Investment Ideas - Marico Limited

 Marico Limited (ML)

Marico Limited (ML), is one of the leading Fast Moving Consumer Goods (FMCG) player in the Indian Market. The company was incorporated in the year 1988.at the time of incorporation it was known as Marico Foods Limited. The name Marico Industries Limited came into being in the year 1989. . In the year February 2004 there was an  Amalgamation of Anandita Arnav Trading & Investment Private Ltd, Madhav Nandini Trading & Investment Private Ltd, Rajvi Rishabh Trading & Investment Private Ltd and Rishabh Harsh Trading & Investment Private Ltd.

Marico's Products and brand names are well known to the Indian household. Brands like Parachute, Saffola, Kaya, Sundari and Fiancee enjoy good consumer confidence and trust. Significant market share is enjoyed by these products.  Marico has built up extensive marketing network more than 20 countries in the Middle East, Asian sub-continent, Australia and USA.

In 1989, the company acquired  Rasoi Industries Limited. In 1990, the company entered into an agreement with Bombay Oil Industries Ltd (BOIL) for the use of the brands Parachute and Saffola. The Company established a new plant in Kerala to manufacture Parachute Coconut Oil. This is a good location because Kerala is a state with large coconut plantations. The Kerala unit has the capacity to produce  24000 tonnes of coconut oil per annum. In the year 1995, Marico acquired the Brand SIL' from KFL.

Marico introduced two products in 1997  Sweekar cotton seed oil and Sweekar mustard oil. The company established two separate production units one at Jalgaon to process the cotton seeds and another one at Jaipur for the mustard oil. in the year 1998 the Company made the joint venture between a Lever group company and Nissin of Japan enabling its products distribution through HLL's networks. Marico acquired the company Sundari LLC in 2003 In the year of 2004, the company launched new products like Silk-n-Shine.

In the year 2006, Marico acquired Hindustan Lever Limited's Nihar for Rs 216 crores. In the following year, the company forayed into South African market. Marico also acquired the consumer division of Enaleni Pharmaceuticals. In the year 2008 Marico made some change in the business style. It sold its processed foods business, Sil' to Good Food Group.  By making correct decisions on acquisitions and mergers the company has managed to corner a market capitalisation of 14,772.37 Crores, which is very impressive and third largest after Godrej and Dabur. 

As on 30^th April the following Mutual funds have invested in Marico. 

Franklin India Prima Plus - (G)                                           1854.40 Cr

Birla Sun Life Midcap Fund - Plan A (G)                           1096.97 Cr

HDFC Mid-Cap Opportunities Fund (G)                            2647.68 Cr

UTI-Dividend Yield Fund (G)                                              3302.10 Cr

Looking at the available financials Marico has seen growth of 9.7% yoy during Q4 FY13. Revenue from international business seems to have declined by 1%. Profit before tax has increased from last year’s 1088 to 1189 Crores. The profit after tax has been adjusted to 507 which is lower than the last years’ 714 Crores. Profit after tax (PAT) is adjusted to 5.1%.

According to the available financial data, the material cost has declined from that of last year. The personnel and advertising cost have slightly increased form that of last Q4. 

Marico believes in the coming FY14, it could see larger volume growth. The company’s interest costs remain unchanged from that of last year. However this could be reduced in the coming FY14.

At the time of writing this note the shares of the company had closed the trade at 229.75. Since the beginning of this year this stock has been moving sideways. This stock is ideal for short term investors. For traders I would say  a buy could be initiated around Rs. 213, which is a good support. A target of 237 can be marked for exiting the stock.