn, in the corresponding period of the previous year. During Q4 FY18, consolidated EBIDTA was Rs mn as against Rs mn in the corresponding period of the previous year. The consolidated PBT of the company stood at Rs mn in Q4 FY 18 as against Rs mn in the corresponding previous year quarter. Consolidated net profit stood at Rs mn in the current quarter as against Rs mn in the corresponding period of the previous year, up by 7.19%. For the quarter the company registered EPS at Rs in Q4 FY18 as against Rs in the corresponding previous quarter. During Q4 FY18, FMCG Business in India achieved a turnover of Rs mn (USD 180 million), a growth of 12% over the same period last year. During the quarter, Marico s International business grew by 16% in constant currency terms (volume growth of 5%). For the full year, the business grew by 9% in constant currency terms (volume growth of 1%) over FY17. During the current year, the Company continues to generate steady net surplus of the Group as at 31 st March, 2018 is about Rs mn (Gross debt of Rs mn and Gross Investments of Rs mn). Marico acquired 12.66% equity in Revolutionary Fitness Private Limited, in the first tranche. Net Sales and PAT of the company is expected to grow at a CAGR of 8% and 6% over 2017 to 2020E, respectively. PEER GROUPS CMP MARKET CAP EPS(TTM) P/E (X)(TTM) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Marico Ltd Godrej Consumer Products Ltd Dabur India Ltd Emami Ltd

2 QUARTERLY HIGHLIGHTS (CONSOLIDATED BASIS) Results updates- Q4 FY18, (Rs in millions) Mar-18 Mar-17 % Change Revenue % Net Profit % EPS % PBIDT (2.34%) The consolidated net profit registered a growth of 7.19% and stood at Rs million in the current quarter as against Rs million in the corresponding period of the previous year. Revenue for the 4 th quarter rose by 11.95% to Rs million from Rs million in the corresponding period of the previous year. Reported earnings per share of the company stood at Rs a share during the quarter as against Rs a share during the previous quarter. Profit before interest, depreciation and tax is Rs million as against Rs million in the corresponding period of the previous year. Break up of Expenditure Break up of Expenditure Cost of Materials Consumed Purchase of Stock in Trade Q4 FY18 Value in Rs. Million Q4 FY17 % Change % % Excise Duty Employee Benefit Expenses Depreciation & Amortization Expenses Advertisement and Sales Promotion % % % Others %

3 Segment Revenue: PERFORMANCE HIGHLIGHTS: The India business volumes grew by a modest 1%, while the International business posted a very healthy constant currency growth of 16% (volume growth of 5%). Value growth in the India business was led by price hikes in the Coconut Oil portfolio. Gross margins (down 522 bps YoY) continued to remain under pressure owing to the unrelenting inflation in copra prices against a benign input cost environment in the base quarter. OTHER HIGHLIGHTS RELATING TO THE QUARTERLY PERFORMANCE ARE AS FOLLOWS: Rural growth (12%) outpaced urban growth (5%) for the third straight quart er. Modern Trade and E-Commerce continued to grow briskly. CSD grew 32%, bouncing back after 4 quarters of decline. Parachute Rigids declined by 5% in volumes, an aberration caused by relatively concentrated price increases in H2 FY18 (aggregating to ~22%) and 15% spikes in volumes in both, the base quarter (Q4 FY17) as well as the preceding quarter (Q3 FY18). However, the franchise witnessed market share gains of 90 bps (March 2018 MAT). Broad based recovery witnessed in Value Added Hair Oils (VAHO) led the franchise to 11% volume growth. The portfolio gained 70 bps in volume market share on a MAT basis. Saffola Edible Oils had a flattish quarter in the wake of sluggishness witnessed in the super premium segment of the edible oils market. Efforts towards turning around this segment are expected to bear fruit in the coming year. Healthy Foods recorded satisfactory growth, with Saffola Masala Oats at 70% value market share (March 18 MAT) in the flavoured oats category. Premium Hair Nourishment and Male Grooming continued on the recovery path during the quarter.

4 All international regions, except Vietnam, posted double-digit constant currency growth. Bangladesh continued its good run, posting 17% constant currency growth in Q4 FY18 and MENA staged a much awaited comeback on a low base. Advertising & Sales Promotion spends was up 14% in Q4 FY18 on a comparable basis. In the medium term, ASP will be stepped up to 10-11% of Sales to support forthcoming innovations. OPERATIONAL PERFORMANCE HIGHLIGHTS: INDIA BUSINESS During Q4 FY18, FMCG Business in India achieved a turnover of Rs mn (USD 180 million), a growth of 12% over the same period last year. For FY18, the turnover was at Rs mn (USD 770 million), a growth of 9% on a year-on-year basis. Volume growth during the quarter was 1%, underperforming the medium term growth expectation due to a one-off decline in the Coconut Oil portfolio and headwinds in Saffola Edible Oils. Overall value growth of 12% during the quarter was primarily driven by price hikes taken in the Coconut Oil portfolio to counter the significant copra price inflation witnessed during the year. The operating margin during Q4 FY18 was 21.8% before corporate allocations as against 26.0% for the same period last year. For the full year, the operating margin was 21.3% before corporate allocations as against 24.3% in FY17. Persistent inflation in copra prices continued to dent margins, which was partially offset by the price increases in Parachute Rigids and tighter cost management. A&P spends in the India business was up 27% during the quarter on a comparable basis. The Company will continue to focus on a balanced approach towards volume growth and profitable margins. Parachute Coconut Oil: One-off volume decline; Medium term growth guidance retained; Focus on increasing rural market share In Q4 FY18, Parachute Rigids (packs in blue bottles) posted a volume declin e of 5%, an anomaly caused by a combination of relatively concentrated price increases in H2 FY18 (aggregating to ~22%) and 15% spikes in volumes in the post-demonetisation base quarter (Q4 FY17) as well as the preceding quarter (Q3FY18). Volumes grew 5% in H2 FY18, as trade began to stabilize post the GST implementation. Volume growth for the year was at 2%, lower than the medium term expectation on account of one-offs in Q1 (pre-gst destocking by trade) and Q4. However, on the back of healthy offtake growth, the Coconut Oil franchise gained 90 bps in volume market share to 59% (March 2018 MAT).

5 During the year, the copra prices went up by 75% while the company increased the consumer prices by 22%, as it chose to resort to the approach of protecting the franchise at the cost of short term margin losses. Of the total coconut oil market, approximately 30-35% in volume terms is in loose form. This loose component provides headroom for growth to branded players. The Company s flagship brand Parachute, being the market leader, is well placed to capture a significant share of this growth potential on a sustainable basis. Notwithstanding lower volume growth this year, the Company retains the guidance of 5-7% volume CAGR over the medium term. Saffola: Flat quarter for Edible Oils; Foods witnessed healthy growth Despite a flat quarter, the brand maintained its leadership position in the super premium refined edible oils segment with a 69% volume market share (March 2018 MAT). In Q4 FY18, the Healthy Foods franchise grew by 18% in value terms. Saffola Masala Oats (SMO) maintained its momentum, on the back of focused inputs and a renewed promotional campaign, which led to a consolidation in its value share to 70% (March 2018 MAT) in the flavoured oats category. The recently launched variants of Saffola Masala Oats viz. Pongal Surprise, Tandoori Magic & Tangy Chaat, continue to see good traction. Company expanding the prototyping of Saffola Masala Oats vending machines in corporate offices, gyms and hospitals in Mumbai, Pune and New Delhi. The company have placed more than 150 vending machines currently, reaching 83,000 consumers across 100 commercial establishments in these cities. Also, Saffola Masala Cuppa Oats have been placed in out of home (OOH) locations in Mumbai in addition to trade. The initial response to Saffola Active Slimming Nutri-Shake and Saffola Active Soups, launched in H2 FY18, has been encouraging. Value Added Hair Oils: Double digit volume growth lends impetus to the premiumisation journey; Nihar Shanti Amla extends its lead in market share Value Added Hair Oils brands registered a volume growth of 11% during the quarter on the back of broad-based growth in the franchise. Strong offtake growth led to the Company to consolidating its market leadership with a volume share of 34% and value share of 26% (March 2018 MAT). Nihar Naturals Shanti Amla Badam consolidated its market leadership in volume terms within the Amla hair oil category. The gain of ~149 bps in market share during the quarter reflects the continuing strong growth trajectory.

6 Both Hair & Care Fruit Oils and Parachute Advansed Aloe Vera Enriched Coconut Hair Oil continued to gain traction. Nihar Naturals Sarson Kesh Tel, a value added mustard oil targeting the pool of loose mustard oil users, launched across markets in North and parts of East India, also continued to gain traction and expand its reach. The brand exit volume market share in the perfumed mustard oil category grew to 10% (March 2018 MAT). Premium Hair Nourishment: Strong growth for Livon Serums in Modern Trade and E-Commerce In Q4 FY18, Premium Hair Nourishment (Livon and H&C Silk n Shine) grew 11% in value terms on a comparable basis and portfolio was seen gaining traction in H2 FY18. Livon Serum sachets registered strong growth with a reach of more than 1 lac stores, sachets are emerging as a key pack in ensuring accessibility and are generating more than 70% of brand trials. Livon Serums continued to witness higher growth in Modern Trade and E-Commerce. The new marketing campaign for Livon Serums - Salon in my bag launched in January 2018, focused on delivering salon finish hair on demand for millennials. With a media plan focusing on creating impact, the campaign reached out to more than 20 mn girls in age group of across all youth channels & digital platforms like Facebook, Instagram & YouTube. Being the market leader with a volume share of 82% (March 2018 MAT) in the Post wash Leave-on Serums, the Company will focus on driving category growth through innovation and consumer engagement. The company closely monitoring the initial response to Livon Hair Gain Tonic, launched in a new 70 ml pack in March Male Grooming Reversal from decline continues; Aim to have a broad spectrum play in the category: Male Grooming grew 5% in Q4 FY18 in value terms on a comparable basis. The value market share of Set Wet Hair Gels currently stands at 58%, constituting circa 60% of total Male Grooming Portfolio. On gaining significant traction in Karnataka and Kerala, Parachute Advansed Men Range has been extended to Maharashtra and Andhra Pradesh as well. The recently launched affordable pocket spray, Set Wet Blast (priced at INR 49), received a good response from trade & consumers across all the launch markets. Given the positive response, the brand will be extended to other markets. The initial response to Set Wet Hair Waxes, launched in Q3 FY18, has been encouraging. The product has been launched on E-Commerce and in select regions of Mumbai, Punjab, Delhi, Kerala, NER and Haryana. Sales Initiatives: During the year, the Company took the following initiatives leading to Sales efficiencies:

7 The Company has successfully used geo-tags & analytics for route optimization and extended it to 26 distributors across 8 cities, which enables coverage of more outlets with lesser manpower. This efficiency in sales beats helped reduce manpower by 13%, which has been redeployed. On the rural front, rural field forces were equipped with a new version of PDAs to enable an exhaustive, daily tracking of the rural business across 50,000+ towns. Additionally, we rolled out an end-to-end in-house field force assessment app through which urban field force were assessed, leading to a better control & faster turnaround time. Markets/Distribution Channels: Rural growth continued to outpace urban growth. In Q4 FY18, Marico s rural sales grew by 12% while urban sales grew by 5% in value terms. In FY18, Marico s rural sales (32% of the India turnover in FY18) grew by 8% while urban sales grew by 7% in value terms. Modern Trade (11% of the India turnover in FY18) grew by 23% in Q4 FY18 and 15% in FY18, fueled by factors such as comfortable and modern shopping experience, access to diverse categories as well as a wide variety of brands under a single roof and attractive prices. CSD (7% of the India turnover in FY18) delivered a strong performance in Q4 FY18 by growing 32% to end flattish for the year. With the growing relevance of the Digital marketplace, E-commerce (over 1% of Ind ia Turnover in FY18) has become an integral pivot of growth. This business grew by 181% during the quarter, albeit on a low base. This segment is expected to contribute ~2% of the India Business in FY19. INTERNATIONAL BUSINESS: During the quarter, Marico s International business grew by 16% in constant currency terms (volume growth of 5%). For the full year, the business grew by 9% in constant currency terms (volume growth of 1%) over FY17. The operating margin (before corporate allocations) was at 11.8% in Q4 FY18 against 9.8% in Q4 FY17. The improvement in profitability was driven by better efficiency in spends. For FY18, operating margin (before corporate allocations) was at 16.6% in FY18 against 16.5% in FY17. The Company aims to maintain international margins at ~16-17% and continue to invest and plough back savings to drive growth. Bangladesh (45% of the International Business): In Bangladesh, topline grew by 17% in Q4FY18 (volume growth of 3%) and 13% in FY18 (volume growth of 4%) in constant currency terms.

8 Parachute Coconut Oil reported growth of 6% in constant currency terms during the quarter, while maintaining the leadership position with 87% volume market share. The non-coconut oil portfolio in Bangladesh grew by 47% and 32% in constant currency terms in Q4 FY18 and FY18 respectively. This was led by handsome volume led growth in Value added Hair Oils, driven by the flagship brand Parachute Advansed Beliphool. Consequently, the non-coconut oil portfolio contributed to 26% of the total business in Bangladesh in FY18 as compared to 10% in FY12. The non-coconut oil portfolio is likely to become 30-35% over next 2-3 years. South East Asia (26% of the International Business): Business in South East Asia (mainly Vietnam and Myanmar) declined by 3% in Q4 FY18 and 2% in FY18 in constant currency terms. Vietnam declined by 4% in constant currency terms due to headwinds in the male shampoo category. The business declined 5% in constant currency in FY18. The flagship brand X-Men maintained its leadership in male shampoos. Myanmar grew steadily through the year and recorded a topline of over USD 8 million during the year. Middle East and North Africa (MENA) (15% of the International Business): The MENA Business posted a volume led recovery, growing 61% in Q4 FY18 in constant currency terms. With the anniversarisation of the Egyptian currency devaluation, optical growth for the quarter was higher. Hair Code in Egypt and Parachute in Middle East enjoy strong brand equities. However, the macros continue to be tough. South Africa (9% of the International Business): South Africa (including Isoplus) posted a growth of 23% in Q4 FY18 and 16% in FY18, in constant currency terms. Despite challenging macro-economic conditions, the standalone business grew in low single digits in constant currency terms through the year. The integration of newly acquired Isoplus has progressed as per schedule and the operating results have been satisfactory. New Country Development & Exports (5% of the International Business): With expansion in adjacent markets such as Sri Lanka, Nepal, Bhutan, exports to diaspora and other markets generated revenues of USD 11 million this year. This business grew by 16% in Q4 FY18 and 15% in FY18, in constant currency terms. The Company remains positive on the future prospects of this business. NET DEBT POSITION: During the current year, the Company continues to generate steady net surplus of the Group as at 31st March, 2018 is about Rs mn (Gross debt of Rs mn and Gross Investments of Rs mn).

9 The overall dividend payout ratio hence is 78% of the consolidated profit after tax as compared to 64% during FY17. LASTEST UPDATES: On April 13, 2018, the Company announced a strategic investment in Revolutionary Fitness Private Limited by agreeing to acquire upto 22.5% equity stake, through primary and secondary infusions. Near Term / Medium Term Outlook: Marico India: For FY19 and beyond, the Company retains the target of 8-10% volume growth, healthy market share gains on the back of increased investment in the core portfolio, aggressive new product launches, distribution expansion, judicious pricing and tighter cost management. In Parachute Rigids, the Company aims to grow volumes in the range of 5-7% in the medium term, despite a volatile FY18. In Value Added Hair Oils, the Company aims for double-digit volume growth on the back of the core portfolio, driving premiumisation and scale up of new launches. The company expect to continue on the recovery path in the Premium Hair Nourishment and Male Grooming portfolios and build it into a growth engine for the future. The Company s Go-To-Market strategy will be focused on improving the width and depth of its distribution both direct and wholesale. The Company is focusing on increasing its Digital footprint, to improve consumer engagement, drive sales through E- commerce for the new-age consumers and build data analytics capabilities. The company aggressively investing in the E-Commerce business and expect it to contribute ~2% of the India Business by FY19. Marico International: The business in Bangladesh had a promising year and is likely to continue the momentum as the medium term macro prospects look promising. Therefore, the Company will continue to invest in brand building, Go to Market transformation and will diversify beyond Coconut Oil within its stated strategy. As a market leader, the Vietnam business will invest in reigniting the male grooming category and excellence in sales and distribution systems. Myanmar and the rest of South East Asia is the new growth engine for future. In the MENA region, the Company will focus on getting its basics right by judiciously investing behind brands and Go-to-Market initiatives. The South African business will leverage the new acquisition of Isoplus to gain scale and grow profitably. The Company will continue to invest in developing new countries and scale the business profitably.

10 The company expect to clock an organic top line growth of 12-15% in constant currency in the near to medium term. Company aim to maintain the guidance of 16-17% operating margins over the medium term. With considerable room for organic growth in the business, the Company will only be opportunistic with respect to acquisitions, which may either be immediately value accretive due to operating leverage or enable consolidation of leadership in existing categories. Overall (India + International): The Company will aim for a volume growth of 8-10% and a topline growth of 15% plus (depending on inflation) in the medium term. Market growth initiatives in core categories and expansion into adjacent categories will be supported by investments in ASP in a band of 10-11% of Sales, with a focus on brand building. Operating margin is expected to be maintained in a band of 17-18% over the medium term. In the near term, the Company has chosen to focus on volume growth and market share gains over short term profitability. COMPANY PROFILE Marico is a leading Indian Group in Consumer Products in the Global Beauty and Wellness space. Marico s Products in Hair care, Skin Care, Health Care and Male Grooming generated a turnover of about Rs mn (USD 982 Million) during Marico markets well-known brands such as Parachute, Saffola, Hair & Care, Nihar, Parachute Advansed, Nihar Naturals, Mediker, Revive, Set Wet, Livon, Fiancée, Hair Code, Caivil, Black Chic, Isoplus, Code 10, Ingwe, X- Men, and Thuan Phat. 90% of Marico s portfolio of brands occupies leadership positions in their respective categories. Marico's products are present in Bangladesh, other SAARC countries, the Middle East, Egypt, South and Sub-Saharan Africa, Malaysia, Myanmar and Vietnam. Marico's own manufacturing facilities in India are located at Kanjikode, Perundurai, Puducherry, Paonta Sahib, Baddi, Jalgaon, and Guwahati and are supported by subcontracting units. Marico s subsidiaries, Marico Bangladesh Limited, Marico Egypt Industries Company, MEL Consumer Care & Partners (Wi nd Co.), Marico South East Asia Corporation (erstwhile International Consumer Products Corporation) have their manufacturing facilities at Mouchak and Shirir Chala, near Gazipur in Bangladesh, Sadaat City, Egypt, Ho Chin Min City, Vietnam and Phú Quốc Island, Vietnam respectively. Marico was incorporated in 1988 and during 1990 took over the then 40-year old consumer products business of The Bombay Oil Industries Limited. It made its initial public offer for equity shares in March Reach: Marico today touches the lives of 1 out of every 3 Indians. Marico sells over 1520 mn packs every month through about 4.7 million retail outlets services by its nationwide distribution network comprising 4 Regional Offices, 31 carrying & forwarding agents (CFAs) and about 5,600 distributors and stockists. Marico s distribution network covers almost every Indian town with population over 10,000.

11 FINANCIAL HIGHLIGHT (CONSOLIDATED BASIS) Balance Sheet as of March 31, E (A*- Actual, E* -Estimations & Rs. In Millions) FY17A FY18A FY19E FY20E ASSETS 1) Non-Current Assets a) Property, plant and equipment b) Capital Work in Progress c) Investment Property d) Goodwill e) Other Intangible Assets f) Investment accounted for using the equity method g) Financial Assets i) Investments ii) Loans iii) Other Financial Assets h) Non-Current Tax Assets i) Deferred Tax Assets (Net) j) Other Non-Current Assets Sub - Total Non- Current Assets ) Current Assets a) Inventories b) Financial assets i) Investments ii) Trade receivables iii) Cash and Cash equivalents iv) Bank Balances Other than Cash v) Loans vi) Other Financial Assets c) Other Current Assets d) Assets Classified as held for Sale Sub - Total Current Assets Total Assets (1+2) EQUITY AND LIABILITIES 1) EQUITY a) Equity Share Capital b) Other Equity Total Equity ) Non Controlling Interests ) Non Current Liabilities a) Financial Liabilities i) Borrowings ii) Employee Benefit Obligation b) Deferred Tax Liabilities Sub - Total Non Current Liabilities ) Current Liabilities a) Financial liabilities i) Borrowings ii) Trade Payables iii) Other financial liabilities b) Provisions c) Employee Benefit Obligation d) Current Tax Liabilities e) Other Current Liabilities Sub - Total Current Liabilities Total Equity and Liabilities ( )

12 Annual Profit & Loss Statement for the period of 2017 to 2020E Value(Rs.in.mn) FY17A FY18A FY19E FY20E Description 12m 12m 12m 12m Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Share of Profit & Loss of Assoc Net Profit Equity capital Reserves Face value EPS Quarterly Profit & Loss Statement for the period of 30 th Sep, 2017 to 30 th June, 2018E Value(Rs.in.mn) 30-Sep Dec Mar June-18E Description 3m 3m 3m 3m Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Share of Profit & Loss of Assoc Net Profit Equity capital Face value EPS

13 Ratio Analysis Particulars FY17A FY18A FY19E FY20E EPS (Rs.) EBITDA Margin (%) 21.17% 19.30% 19.10% 19.21% PBT Margin (%) 19.37% 17.64% 17.50% 17.64% PAT Margin (%) 13.68% 13.07% 13.00% 13.08% P/E Ratio (x) ROE (%) 34.91% 32.54% 26.08% 22.09% ROCE (%) 45.48% 39.74% 33.06% 28.63% Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV Charts

14 OUTLOOK AND CONCLUSION At the current market price of Rs , the stock P/E ratio is at x FY19E and x FY20E respectively. Earning per share (EPS) of the company for the earnings for FY1 9E and FY20E is seen at Rs and Rs. 7.56, respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 8% and 6% over 2017 to 2020E, respectively. On the basis of EV/EBITDA, the stock trades at x for FY19E and x for FY20E. Price to Book Value of the stock is expected to be at x and 9.46 x for FY19E and FY20E respectively. Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment. INDUSTRY OVERVIEW Overview of the Consumer Products Industry: India s FMCG sector at USD 41.1 billion is one of the largest sectors in India. Over the last five years, the sector has grown at compounded annual growth rate of 9.3%, ahead of the GDP growth. During the year under review, the growth rate has tapered off mainly due to deflation and the impact of demonetization, while sentiment appears to have improved; it has not yet translated to tangible improvement in consumption across the sector. However, there is a silver lining. The recent normal monsoon forecast augurs well for the sector. Some other factors expected to drive the recovery are a stronger GDP growth (leading to investments in various sectors, which eventually results in employment generation); moderate consumer inflation; enabling government policy framework; continuing input cost benefits; Goods and Service Tax (GST); Direct Benefit Transfer Scheme (DBIT); One Rank One Pension (OROP) for Ex -Military Servicemen; and increased pay-outs to government employees consequent to implementation of 7 th Pay Commission recommendations.

15 Indian consumer segment is broadly segregated into urban and rural markets, and it attracts companies from across the world. The sector comprises a large middle class, relatively large affluent class and a small economically disadvantaged class, with spending anticipated to more than double by India s Consumer confidence index stood at 136 in the fourth quarter of calendar It topped the global list of countries on the same parameter, as a result of strong consumer sentiment, according to market research agency, Nielsen. Further, in the discretionary spending category, 68% respondents from India indicated the next 12 months as being good to buy; thus, ensuring once again that India leads the global top 10 countries on this parameter during the quarter. Global corporations view India as one of the key markets from where future growth is likely to emerge. The growth in India s consumer market would be primarily driven by a favorable demographics and increasing disposable incomes. McKinsey Global Institute s recent study (MGI) suggests that if India continues to grow at the current pace, average household incomes will triple over the next two decades. This will help India jump to the spot of the world s fifth-largest consumer economy by 2025, up from the current 12 th position. India s robust economic growth and rising household incomes are expected to increase consumer spending to US$ 3.6 trillion by The maximum consumer spending is likely to occur in food, housing, consumer durables, and transport and communication sectors. The report further stated that India's share of global consumption would expand more than twice to 5.8% by The growing purchasing power and rising Influence of the social media have enabled Indian consumers to spend more on discretionary items. India s consumer sector has grown at an annual rate of 5.7% between FY2005 and FY2015. Annual growth in the Indian consumption market is estimated to be 6.7% during FY and 7.1% during FY India s fast-moving consumer goods (FMCG) companies are now collectively bigger than their multinational peers. The combined revenue of India's seven leading FMCG companies stood at US$ 11.1 billion in FY , vis-à-vis US$ 9.4 billion revenues generated by select seven multinational companies. Overview of the Beauty and Wellness Business: The personal care industry makes up 22% of India s market for consumer-packaged goods and experts agree that India is full of opportunities and is a potential gold mine for many beauty and personal care companies. As per analysts, the Ayurvedic market is estimated to be at Rs. 4,500 crore at present (~700 million USD). Currently, the herbal products form 6-7% of the overall personal care products market; while the estimates are that it could grow to about 10% of the segment by FY20 as the trend accelerates. Consequently, various players are rebooting their business strategies and investing in new products or making new acquisitions to reap in the benefit of the herbal wave. With a CAGR of 40%, the spa industry is the subsector with the most significant growth prospects among all personal care subsectors in India.

16 According to industry experts, the market size of India s beauty, cosmetics and grooming market will touch 20 billion USD by 2025 from the current level of 6.5 billion dollars. The rising awareness of personal care products, growing disposable incomes, changes in consumption Patterns and lifestyles will influence the industry. Moreover, improved purchasing power of women promises exciting times for the personal care industry. These trends are anticipated to boost the personal care market in India and raise the consumption of personal Care market in India and raise the consumption of personal care products and services, thereby offering extensive opportunities for domestic and international players. The speed and stress of modern day living in India has brought the need for 'wellness' to the centre stage, paving way for accelerated growth of this segment. The wellness industry in India is set to cross the Rs. 500 billion mark by the end of this year. The latest trends depict that the market will rise by 30% every year. Another important factor that has driven the beauty and wellness business to a successful level is the increase in disposable income. The contemporary population is well aware of health and tends to inculcate new ideas for healthy lifestyle immediately. Going forward, the presence of appropriate supply channels will help in reaching the end customers efficiently. This is the right time to harness the potential market prospect by utilising the scope available with the wellness companies that provide franchise all over the country. The price correction is expected to provide a fillip to consumption in these categories in the medium term. Input Costs and Pricing: During the quarter, the average market price of copra was up by 21% sequentially and by 91% Y-o-Y. The annual crop in FY 2018 is expected to be lower by around 20% due the deficient monsoon of This will cause the price to remain firm. The prices in Q4 FY18 are expected to be mildly bullish due to low seasonal supplies. The market price of the other key inputs, Rice Bran oil was down 3% and Liquid Paraffin (LP) was up 28% during the quarter as compared to Q3FY17. HDPE (a key ingredient in packaging material) price was down by 1% as compared to Q3 FY17. The Company derives comfort and confidence from the pricing power that its brands enjoy. The Company would continue to exercise a bias for franchise expansion as long as margins remain within a band and do not fall below a threshold at the overall business level. Markets/Distribution Channels: Like in Q2 FY18, rural growth outpaced urban growth. In Q3FY18, Marico s rural sales grew by 26% while urban sales grew by 15% in value terms. This trend is likely to sustain in the medium term with the focus of the Government on strengthening the rural sector, which was further underlined in the enhanced budgetary allocations and initiatives proposed in the Union Budget 2018.

17 Sales in Modern Trade (10% of the India turnover) grew by 27%, as the new habit of convenience shopping in the modern trade environment take roots. CSD (7% of the domestic turnover) declined by 1%, but showed signs of recovery in the month of December. Recovery in the CSD channel is expected from Q4 FY18. E-Commerce: With the growing relevance of the Digital marketplace, E-commerce has become an integral pivot of growth. This business grew by 246% during the quarter, albeit on a lower base. This segment is expected to contribute over 1% of the India Business in FY18. The Company has taken definitive steps to stay ahead of the curve in this space and has identified and appointed dedicated resources for E-commerce, including top-class consulting resources. Union Budget 2018: In the Union Budget , the Government has put a thrust on enhancing agricultural productivity, increase famer incomes, and improve the state of rural health, infrastructure and education. This augurs well for the consumer goods industry from a medium term perspective. As part of the changes in the Indirect Tax structure, the import duties on crude and refined edible oils have been increased from 12.5% to 25% and from 20% to 35% respectively. For Marico, Safflower Oil is the main edible oil which is imported. However, over the last few years, it also developed domestic sources of Safflower Oil through contract farming initiatives. The share of imported edible oil as a percentage of overall edible oil procurement is circa 15%. Therefore, the impact of the same on total procurement cost is limited. Also, given the stock positions that they carry, the short term impact will be minimal. Road Ahead: Marico will deepen the initiatives along the digital Framework identified above, with greater use of consumer engagement and online sales along with analytics. This will enhance the Company s Sustainable profitable journey. Marico has piloted sensor & IOT based automation in its manufacturing plants, which will be scaled up in the coming year.

18 Disclosure Section The information and opinions in Firstcall Research was prepared by our analysts and it does not constitute an offer or solicitation for the purchase or sale of any financial instrument including any companies scrips or this is not an official confirmation of any transaction. The information contained herein is from publicly available secondary sources and data or other secondary sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for the recipients investment decision based on this document. Analyst Certification The following analysts hereby state that their views about the companies and sectors are on best effort basis to the best of their knowledge. Unless otherwise stated, the individuals listed on the cover page of this report are research analysts. The analyst qualifications, sectors covered and their exposure if any are tabulated hereunder: Name of the Analyst Qualifications Sectors Covered Dr.C.V.S.L. Kameswari M.Sc, PGDCA, Pharma & M.B.A, Diversified Ph.D (Finance) U. Janaki Rao M.B.A Capital Goods B. Anil Kumar M.B.A Auto, IT & FMCG Exposure/Interest to company/sector Under Coverage in the Current Report No Interest/ Exposure No Interest/ Exposure No Interest/ Exposure M. Vijay M.B.A Diversified No Interest/ Exposure V. Harini Priya M.B.A Diversified No Interest/ Exposure MD. Naveed M.B.A Diversified No Interest/ Exposure A. Bhikshapathi M.B.A Diversified No Interest/ Exposure Important Disclosures on Subject Companies In the next 3 months, neither Firstcall Research nor the Entity expects to receive or intends to seek compensation for any services from the company under the current analytical research coverage. Within the last 12 months, Firstcall Research has not received any compensation for its products and services from the company under the current coverage. Within the last 12 months, Firstcall Research has not provided or is providing any services to, or has any client relationship with, the company under current research coverage. Within the last 12 months, Firstcall Research has neither provided or is providing any services to and/or in the past has not entered into an agreement to provide services or does not have a client relationship with the company under the research coverage. Certain disclosures listed above are also for compliance with applicable regulations in various jurisdictions. Firstcall Research does not assign ratings of Buy, Hold or Sell to the stocks we cover. Overweight, Equal-weight, No-Weight and Underweight are not the equivalent of buy, hold and sell. Investors should carefully read the definitions of all weights used in Firstcall Research. In addition, since Firstcall Research contains more complete information concerning the analyst's views, investors should carefully read Firstcall Research, in its entirety, and not infer the contents from the weightages assigned alone. In any case, weightages (or research) should not be used or relied upon as investment advice.

19 An investor's decision to buy or sell should depend on individual circumstances (such as the investor's own discretion, his ability of understanding the dynamics, existing holdings) and other considerations. Analyst Stock Weights Overweight (O): The stock's total return is expected to exceed the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next months. Equal-weight (E): The stock's total return is expected to be in line with the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next months. No-weight (NR): Currently the analyst does not have adequate conviction about the stock's total return relative to the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next months. Underweight (U): The stock's total return is expected to be below the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next months. Unless otherwise specified, the weights included in Firstcall Research does not indicate any price targets. The statistical summaries of Firstcall Research will only indicate the direction of the industry perception of the analyst and the interpretations of analysts should be seen as statistical summaries of financial data of the companies with perceived industry direction in terms of weights. Firstcall Research may not be distributed to the public media or quoted or used by the public media without the express written consent of Firstcall Research. The reports of Firstcall Research are for Information purposes only and is not to be construed as a recommendation or a solicitation to trade in any securities/instruments. Firstcall Research is not a brokerage and does not execute transactions for clients in the securities/instruments. Firstcall Research - Overall Statement S. No Particulars Remarks 1 Comments on general trends in the securities market Full Compliance in Place 2 Discussion is broad based and also broad based indices Full Compliance in Place 3 Commentaries on economic, political or market conditions Full Compliance in Place 4 Periodic reports or other communications not for public appearance Full Compliance in Place 5 The reports are statistical summaries of financial data of the companies as and where Full Compliance in Place applicable 6 Analysis relating to the sector concerned Full Compliance in Place 7 No material is for public appearance Full Compliance in Place 8 We are no intermediaries for anyone and neither our entity nor our analysts have any Full Compliance in Place interests in the reports 9 Our reports are password protected and contain all the required applicable Full Compliance in Place disclosures 10 Analysts as per the policy of the company are not entitled to take positions either for trading or long term in the analytical view that they form as a part of their work Full Compliance in Place 11 No conflict of interest and analysts are expected to maintain strict adherence to the company rules and regulations. Full Compliance in Place

20 12 As a matter of policy no analyst will be allowed to do personal trading or deal and even if they do so they have to disclose the same to the company and take prior approval of the company 13 Our entity or any analyst shall not provide any promise or assurance of any favorable outcome based on their reports on industry, company or sector or group 14 Researchers maintain arms length/ Chinese wall distance from other employees of the entity 15 No analyst will be allowed to cover or do any research where he has financial interest 16 Our entity does not do any reports upon receiving any compensation from any company Full Compliance in Place Full Compliance in Place Full Compliance in Place Full Compliance in Place Full Compliance in Place Firstcall Research Provides Industry Research on all the Sectors and Equity Research on Major Companies forming part of Listed and Unlisted Segments For Further Details Contact: Mobile No: info@firstobjectindia.com info@firstcallresearch.com