The FMCG sector has acquired its position among the fastest growing industries in Bangladesh and also contributes significantly to the GDP of Bangladesh. Consumer confidence, which is fueled by economic growth, has a significant impact on demand in this industry. The scope of this industry has expanded over the years and includes products which are daily essentials as well as those which are aspirational and typically sold or traded rapidly in the market. The growth of this sector’s market size is mostly determined by population growth in the economy as well as income levels (purchasing power). The following chart shows that along with the considerable growth of GDP, private consumption growth has also increased over the years.

GDP and Private Consumption Growth in percent
GDP and Private Consumption Growth in percent

Marico Bangladesh Limited is amongst the top three FMCG MNC companies in Bangladesh that manufacture and market beauty and wellness products under categories such as – branded coconut oil, value-added hair oil, edible oil & foods, beauty and health, baby care, hair color etc. “Parachute” is the flagship brand of Marico. However, the company is continuously focusing on creating a well-diversified product portfolio to reduce its dependence on parachute coconut hair oil. The following chart shows the revenue decomposition of the company for the last 5 years:

Revenue Decomposition of MARICO
Revenue Decomposition of MARICO

The sales revenue of Marico Bangladesh Limited increased by 15.4 percent YoY to BDT 11,306.52 million for the FY’20-21 from BDT 9,795.91 million in the previous year. The company has been consistent in increasing its profit margins and returns in the last 5 years, and the stability of these profit margins is expected to continue in the future as well.

Revenue Changes as percent of Marico Bangladesh
Revenue Changes as percent of Marico Bangladesh

The intrinsic value of the company’s shares has been calculated as around BDT 2,116.50 per share, which indicates an approximate 10% potential downside from the market price of BDT 2,342.10 per share as on March 24, 2022. As it shows that the stocks of MARICO are trading at a moderately higher price than the intrinsic value, we can rate it as an overvalued share.