RIL Company Analysis – MARICO
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.
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:
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.
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.