Result Update

November 2, 2018
Rating matrix
Rating : Buy Marico (MARLIM) | 335
Target : | 400
Target Period
Potential Upside
:
:
12-15 months
19%
Soft copra prices to drive earnings growth…
 India business volumes witnessed tepid growth of 6% YoY largely
What’s changed?
Target Unchanged
due to a significant decline in canteen stores department (CSD) sales.
EPS FY19E Changed from |7.9 to |8 Volume growth ex-CSD was 7%. Value growth of 19.6% for Q2FY19
EPS FY20E Unchanged was driven by 25% price hike taken in Parachute portfolio to counter
Rating Unchanged input cost inflation. Parachute, VAHO and Saffola witnessed YoY
volume growth of 8%, 5% and 5%, respectively
Quarterly performance  While copra prices corrected by more than 11% YoY, consumption
Q2FY19 Q2FY18 YoY (%) Q1FY19 QoQ (%) of higher cost copra inventory during the quarter and increase in
Sales 1836.8 1536.3 19.6 2026.8 -9.4 crude derivatives and edible oil prices resulted in 293 bps decline in
EBITDA 294.1 259.1 13.5 354.9 -17.1 gross margins. However, 76 bps, 75 bps & 57 bps saving in
EBITDA (%) 16.0 16.9 -86 bps 17.5 -150 bps employee expenditure, advertisement spend and overhead spend to
PAT 218.3 185.0 18.0 260.1 -16.1
sales, respectively, partly neutralised the impact of a decline in gross
margins. As a result, operating margins were down 86 bps to 16%
Key financials
| Crore FY17 FY18 FY19E FY20E Soft copra prices amid recent price hikes to improve margins
Net Sales 5,935.9 6,333.1 7,722.4 8,615.3 Copra, which accounts for 45-50% of the company’s material costs, is a
EBITDA 1,159.3 1,137.8 1,397.0 1,699.3 key raw material used to make coconut hair oil. Copra prices have surged
Net Profit 811.0 827.5 1,026.6 1,241.2 by 59% from | 90.48 per kg in June 2017 to a high of | 144.33 per kg in
EPS (|) 6.3 6.4 8.0 9.6
January 2018 due to lower crop impacted by deficient monsoons in
Valuation summary previous years. To offset the steep price in copra prices, Marico increased
FY17 FY18 FY19E FY20E Parachute prices by ~25% during the same period. We believe that
P/E 53.3 52.2 42.1 34.8 despite inflation in raw material prices of rice bran, LLP and HPDE, gross
Target P/E 63.7 62.4 50.3 41.6 margins in H2FY19 should improve on account of ~36% fall in copra
Div. Yield 1.0 1.3 1.5 1.5 prices from January 2018 peak to | 91.65 per kg in October 2018.
Mcap/Sales 7.3 6.8 5.6 5.0 Efficient distribution network to aid market share gains
RoNW (%) 34.9 32.5 36.3 37.3
RoCE (%) 44.5 38.9 44.2 45.9 The company sells over 155 million packs every month, through its
nationwide distribution network of about 4.7 million retail outlets
Stock data comprising four regional offices, 31 carrying & forwarding agents and
Particular Amount about 5,600 distributors and stockists. Marico’s distribution network
Market Capitalization (| Crore) 43,221.7 covers almost every Indian town with a population over 10,000. Marico
Total Debt (FY18) (| Crore) 309.3 has increased its retail outlet reach by 30% in FY16-18. In order to ramp
Cash and Investments (FY18) (| Crore) 685.9 up its direct distribution network, Marico has initiated Project One and
EV (| Crore) 42,845.1
through this company has been able to add up ~90,000 direct stores and
52 week H/L 388 / 284
Equity capital | 129 Crore
envisages to ramp up direct distribution further. Further, to
Face value |1 technologically update distribution strategy, Marico has integrated its
sales and distribution platform. With the increasing direct distribution
Price performance channel, company would reduce its dependency on wholesale channel
1M 3M 6M 12M which was severely impacted after the GST implementation. We believe
Marico -4.0 -12.1 -3.9 1.4 increasing direct distribution reach would help it gain market share from
Dabur -9.9 -8.3 4.3 15.7 unorganised players in Edible oil / Hair oil segment.
GCPL -5.7 -17.6 -2.7 16.3
HUL 0.6 -6.6 7.2 30.8
Rural segment to aid medium-term growth; maintain BUY
Marico derives 32% of its sales from rural markets and expects to
Research Analyst increase it by 3-4% in the next three to five years on the back of
Sanjay Manyal improving penetration through price point packs and focused marketing
[Link]@[Link] initiatives. In Q2FY19, rural growth continued to outpace urban growth for
a fifth consecutive quarter, whereby rural sales grew an impressive 24%
Kapil Jagasia, CFA
while urban sales growing a healthy 11%. We expect the government's
[Link]@[Link]
spending plans to bolster rural development and MSP crop hike to help
regain the momentum in rural demand in the medium term. We expect
Marico to report healthy revenue and PAT CAGR of 16.6% and 22.5%,
receptively, in FY18-20E. We estimate 9% volume CAGR for both hair oil
and edible oil categories. We have a BUY recommendation on the stock
with a target price of | 400/share.

ICICI Securities Ltd | Retail Equity Research

Variance analysis
Q2FY19 Q2FY19E Q2FY18 YoY (%) Q1FY19 QoQ (%) Comments
Net Sales 1,836.8 1,831.3 1,536.3 19.6 2,026.8 -9.4 Net sales witnessed growth of 19.6% mainly on the back of ~25% price hike
taken by the company in the parachute portfolio. India business reported
growth of 19.9% YoY while the international business grew 18.4% YoY
Raw Material Expenses 1,028.7 778.3 815.4 26.2 1,169.6 -12.1 Raw material cost to sales increased 293 bps due to consumption of higher
cost copra inventory during the quarter and increase in crude derivatives and
edible oil prices
Employee Expenses 114.6 115.8 107.5 6.5 114.7 -0.1
SG&A Expenses 175.8 173.8 158.5 10.9 165.7 6.1
Other operating Expenses 223.7 243.3 195.8 14.2 221.9 0.8
EBITDA 294.1 327.2 259.1 13.5 354.9 -17.1
EBITDA Margin (%) 16.0 17.9 16.9 -86 bps 17.5 -150 bps Operating margins were down 86 bps to 16% . A 76 bps saving in employee
expenditure to sales, 75 bps saving in advertisement spend to sales and 57
bps saving in overhead spend to sales partly neutralised the impact of a sharp
decline in gross margins
Depreciation 22.4 21.0 23.5 -4.8 22.4 -0.2
Interest 5.7 5.8 3.5 61.1 5.3 7.2
Other Income 29.2 23.8 21.4 36.2 24.0 21.7
Exceptional Income/(Expenses) 0.0 0.0 0.0 NA 0.0 NA
Minority Interest 0.0 0.0 0.0 NA 0.0 NA

PBT 295.2 324.2 253.5 16.5 351.2 -15.9

Tax Outgo 77.6 84.3 67.9 14.3 91.3 -15.0
PAT 218.3 239.9 185.0 18.0 260.1 -16.1 Net profit increased by 18% driven by higher operating profit and other income

Key Metrics (%)

Domestic Volume Growth 6.0 8.0 12.4 Sharp decline in CSD sales led to tepid volume growth across categories

Parachute Volume Growth 8.0 12.0 9.0

Saffola Volume Growth 5.0 3.0 10.0
VAHO Volume Growth 5.0 12.0 15.0
Source: Company, ICICI Direct Research

Change in estimates
FY19E FY20E
(| Crore) Old New % change Old New % change Comments
Gross Sales 7,840.6 7,722.4 -1.5 8,520.3 8,615.3 1.1 We have increased FY20E margin & PAT estimates considering a recovery in copra
prices
EBITDA 1,415.0 1,397.0 -1.3 1,618.7 1,699.3 5.0
EBITDA Margin (%) 18.0 18.1 4 bps 19.0 19.7 73 bps
PAT 1,007.9 1,026.6 1.9 1,156.5 1,241.2 7.3
EPS (|) 7.8 8.0 1.9 9.0 9.6 7.3
Source: Company, ICICI Direct Research

Assumptions
Current Earlier
FY17 FY18 FY19E FY20E FY19E FY20E
Std. Sales (| crore) 4,579.5 4,969.0 6,167.4 6,873.7 6,285.6 6,747.6 Minor change in our estimates
Subs. Sales (| crore) 1,356.5 1,364.1 1,555.0 1,741.6 1,555.0 1,772.7
Source: Company, ICICI Direct Research

ICICI Securities Ltd | Retail Equity Research Page 2

YoY Volume growth (%)
Quarterly highlights
15.0  Marico reported consolidated sales growth of 19.6%. This was mainly
12.0 12.0
on the back of ~25% price hike taken by the company in parachute
10.0 8.0 8.0 portfolio India & international businesses that saw growth of 19.9%
6.0 and 18.4% YoY, respectively. India business volumes came in at 6%
5.0 5.0
5.0 3.0 during the quarter. International business posted a broad-based
constant currency growth of 11%, led by volume growth of 8%
0.0
 Parachute Coconut Oil (rigid pack), which contributes 36% to the
Domestic Parachute Saffola VAHO
consolidated topline, witnessed 8% increase in volumes. The
Q2FY19 Q2FY18 company has taken a price increase of ~25% across parachute
portfolio mainly to pass on the sharp increase in copra prices (which
Source: Company, ICICI Direct Research
increased by 40%). The company has guided a medium term
sustainable volume growth of 5-7% in parachute portfolio
 Saffola refined edible oils franchise, which contributes 18% to the
Raw material movement on YoY basis (%) consolidated topline saw 5% increase in volumes. Increasing traction
in modern trade & e-commerce and higher media spend should help
35
29 volume growth for this franchise going forward also
30 26
 Healthy foods franchise of Saffola witnessed growth of 35%. Saffola
25
20 Masala Oats maintained its momentum on the back of continued
20
promotional campaign. The brand continued the uptrend in its value
15
market share, now holding ~70% in the flavoured oats category.
10 6 During Q2FY19, Marico launched Pav Bhaji variant of Saffola Masala
5
Oats in a few select markets. It also prototyped Saffola Masala Oats
0
vending machines in corporate offices, gyms & hospitals in Mumbai,
Copra Rice bran oil Liquid Paraffin HDPE
Pune and New Delhi by placing more than 250 vending machines
 Value added hair oils (VAHO) brands registered volume growth of 5%
Source: Company, ICICI Direct Research during the quarter lower than the medium term aspiration, due to a
steep decline in CSD sales. Volume growth in VAHO ex-CSD was at
10%. The company consolidated its market leadership with a volume
share of ~34% and value share of ~26%
 Male grooming grew 32% in Q2FY19 in value terms. The value market
share of Set Wet Hair Gels currently stands at 57%
 International business grew 11% in constant currency terms backed
by volume growth of 8%. Operating margin (before corporate
allocations) was at 18% in Q2FY19 against 18.5% in Q2FY18.
Bangladesh, which contributed 45% to international sales, witnessed
a constant currency growth of 10% (3% volume growth). South East
Asia (mainly Vietnam and Myanmar), which contributed 26% to
international sales, recovered to grow 14% in constant currency
terms. MENA business grew 19% in constant currency terms
 Rural growth continued to outpace urban growth, whereby rural sales
grew by 24% while urban sales grew by 11% in value terms. Modern
Trade (11% of the India turnover in FY18) grew by 39% while CSD
(7% of the India turnover in FY18) declined by 3% in value terms
 In spite of 11%+ correction in copra prices on a YoY basis, increase
in prices of rice bran oil, liquid paraffin (LLP) and HDPE (a key
ingredient in packaging material) by 20%, 26% and 29%, respectively
resulting in 293 bps decline in gross margins. However, 76 bps saving
in employee expenditure to sales, 75 bps saving in advertisement
spend to sales and 57 bps saving in overhead spend to sales partly
neutralised the impact of sharp decline in gross margins. As a result,
operating margins were down by 86 bps to 16%
 Marico expects 8-10% volume growth for domestic business in
H2FY19. Decline in CSD sales should slow down and get back to
positive territory in H2FY19 leading to expansion in gross margins
 Further softening of copra prices is expected. As a result, H2FY19
should start witnessing improvement in margins

ICICI Securities Ltd | Retail Equity Research Page 3

 Company Analysis
Exhibit 1: Revenue to grow at CAGR of 16.6% over FY18-20E Exhibit 2: Domestic volume trend YoY (%)

10000.0 25.0 12.4

8615.3 15 10.5 10.0
8.4 8.0 9.4
7722.4 8.0
8000.0 20.0 10 6.0 5.5
6333.1
5720.3 6014.8 5935.9 15.0 5
3.0
1.0
6000.0 4676.2
10.0 0 -4.0
4000.0
5.0
-5 -9.0
2000.0 0.0
-10
0.0 -5.0
-15
FY14 FY15 FY16E FY17 FY18 FY19E FY20E

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19
Sales (| crore) Sales growth (%)

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 3: International revenue growth in constant currency (YoY) (%) Exhibit 4: International revenue break-up for Q2FY19
South Africa New Country
20 16 16 9% Development &
15 Exports
9
10 6 7
MENA
4 4 14% Bangladesh
5 9 2 1 46%
-1
0
2 -4.6 South East Asia
-5 26%
Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 5: EBITDA margin to remain range bound Exhibit 6: PAT (| crore) - LHS and PAT growth YoY (%) – RHS

60 25 1400 26.1 20.9 30

19.5 19.7 22.6 24.1
17.5 18.0 18.1 1200
16.0 20 25
55 15.2 18.2 2.0
1000 12.1 20
54.5 15 800
50 52.9 53.3 15
51.3 51.0 51.7 10 600
400 10
45 47.6 5 5
200 485.4 573.5 723.3 811.0 827.5 1026.6 1241.2
40 0 0 0
FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY14 FY15 FY16 FY17 FY18 FY19E FY20E

Raw Material Cost to Sales % EBITDA Margin PAT (| crore) PAT Growth (%)

Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

ICICI Securities Ltd | Retail Equity Research Page 4

 Outlook & Valuation
We are positive on the growth prospects of the company with visible
signs of a demand shift from the unorganised to the organised market.
We also believe Marico is a major beneficiary of GST implementation with
the highly unorganised edible oil market providing the company a huge
opportunity to grow. We expect the government's spending plans to
bolster rural development and raising of MSP of crops to help regain the
momentum in rural demand in the medium term. A revival in
discretionary demand and improving economic scenario would drive
growth in all segments. We expect Marico to report healthy revenue and
PAT CAGR of 16.6% and 22.5%, receptively, in FY18-20E. We estimate
9% volume CAGR for both hair oil and edible oil categories. We have a
BUY recommendation with a target price of | 400/share.

Exhibit 7: Valuations
Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE
(| cr) (%) (|) (%) (x) (x) (%) (%)
FY17 5935.9 6.3 53.3 37.2 34.9 44.5
FY18 6333.1 6.7 6.4 2.0 52.2 37.9 32.5 38.9
FY19E 7722.4 21.9 8.0 24.1 42.1 30.8 36.3 44.2
FY20E 8615.3 11.6 9.6 20.9 34.8 25.1 37.3 45.9
Source: Company, ICICI Direct Research

ICICI Securities Ltd | Retail Equity Research Page 5

Recommendation history vs. Consensus
400 60.0

50.0

300 40.0
(|)

30.0

(%)
200 20.0

10.0

100 0.0
Oct-16 Jan-17 Mar-17 Jun-17 Aug-17 Oct-17 Jan-18 Mar-18 Jun-18 Aug-18 Nov-18

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICI Direct Research

Key events
Date Event
Jun-08 Highest copra prices (|4140/quintal, ~10% higher YTD) ; a threat to margins in a softening consumption demand scenario
Feb-11 Acquires 85% stake in Vietnam's 'International Consumer Products' with its leading men's brand 'X-men'
Jun-11 Robust revenue and volume growth of ~33% and 21%, respectively. Copra prices higher ~97% YooY resulting in market share gains in hair oils
Nov-11 Copra prices peaked in May,2011 (|6865/qtl);FMCG Index return - 32% (YTD); Marico storck return - 30%; Revenue growth back on 25-30%
May-12 Copra prices decline ~40% YoY; Revenue growth starts declining to 10-15% led by increasing competition from unbranded players
Sep-13 Kaya business de-merged; volume growth remains muted after price cuts taken back; Expanding presence in rural markets
Aug-16 Buys Paras Pharmaceutical's personal care brands such as Set Wet, Livon and Zatak from Reckitt Benckiser. In 2011, Reckitt Benckiser had acquired Paras' for
|3260 crore
Mar-17 Copra prices during Q4FY17 were up 46% YoY and 25% QoQ
Mar-17 Acquires 45% stake in Beardo men’s grooming brand. Men's grooming market is valued at |3200 crore
Apr-18 To acquire upto 22.5% stake in fitness and wellness solutions app Revofit. Revofit posted sales of |2.31 lakh in FY17.
Sep-18 Launches a new brand ‘True Roots’, that delays hair greying from the roots
Source: Company, ICICI Direct Research

Top 10 Shareholders Shareholding Pattern

Rank Name Latest Filing Date % O/S Position (m) Change (m) (in %) Sep-17 Dec-17 Mar-18 Jun-18 Sep-18
1 Taurus Family Trust 30-Jun-18 11.50 148.5 0.0 Promoter 59.7 59.7 59.7 59.7 59.7
2 Gemini Family Trust 30-Jun-18 11.50 148.5 0.0 FII 28.1 27.8 27.4 25.6 25.1
3 Valentine Family Trust 30-Jun-18 11.50 148.5 0.0 DII 5.5 5.4 6.2 7.5 7.2
4 Aquarius Family Trust 30-Jun-18 11.50 148.4 0.0 Others 6.7 7.1 6.7 7.2 8.0
5 Stewart Investors 30-Jun-18 4.22 54.4 0.0
6 First State Investments (HK) Ltd. 30-Jun-18 3.64 47.0 0.0
7 Life Insurance Corporation of India 30-Jun-18 3.61 46.6 0.0
8 ARISAIG Partners (Asia) Pte. Ltd. 31-Mar-17 2.22 28.6 -37.9
9 Mariwala (Rajvi Harsh) 30-Jun-18 2.20 28.4 0.0
10 Mariwala (Rishabh Harsh) 30-Jun-18 1.93 25.0 0.0
Source: Reuters, ICICI Direct Research

Recent Activity
Buys Sells
Investor name Value Shares Investor name Value Shares
Amundi Hong Kong Limited 16.29m 3.06m DSP Investment Managers Pvt. Ltd. -6.05m -1.16m
Kuwait Investment Authority 13.41m 2.77m Canara Robeco Asset Management Company Ltd. -5.72m -1.10m
SBI Funds Management Pvt. Ltd. 6.90m 1.50m APG Asset Management -4.63m -0.92m
Mirae Asset Global Investments (Hong Kong) Limited 7.39m 1.48m Mirae Asset Global Investments (India) Pvt. Ltd. -2.82m -0.54m
Principal PNB Asset Management Company Ltd. 4.53m 0.87m Florida State Board of Administration -1.57m -0.31m
Source: Reuters, ICICI Direct Research

ICICI Securities Ltd | Retail Equity Research Page 6

Financial summary
Profit and loss statement | Crore Cash flow statement | Crore
(Year-end March) FY17 FY18 FY19E FY20E (Year-end March) FY17 FY18 FY19E FY20E
Total Operating Income 5935.9 6333.1 7722.4 8615.3 Profit before Tax 1,148.7 1,117.0 1,387.3 1,677.3
Growth (%) -1.3 6.7 21.9 11.6 Add: Depreciation 90.3 89.1 84.0 105.7
Raw Material Expenses 2,825.9 3,348.2 4,116.8 4,452.0 (Inc)/dec in Current Assets -293.6 -305.3 29.7 -273.1
Employee Expenses 404.2 422.2 463.3 516.9 Inc/(dec) in CL and Provisions 27.6 125.1 -114.6 108.3
Marketing Expenses 651.0 585.6 772.2 861.5 Others -320.5 -345.1 -360.7 -436.1
Excise Duty 18.1 10.9 0.0 0.0 CF from operating activities 648.7 554.5 1,025.8 1,182.1
Other expenses 877.5 828.4 973.0 1,085.5 (Inc)/dec in Investments -44.1 104.7 -52.0 -52.0
Total Operating Expenditure 4,776.7 5,195.3 6,325.4 6,916.0 (Inc)/dec in Fixed Assets -81.5 -123.1 -46.0 -24.3
EBITDA 1159.3 1137.8 1397.0 1699.3 Others 34.0 35.3 -54.0 -75.7
Growth (%) 10.3 -1.9 22.8 21.6 CF from investing activities -91.5 16.9 -152.0 -152.0
Depreciation 90.3 89.1 84.0 105.7 Issue/(Buy bick) of Equity 0.0 0.0 0.0 0.0
Interest 16.6 16.2 23.0 23.4 Inc/(dec) in loan funds -34.7 98.3 -2.0 -2.0
Other Income 97.3 84.6 97.3 107.1 Dividend paid & dividend tax -508.8 -635.7 -742.3 -742.3
Share of profit/(loss) of associates & JV -1.0 -0.1 0.0 0.0 CF from financing activities -574.0 -567.5 -744.3 -744.3
Total Tax 337.7 289.6 360.7 436.1 Net Cash flow -50.5 7.9 129.5 285.8
PAT 811.0 827.5 1026.6 1241.2 Opening Cash 93.2 42.7 50.6 180.1
Growth (%) 12.1 2.0 24.1 20.9 Cash in Bank 193.3 149.6 149.6 149.6
Adjusted EPS (|) 6.3 6.4 8.0 9.6 Closing Cash 236.0 200.1 329.6 615.4
Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Balance sheet | Crore Key ratios

(Year-end March) FY17 FY18 FY19E FY20E (Year-end March) FY17 FY18 FY19E FY20E
Liabilities Per share data (|)
Share Capital 129.1 129.1 129.1 129.1 EPS (Adjusted) 6.3 6.4 8.0 9.6
Reserve and Surplus 2,196.6 2,413.8 2,698.1 3,197.1 Cash EPS 7.0 7.1 8.6 10.4
Total Shareholders funds 2,325.7 2,542.9 2,827.2 3,326.1 BV 18.0 19.7 21.9 25.8
Long Term Borrowings 0.0 19.8 0.0 0.0 DPS 3.5 4.3 5.0 5.0
Provisions & other LTL 22.5 19.2 19.2 19.2 Cash Per Share 1.8 1.6 2.6 4.8
Minority Interest / Others 13.3 12.5 12.5 12.5 Operating Ratios (%)
Deferred Tax Liability 22.03 29.44 27.44 25.44 EBITDA Margin 19.5 18.0 18.1 19.7
Total Liabilities 2383.6 2623.9 2886.3 3383.3 PBT / Total Operating income 19.4 17.6 18.0 19.5
Assets PAT Margin 13.7 13.1 13.3 14.4
Gross Block 712.6 780.5 900.5 1,020.5 Inventory dbcs 77 87 66 66
Less: Acc Depreciation 165.4 246.0 330.0 435.7 Debtor dbcs 15 20 16 16
Net Block 547.2 534.5 570.4 584.8 Creditor dbcs 43 47 32 32
Capital WIP 27.5 47.0 57.0 67.0 Return Ratios (%)
Goodwill on Consolidation 479.5 485.8 455.8 425.8 RoE 34.9 32.5 36.3 37.3
Non Current Investments 77.9 55.9 80.9 105.9 RoCE 44.5 38.9 44.2 45.9
Other Non CA 111.3 164.9 191.9 218.9 RoIC 47.2 41.6 49.5 56.1
Current Investments 533.5 485.8 545.8 605.8
Inventory 1,253.4 1,510.9 1,396.4 1,557.8 Valuation Ratios (x)
Debtors 247.0 340.6 338.5 377.7 P/E 53.3 52.2 42.1 34.8
Cash 236.0 200.1 329.6 615.4 EV / EBITDA 37.2 37.9 30.8 25.1
Other CA 119.6 256.1 282.9 295.3 EV / Net Sales 7.3 6.8 5.6 5.0
Total Current Assets 2,389.5 2,793.4 2,893.2 3,452.1 Market Cap / Sales 7.3 6.8 5.6 5.0
Creditors 696.6 821.7 677.0 755.3 Price to Book Value 18.6 17.0 15.3 13.0
Short Term Borrowings 238.8 289.5 304.5 319.5
Other Current Liabilities 313.8 346.5 361.5 376.5 Solvency Ratios
Total Current Liabilities 1,249.2 1,457.6 1,343.0 1,451.3 Debt/EBITDA 0.2 0.3 0.2 0.2
Net Current Assets 1,140.3 1,335.8 1,550.2 2,000.8 Debt / Equity 0.1 0.1 0.1 0.1
Miscl. Exps. not w/o 0 0 -19.8 -19.8 Current Ratio 2.1 2.2 2.5 2.5
Application of Funds 2383.6 2623.9 2886.4 3383.3 Quick Ratio 0.9 0.9 1.1 1.1
Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

ICICI Securities Ltd | Retail Equity Research Page 7

ICICI Direct coverage universe (FMCG)
CMP M Cap EPS (|) P/E (x) Price/Sales (x) RoCE (%) RoE (%)
Sector / Company (|) TP(|) Rating (| Cr) FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E
Colgate (COLPAL) 1,115 1,200 Hold 30,326 24.8 28.1 31.3 45.0 39.7 35.7 7.1 6.7 6.1 62.9 60.2 59.1 44.7 42.5 41.6
Dabur India (DABIND) 370 475 Buy 67,625 7.7 8.7 10.4 48.0 42.4 35.6 8.7 7.6 6.7 26.2 27.1 29.5 23.8 24.2 26.0
GSK CH (GLACON) 7,200 7,700 Buy 28,177 166.5 197.2 217.5 43.3 36.5 33.1 6.4 5.8 5.3 29.8 31.4 31.6 20.1 21.6 21.6
Hindustan Unilever (HINLEV) 1,635 1,800 Buy 328,320 24.2 28.9 35.3 67.4 56.7 46.3 9.5 8.6 7.5 79.9 100.3 120.7 74.7 86.7 103.8
ITC Limited (ITC) 282 365 Buy 364,422 9.2 10.3 11.5 30.5 27.3 24.5 9.1 8.2 7.5 30.9 34.0 36.2 21.3 23.6 25.0
Jyothy Lab (JYOLAB) 190 215 Buy 6,545 8.8 4.9 6.1 21.5 38.4 31.2 3.9 3.5 3.2 35.1 33.8 37.0 23.5 25.3 29.1
Marico (MARLIM) 335 400 Buy 43,222 6.4 8.0 9.6 52.2 42.1 34.8 6.8 5.6 5.0 38.9 44.2 45.9 32.5 36.3 37.3
Nestle (NESIND) 10,300 12,000 Buy 93,527 127.1 155.6 194.4 81.0 66.2 53.0 9.2 8.3 7.3 34.9 44.9 47.9 37.6 41.8 42.9
Prabhat Dairy (PRADAI) 110 185 Buy 1,543 4.8 6.3 9.2 22.7 17.5 11.9 1.0 0.9 0.8 9.6 11.3 14.1 7.0 8.2 11.2
VST Industries (VSTIND) 3,175 4,000 Buy 4,911 117.8 159.4 173.7 27.0 19.9 18.3 5.2 4.4 4.0 46.9 54.6 51.1 31.3 36.5 34.4
Varun Beverage (VARBEV) 780 860 Buy 13,856 11.7 15.7 19.7 66.5 49.8 39.5 3.5 2.8 2.4 12.7 15.6 17.5 12.1 14.7 17.0
Source: Company, ICICI Direct Research

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RATING RATIONALE
ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according to their notional target price vs. current market price and then categorises them as Strong
Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is
defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;

Pankaj Pandey Head – Research [Link]@[Link]

ICICI Direct Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
research@[Link]

ICICI Securities Ltd | Retail Equity Research Page 9

ANALYST CERTIFICATION
We /I, Sanjay Manyal, MBA (Finance) and Kapil Jagasia, CFA, MBA (Finance), Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this
research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific
recommendation(s) or view(s) in this report.

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owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance,
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and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

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ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned
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compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts
and their relatives have any material conflict of interest at the time of publication of this report.

It is confirmed that Sanjay Manyal, MBA (Finance) and Kapil Jagasia, CFA, MBA (Finance), Research Analysts of this report have not received any compensation from the companies mentioned in the report
in the preceding twelve months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month
preceding the publication of the research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject
company/companies mentioned in this report.

It is confirmed that Sanjay Manyal, MBA (Finance) and Kapil Jagasia, CFA, MBA (Finance), Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

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ICICI Securities Ltd | Retail Equity Research Page 10