Marico ADD ICICI Securities Limited Maintained Is the Author and Distributor of This Report Strong Performance Across Portfolio Rs363

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Equity Research October 29, 2020 INDIA BSE Sensex: 39922 Marico ADD ICICI Securities Limited Maintained is the author and distributor of this report Strong performance across portfolio Rs363

2Q volume growth of 11% was a sharp recovery driven by growth in 95% of Q2FY21 result review portfolio. Likely market share gains in Parachute, recovery in value-added hair oils and earnings revision (VAHO) and continued growth momentum in Saffola edible oils (more importantly, Consumer Staples & through increased penetration and retention - link) inspire confidence on Discretionary sustained growth momentum. We like its focus on prioritising market share over margins in the near-term (some input cost inflation seen). We reiterate that new Target price Rs415 launches in healthy foods portfolio is likely to provide another leg to growth (targeting ~Rs5bn revenue in FY22 (Rs2.5bn in FY20)) and a potential stock re- Earnings revision rating trigger. A resilient international portfolio adds to potential outperformance. (%) FY21E FY22E Sales ↑ 0.8 ↑ 0.8 Reiterate ADD. EBITDA ↓ 1.4 ↓ 2.6 In the results conference call, this analyst sought clarity about “extension of Saffola ↓ 0.0 ↓ 1.4 PAT brand into Ayurvedic products like Chyawanprash and consumer insights”.

Management response was that Saffola brand has strong health equity (having evolved Target price revision Rs415 from Rs420 from a therapeutic positioning to preventive to health focussed). It plans to extend Saffola into a more modern Ayurveda offering given the increased consumer focus on immunity and prevention. Shareholding pattern Mar Jun Sep  Revenue back to growth trajectory across portfolio: Consolidated revenue / ‘20 ‘20 ‘20 Promoters 59.6 59.6 59.6 EBITDA / recurring PAT grew 9% / 10% / 15%. Domestic revenue grew 8% driven by Institutional 11% volume growth with improving consumer sentiment, supply chain operations investors 33.2 33.5 33.9 MFs and others 3.9 3.4 2.5 returning back to pre-Covid levels and 95% of product portfolio returning back to YoY Banks, FI’s 6.6 6.3 7.7 FIIs 22.7 23.8 23.7 growth trajectory. This performance was also driven by strong rural performance of

Others 7.2 6.9 6.5 22% volume growth (rural now contributes to ~35% of overall business as compared Source: BSE to ~32% earlier). Price chart  Segment performance: Parachute revenue grew 8% with 10% volume growth 450 driven by likely market share gains led by direct distribution. Value added hair oils 400 (VAHO) returned to volume growth trajectory (+4% volume, -1% value) despite CSD channel being impacted (+7% volume ex-CSD). Saffola edible oils continued its 350 strong performance (+20% volume, +16% value), benefitting from increased

(Rs) 300 penetration and higher retention which together contributed 62% to this growth. This 250 performance was despite significant headwinds in MT and CSD channels where 200 Saffola has higher salience. In other categories, healthy foods grew 55% in value terms while Premium personal care segment reported declined (Discretionary within Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 Apr-20 Oct-20 Staples). Hygiene segment contributed ~1.5% of domestic revenues.

Market Cap Rs469bn/US$6.4bn Year to March FY19 FY20 FY21E FY22E

Reuters/Bloomberg MRCO.BO/MRCO IN Revenue (Rs mn) 73,340 73,150 76,139 83,771 Shares Outstanding (mn) 1,291.2 Adj. Net Profit (Rs mn) 9,300 10,500 11,520 12,719 Research Analysts: 52 -week Range (Rs) 379/240 Dil. Rec. EPS (Rs) 7.2 8.1 8.9 9.9 Manoj Menon Free Float (%) 45.0 % Chg YoY 14.3 12.9 9.7 10.4 [email protected] FII (%) 23.7 P/E (x) 50.4 44.6 40.6 36.8 +91 22 6637 7209 Daily Volume (US$'000) 15,526 CEPS (Rs) 9.4 9.0 10.0 11.0 Vismaya Agarwal, CFA [email protected] Absolute Return 3m (%) 0.3 EV/EBITDA (x) 36.3 31.6 29.0 26.2 +91 22 2277 7632 Absolute Return 12m (%) (5.2) Dividend Yield (%) 1.3 1.9 1.8 2.0 Karan Bhuwania Sensex Return 3m (%) 4.0 RoCE (%) 30.4 30.6 31.4 32.8 [email protected] +91 22 6637 7351 Sensex Return 12m (%) 22.9 RoE (%) 33.6 34.9 36.2 36.3

Please refer to important disclosures at the end of this report

Marico, October 29, 2020 ICICI Securities

 International business: Revenue grew 7% in constant currency terms (+12% reported) driven by significant outperformance in Bangladesh (+16% in cc terms) and revival in South Africa (+16% in cc terms) while other international markets were impacted with supply chain disruptions and macro headwinds – South East Asia (-4% in cc terms), MENA (-6% in cc terms).  Margin expanded a tad, mitigating input cost headwinds by rationalisation in A&P spends and cost controls: Consolidated gross margin declined 160bps to 48% driven by input cost inflation in copra and rice barn oil. However, consolidated EBITDA margin expanded 25bps to 19.6% primarily driven by rationalisation in A&P spends (-130bps YoY) with cuts in spends on discretionary products while maintaining share of voice in core portfolio and decline in other expenses (-60bps YoY) due to cost saving initiatives. Management expects Copra prices to stabilise by 4QFY21.

 Valuation and risks: We cut our earnings estimates by ~1%; modelling revenue / EBITDA / PAT CAGR of 7 / 10 / 10 (%) over FY20-22E. Maintain ADD with DCF-based revised target price of Rs415 (earlier Rs420). At our target price, the stock will trade at 39x P/E multiple Sept-22E. Key downside risk is higher-than-expected inflation in copra prices.

Table 1: Management guidance over medium term Business Guidance India EBIDTA Margin 20% + Parachute 5-7% CAGR Volume growth Saffola Edible Oils High-single digit volume growth Foods Maintaining 20% plus CAGR Premium Hair Nourishment, Male Double digit value growth Grooming and Skin Care International Double digit cc growth, EBIDTA Margin 20% + Overall 8-10% volume growth, 13-15% value growth, 19% + operating margin Source: Company data, I-Sec research

Marico, October 29, 2020 ICICI Securities

Table 2: Q2FY21 results review (consolidated) (Rs mn) Q2FY21 Q2FY20 YoY (%) Q1FY21 QoQ (%) 1HFY21 1HFY20 YoY (%) Net Revenues 19,890 18,290 9 19,250 3 39,140 39,950 (2) COGS (10,340) (9,210) 12 (9,840) 5 (20,180) (20,580) (2) Gross profit 9,550 9,080 5 9,410 1 18,960 19,370 (2) Staff cost (1,370) (1,270) 8 (1,350) 1 (2,720) (2,540) 7 A&SP (1,890) (1,970) (4) (1,370) 38 (3,260) (4,160) (22) Other opex (2,400) (2,310) 4 (2,020) 19 (4,420) (4,530) (2) Total opex (5,660) (5,550) 2 (4,740) 19 (10,400) (11,230) (7) EBITDA 3,890 3,530 10 4,670 (17) 8,560 8,140 5 Other income 270 350 (23) 190 42 460 630 (27) Finance cost (80) (130) (38) (90) (11) (170) (250) (32) D&A (330) (350) (6) (340) (3) (670) (700) (4) PBT 3,750 3,400 10 4,430 (15) 8,180 7,820 5 Tax (810) (880) (8) (1,025) (21) (1,835) (2,008) (9) PAT 2,940 2,520 17 3,405 (14) 6,345 5,813 9 Minority Interest (90) (50) (90) (180) (120)

PAT after MI 2,850 2,470 15 3,315 (14) 6,165 5,693 8 Extraordinary items (210) - 495 285 (143)

Net profit (reported) 2,640 2,470 7 3,810 (31) 6,450 5,550 16 EPS 2.2 1.9 15 2.6 (14) 4.8 4.4 8

Costs as a % of sales

COGS 52.0 50.4 163 bps 51.1 86 bps 51.6 51.5 4 bps Gross margin (%) 48.0 49.6 -164 bps 48.9 -87 bps 48.4 48.5 -5 bps Staff cost 6.9 6.9 -6 bps 7.0 -13 bps 6.9 6.4 59 bps A&SP 9.5 10.8 -127 bps 7.1 238 bps 8.3 10.4 -209 bps Other opex 12.1 12.6 -57 bps 10.5 157 bps 11.3 11.3 -5 bps EBITDA margin (%) 19.6 19.3 25 bps 24.3 -471 bps 21.9 20.4 149 bps Income tax rate (%) 21.6 25.9 -429 bps 23.1 -154 bps 22.4 25.7 -324 bps Source: Company data, I-Sec research

Table 3: Q2FY21 results review (standalone) (Rs mn) Q2FY21 Q2FY20 YoY (%) Q1FY21 QoQ (%) 1HFY21 1HFY20 YoY (%) Net Revenue 15,500 14,540 7 15,160 2 30,660 32,310 (5) COGS (8,790) (7,870) 12 (8,420) 4 (17,210) (17,840) (4) Gross profit 6,710 6,670 1 6,740 (0) 13,450 14,470 (7) Staff cost (870) (810) 7 (950) (8) (1,820) (1,670) 9 A&SP (1,140) (1,390) (18) (880) 30 (2,020) (3,020) (33) Other opex (1,910) (1,850) 3 (1,590) 20 (3,500) (3,670) (5) Total opex (3,920) (4,050) (3) (3,420) 15 (7,340) (8,360) (12) EBITDA 2,790 2,620 6 3,320 (16) 6,110 6,110 - Other income 1,450 1,010 44 190 663 1,640 1,270 29 Finance cost (50) (90) (44) (60) (17) (110) (170) (35) D&A (260) (270) (4) (260) - (520) (560) (7) PBT 3,930 3,270 20 3,190 23 7,120 6,650 7 Tax (590) (680) (13) (640) (8) (1,230) (1,360) (10) Recurring PAT 3,340 2,590 29 2,550 31 5,890 5,290 11 Extraordinary items (210) - - (210) (190)

Net profit (reported) 3,130 2,590 21 2,550 23 5,680 5,100 11 EPS 2.6 2.0 29 2.0 31 4.6 4.1 11

Costs as a % of sales

COGS 56.7 54.1 258 bps 55.5 116 bps 56.1 55.2 91 bps Gross margin (%) 43.3 45.9 -259 bps 44.5 -117 bps 43.9 44.8 -92 bps Staff cost 5.6 5.6 4 bps 6.3 -66 bps 5.9 5.2 76 bps A&SP 7.4 9.6 -221 bps 5.8 155 bps 6.6 9.3 -276 bps Other expenditure 12.3 12.7 -41 bps 10.5 183 bps 11.4 11.4 5 bps EBITDA margin (%) 18.0 18.0 -2 bps 21.9 -390 bps 19.9 18.9 101 bps Income tax rate (%) 15.0 20.8 -579 bps 20.1 -505 bps 17.3 20.5 -318 bps Source: Company data, I-Sec research

Marico, October 29, 2020 ICICI Securities

Business performance and conference call takeaways India Business (77% of sales)  Domestic revenue grew by 8% YoY driven by 11% volume growth.  In terms of markets, rural general trade (GT) grew 22% YoY, while urban GT grew 14% YoY in volume terms.  In terms of distribution channels, modern trade (MT) (17% contribution to Indian business in FY20) declined 12% due to increased social distancing norms and E- commerce (5% contribution to Indian business in FY20, now contributes 8% to overall turnover) grew 39%. CSD posted decline of 29% due to scaled down operations during the quarter.  Launched few immunity products during the quarter – Kadha Mix and Golden Turmeric Milk Mix launched in select MT and E-commerce under umbrella Saffola ImmuniVeda. Also forayed into Chyawanprash category with launch of Saffola Arogyam Chyawan Amrut, an enhanced version of traditional Chyawanprash. Chart 1: Domestic business volume growth

15 12 11 11 10 9 10 8 8 8 8 6 6 6 5 6 5 3 1 1 1 0 (%) (5) (4) (3) (10) (9) (15) (14) (20) Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21

Source: Company data, I-Sec research

 Average copra cost in Q1FY21 was up 11% YoY and 9% QoQ on account of leaner supplies and lower coconut to copra conversions. Management expects copra prices to be stable for the rest of the year. Correction in prices is expected in Q4FY21 due to arrival of season.  Prices of other key raw materials were benign except Rice bran oil (+26% YoY) while HDPE was flattish and LLP was down by 6% YoY.  India business operating margin (ex-corporate overheads) declined marginally by 30bps YoY to 20.7% primarily led by input cost inflation largely offset by rationalized ad-spends and cost control. Company aims to maintain margins at 20%+ over medium term.  Parachute reported 10% growth in volume and 8% growth in revenue. The company maintained its volume market share at 62% in coconut oil category. Parachute brand strengthened its leadership position. Management maintained its 5-7% volume growth target for the medium-term.  Company is ready to take judicial pricing actions in Parachute and other brands to improve the value proposition of the brand as the management expects consumer to become value conscious with declining income levels. It expects market share gains during these times to remain permanent.

Marico, October 29, 2020 ICICI Securities

Chart 2: Parachute volume growth Chart 3: Parachute value growth

20 50 41 15 15 38 40 15 12 32 11 10 9 9 9 30 26 10 8 8 24 6 7 6 19 20 16 4 11 5 9 8 8 (%) (%)10 3 4 0 0 (1) (1) (5) (2) (1) (10) (5) (4)(5) (6) (5) (10) (12) (12) (12)(12) (9) (8) (20) (11) (19) (15) (30) Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21

Source: Company data, I-Sec research Source: Company data, I-Sec research

 Value-Added Hair Oil (VAHO) reported 4% volume growth while revenue declined 1%. Demand in premium segment was impacted and CSD business continued to underperform (+7% volume growth ex-CSD).  Management noted that Nihar Naturals Shanti Amla Badam led the recovery of hair oils with growth across markets. Parachute Advansed Aloe Vera Enriched Coconut Hair Oil and Nihar Natural Shanti Jasmine witnessed strong recovery after sharp decline in Q1.  Recovery in VAHO will be done by (1) aggressively participating in economy segment with Sarson Amla and Nihar Shanti Amla, (2) pricing correction and brand renovation in mid segment and, (3) participating more aggressively in premium format (hair fall, almond etc.).

Chart 4: VAHO volume growth Chart 5: VAHO value growth

30 30 21 19 20 19 20 14 15 20 11 11 10 12 11 12 11 12 12 12 11 8 9 8 7 7 9 9 9 7 9 7 10 5 4 10 1 0 0 0 (%) (%) (1) (10) (10) (8) (7) (7) (6) (12) (11) (20) (20) (13) (17)(18) (30) (30) (30) (32) (40) (40) Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21

Source: Company data, I-Sec research Source: Company data, I-Sec research

 Saffola edible oils continue to grow at 16% driven by 20% volume growth. Volume growth benefited from increased penetration and higher retention which together contributed 62% to this growth. Company leveraged main stream media and digital media through targeted campaigns in lockdown to engage with consumers (Saffola wala Khana).

Marico, October 29, 2020 ICICI Securities

Chart 6: Saffola volume growth Chart 7: Saffola value growth

30 30 25 25 25 20 25 18 20 17 16 20 13 15 15 16 16 15 11 11 14 13 10 15 11 10 8 10 6 6 5 9 9 8 (%) 4 4 3 3 (%)10 7 7 6 5 2 1 4 5 0 5 3 0 1 (5) (1) 0 (10) (5) (3) (9) (4) (15) (10) (8) Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21

Source: Company data, I-Sec research Source: Company data, I-Sec research

 New segments posted strong performance. Healthy foods segment (c.15% of Saffola franchise) grew 55% YoY driven by Saffola Oats franchise (+45% YoY), benefited from increased penetration and higher retention which together contributed 60% to this growth. Management expects increase in in-home food consumption and preference towards healthier options within Foods. Saffola Honey (100% pure with no added sugar) is scaling across channels and has gained 8% market share in MT already. Management targets to make healthy food business of around Rs3-3.5bn and Rs 5bn by FY21 and FY22 respectively. Male grooming, premium Hair Nourishment and premium Skin Care reported decline due to discretionary nature of the products.

Marico, October 29, 2020 ICICI Securities

International Business (23% of sales)  International business revenue grew 7% in constant currency terms, 12% growth on a reported basis due to strong growth in Bangladesh.  Operating margin (ex-corporate overheads) expanded 160bps YoY to 23.1% driven by rationalized ad-spends and tighter cost control across all geographies.  Bangladesh reported 16% cc sales growth despite lockdown restriction. Parachute coconut oil (constitutes 65% of Bangladesh revenue) registered 8% sales growth in cc terms. Non-coconut oil business (35% of Bangladesh sales) grew 31% in cc terms driven by growth in VAHO. Management expects double- digit growth in medium-term for Bangladesh.  South East Asia (mainly Vietnam and Myanmar) revenue declined by 4% in cc terms. Vietnam posted a decline of 6% in cc terms due to slowdown in Home and Personal care business. Management optimistic about going back to normal and expect meaningful growth at exit of the year.  MENA business declined by 6% in cc terms. Management remains cautious on outlook with challenging macros ahead and will be aggressive on cost management.  South Africa business (including Isoplus) marked a revival with growth of 16% in constant current terms driven by robust growth in Health Care and Hair Care portfolio.

Chart 8: International business revenue growth (reported)

25 21 20 18 16 14 15 13 12 9 9 9 10 8 8 6 (%) 4 5 5 2 2 0 1 0 (1) (5) (5) (10) (8) (8) Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21

Source: Company data, I-Sec research

Marico, October 29, 2020 ICICI Securities

Chart 9: Consolidated revenue growth Chart 10: Consolidated EBITDA margin

25 26 21 20 24 20 24 15 15 13 21 21 15 22 20 9 9 19 20 19 19 20 10 7 20 19 19 19 6 6 7 19 18 18 18 (%) 5 2 (%)18 17 17 17 0 16 0 16 (0) (5) (1) (2) 14 (4) (10) (8) (7) 12 (15) (11) 10 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21

Source: Company data, I-Sec research Source: Company data, I-Sec research

Chart 11: Standalone revenue growth Chart 12: Standalone EBITDA margin

25 23 24 20 20 17 22 22 22 21 15 12 20 20 10 20 7 8 18 19 19 10 7 6 5 7 18 18 18 18 4 5 17 17 18 17 18 5 18 17 1 1 0 17 (%) (%) 16 0 16 15 15 (5) (3) 14 (5) (4) (10) (8) (8) (15) 12 (15) (20) 10 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21

Source: Company data, I-Sec research Source: Company data, I-Sec research

Chart 13: Mean P/E and standard deviations

55 MRCO P/E -1 Std Dev. Mean +1 Std Dev. 50 45 40 35

(x) 30 25 20 15 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 Apr-20 Oct-20

Source: Company data, I-Sec research

Marico, October 29, 2020 ICICI Securities

Financial summary

Table 4: Profit & Loss statement Table 7: Cashflow statement (Rs mn, year ending March 31) (Rs mn, year ending March 31) FY19 FY20 FY21E FY22E FY19 FY20 FY21E FY22E Net Sales 73,340 73,150 76,139 83,771 Operating Cashflow 9,970 11,860 12,200 13,414 Operating Expenses 60,530 58,460 60,126 66,034 Working Capital 210 330 174 (576) EBITDA 12,810 14,690 16,012 17,737 Changes % margins 17.5 20.1 21.0 21.2 Capital Commitments (1,490) (1,940) (1,370) (1,675) Depreciation & Amortisation 960 1,400 1,334 1,449 Free Cashflow 8,690 10,250 11,004 11,163 Gross Interest 240 500 425 468 Cashflow from (3,510) (440) (62) (201) Other Income 1,030 1,240 1,308 1,474 Investing Activities Recurring PBT 12,640 14,030 15,562 17,295 Issue of Share Capital - - - - Less: Taxes 3,160 3,310 3,813 4,324 Inc (Dec) in Borrowings 290 (1,210) (975) (3,268) Less: Minority Interest (180) (220) (229) (252) Dividend paid (6,820) (10,250) (8,385) (9,353) Net Income (Reported) 11,180 10,210 11,520 12,719 Chg. in Cash & Bank (20) 450 2,952 17 Extraordinaries (Net) 1,880 (290) - - balance Recurring Net Income 9,300 10,500 11,520 12,719 Closing cash & balance 386 930 3,882 3,899 Source: Company data, I-Sec research Source: Company data, I-Sec research

Table 5: Balance sheet Table 8: Key ratios (Rs mn, year ending March 31) (Year ending March 31) FY19 FY20 FY21E FY22E FY19 FY20 FY21E FY22E Assets Per Share Data (Rs) Total Current Assets 32,000 31,820 34,844 37,046 EPS 7.2 8.1 8.9 9.9 of which cash & cash eqv. 5,520 2,790 5,742 5,759 Cash EPS 9.4 9.0 10.0 11.0 Total Current Liabilities & 13,510 14,600 14,821 16,364 Dividend per share (DPS) 4.8 6.8 6.5 7.3 Provisions Book Value per share (BV) 23.2 23.4 25.9 28.5 Net Current Assets 18,490 17,220 20,023 20,682 Investments 1,790 2,240 2,282 2,388 Growth (%) Net Fixed Assets 11,300 13,790 13,827 14,053 Net Sales 16.0 (0.3) 4.1 10.0 Capital Work-in-Progress 450 580 580 580 EBITDA 12.6 14.7 9.0 10.8 Total Assets 32,030 33,830 36,712 37,702 PAT 14.2 12.9 9.7 10.4 DPS 11.8 42.1 (3.7) 11.5 Liabilities Borrowings 3,690 5,000 4,517 1,890 Valuation Ratios (x) Deferred Tax Liability (1,760) (1,530) (1,530) (1,530) P/E 50.4 44.6 40.6 36.8 Minority Interest 110 130 359 611 P/CEPS 38.6 40.3 36.4 33.0 Equity Share Capital 1,290 1,290 1,290 1,290 P/BV 15.6 15.5 14.0 12.7 Face Value per share (Rs) 1.00 1.00 1.00 1.00 EV / EBITDA 36.3 31.6 29.0 26.2 Reserves & Surplus* 28,700 28,940 32,075 35,442 EV / Sales 6.3 6.4 6.1 5.5 Less: Misc. Exp. n.w.o. Net Worth 29,990 30,230 33,365 36,732 Operating Ratios Total Liabilities 32,030 33,830 36,712 37,702 Raw Material / Sales (%) 54.8 51.2 51.9 50.6 Source: Company data, I-Sec research Employee cost / Sales (%) 6.4 6.5 6.8 6.5 Other exps / Sales (%) 21.4 22.2 20.2 21.6 Table 6: Quarterly trends Other Income / PBT (%) 8.1 8.8 8.4 8.5 Effective Tax Rate (%) 21.8 24.1 24.5 25.0 (Rs mn, year ending March 31) Working Capital (days) 49.2 37.5 35.2 34.5 Dec 19 Mar 20 Jun 20 Sep 20 Inventory Turnover (days) 70.2 68.9 65.0 64.8 Net sales 18,240 14,960 19,250 19,890 Receivables (days) 25.7 26.9 26.6 26.4 % growth (YoY) (2.0) (7.0) (11.1) 8.7 Payables (days) 47.0 48.8 47.0 47.3 EBITDA 3,730 2,820 4,670 3,890 Net D/E (x) (0.2) (0.2) (0.3) (0.3) Margin (%) 20.4 18.9 24.3 19.6 Other income 290 320 190 270 Profitability Ratios (%) Extraordinaries (Net) - (100) 495 (210) Net Income Margins 12.7 14.4 15.1 15.2 Net profit 2,720 2,040 3,315 2,850 RoACE 30.4 30.6 31.4 32.8 Source: Company data, I-Sec research RoAE 33.6 34.9 36.2 36.3 Dividend Payout 62.8 98.1 72.8 73.5 Dividend Yield 1.3 1.9 1.8 2.0 EBITDA Margins 17.5 20.1 21.0 21.2 Source: Company data, I-Sec research

Marico, October 29, 2020 ICICI Securities

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New I-Sec investment ratings (all ratings based on absolute return; All ratings and target price refers to 12-month performance horizon, unless mentioned otherwise) BUY: >15% return; ADD: 5% to 15% return; HOLD: Negative 5% to Positive 5% return; REDUCE: Negative 5% to Negative 15% return; SELL: < negative 15% return

ANALYST CERTIFICATION I/We, Manoj Menon, MBA, CMA; Vismaya Agarwal, CFA, BTech, PGDM; Karan Bhuwania, MBA 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. Analysts are not registered as research analysts by FINRA and are not associated persons of the ICICI Securities Inc. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report. 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