Earnings Report /
Bangladesh

Marico Bangladesh: 2Q 21/22 – c14% NPAT growth on the back of robust sales growth; upgrade to Buy

  • 2Q 21/22 EPS of BDT 28.45 (+c14% YoY) meet our expectations, led by c17% YoY revenue growth

  • Declared BDT20/share interim cash dividend; we expect Marico to pay a total of BDT90/share cash dividend for FY 21-22

  • Upgrade to Buy with increased TP of BDT2,670 (+13% revision) for June 2022, ETR 18.9%

Auneea Haque
Auneea Haque

Research Associate

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IDLC Securities
25 October 2021
Published byIDLC Securities

2Q 21/22 revenue stood at BDT3,408.6mn against BDT2,907.9mn in the same quarter of the previous year, implying c17% YoY growth. As per our expectations, MBL maintained a double-digit top-line growth led by high growth in VAHO and baby care categories. Moreover, the newer additions of MBL such as Saffola Honey within food category, Face cream & Rash cream within Baby care category boosted sales.

In the first six months of 21/22, revenue increased by c14% YoY to BDT6,752.6mn against BDT5,919.6mn. As the revenue growth beat our expectations, we have increased our revenue growth forecast by 100bps to 13.6% YoY from 12.6% YoY for FY22.

MBL reported 2Q 21/22 NPAT of BDT896.0mn (EPS: BDT28.45) up by 13.6% YoY. High top-line growth, lower effective tax rate of 23.2% (down by 370bps YoY due to 250bps corporate tax rate cut), and 288bps lower OPEX to sales mainly contributed to the earnings growth offsetting the impact of 390bps GPM dent.

Marketing, Selling & Distribution expenses as a percentage of sales went down by 300bps+ YoY to 9.7% in 2Q 21/22. During the same quarter previous year, the launch of new products pushed the expense up. Due to the high base effect, Marketing, Selling & Distribution expenses as a percentage of sales was lower in this quarter.

Gross profit margin deteriorated by c390bps on a YoY basis and c220bps on a QoQ basis. MBL’s gross profit margin stood at 54.5% in 2Q 21/22 which is the lowest in the last eleven quarters. This trend reflects the upsurge in copra price in the global market. But we expect the gross margin to improve in the coming quarters. Our gross margin expectation for FY22 is 56%.

MBL declared BDT20/share interim cash dividend with 2Q 21/22 results vs BDT20/share in the same period the previous year. The total interim dividend paid into six months of this fiscal year remained BDT40/share vs BDT 50/share, underperforming our expectations. Hence, we have lowered the cash dividend forecast for full-year FY22 to BDT90/share, with the dividend payout ratio being c82%.

We upgrade to Buy with increased TP BDT2,670 (ETR 18.9%) for June 22. We revised MBL’s TP upwards from BDT2,350 (+13% revision). Our current TP implies 21.1x 2022f PE and EV/Sales of 5.6x 2022f. With MBL currently trading at 22.2x LTM PE and 5.9x EV/Sales, our TP offers an ETR of 18.9% with a dividend yield of 3.9%. We recommend Buy for MBL.