MARICO KAYA
Another Game changer
Marico Kaya is a demerged company from its parent Marico, the famous FMCG giant. Kaya is established to create prime space in running skin clinics and selling its 60 plus skin products. It has 85 skin clinics in India and about 23 in middle east. Middle east clinics are more profitable than domestic clinics. In future, Kaya management will give more focus on selling of its products along with running the skin clinics. We found the following strong reasons for terming it as a game changer stock:
1. Marico Kaya belongs to famous Marico group and have excellent management to back its operations with 100% integrity and corporate governance.
2. Though it has gone up from Rs.300 to 1000 in a span of 5 months but still it is a baby and there are sufficient strong reasons in a country like India to make it a boy and then a strong man in the years to come. India's upper middle class and HNI population is increasing very fast and with increasing trend of money spending in young population, kaya products are going to increase their business manifold. Imagine if after 5 years 1% of the population i.e., 1 crores use its products for Rs. 5000 per year, the total sales of its products only should be not less than Rs. 5000 crores. These are all high end premium products and company will have at least Rs. 600-700 crores ( 12% of sales ) as Net Profit. Its current annual sales is only Rs. 350 crores, so there are chances that this company will show tremendous growth in sales as well as profits.
3. If the growth is only 30% of estimated as per point 2, the Net Profit will not be less than Rs. 200 crores. Page Industries ( Jockey brand ) shows an annual profit of Rs. 200 crores and its market valuation in stock market is more than Rs. 11,000 crores. Marico Kaya market valuation is only Rs.1200 crores and hence, there is full chance that its share price can go up 9-10 times in next 5 years. As a conservative estimate we have taken the target price with growth of 4-5 times only by 2019 which is very likely to happen.
4. Kaya products and clinics sale is directly related to working women salaries and incomes. In middle east skin clinics are charging Rs.100,000 per female customer on an average. The average female earnings in middle east is Rs. 80,000 per month whereas in India urban educated females on an average is earning Rs.25,000-40,000 per month. There is likelihood that India female shall be earning Rs. 50,000-80,000 after 5 years. At present, Kaya Indian skin clinics are charging Rs. 14,000 per customer on an average and hence with increased female income, this average charge will increase 3-4 fold. This increase in female salaries in India will ensure manifold increase in spending power for kaya type of products and skin care.
5. Marico Kaya skin clinics provide medical solutions for skin disorders and at present there is hardly any competition. VLCC which is in beauty solutions provider where so many players are there.
6. Marico Kaya has not started marketing of its products and once this is started in full force in malls and through e commerce, the products sale can increase very fast which will ensure sustainability in sales and profits.
7. Marico Kaya products are competitively priced in comparison to MNCs products and its packing, look etc is very good and appealing.
8. Marico Kaya skin clinics being more profitable, are in Saudi Arabia, Oman and UAE. It looks possible to spread the same type of clinics in other countries also and hence expansion of geographical spread is very much possible. Marketing of its entire product range in middle east may also be attempted by the management in future.
Another Game changer
Marico Kaya is a demerged company from its parent Marico, the famous FMCG giant. Kaya is established to create prime space in running skin clinics and selling its 60 plus skin products. It has 85 skin clinics in India and about 23 in middle east. Middle east clinics are more profitable than domestic clinics. In future, Kaya management will give more focus on selling of its products along with running the skin clinics. We found the following strong reasons for terming it as a game changer stock:
1. Marico Kaya belongs to famous Marico group and have excellent management to back its operations with 100% integrity and corporate governance.
2. Though it has gone up from Rs.300 to 1000 in a span of 5 months but still it is a baby and there are sufficient strong reasons in a country like India to make it a boy and then a strong man in the years to come. India's upper middle class and HNI population is increasing very fast and with increasing trend of money spending in young population, kaya products are going to increase their business manifold. Imagine if after 5 years 1% of the population i.e., 1 crores use its products for Rs. 5000 per year, the total sales of its products only should be not less than Rs. 5000 crores. These are all high end premium products and company will have at least Rs. 600-700 crores ( 12% of sales ) as Net Profit. Its current annual sales is only Rs. 350 crores, so there are chances that this company will show tremendous growth in sales as well as profits.
3. If the growth is only 30% of estimated as per point 2, the Net Profit will not be less than Rs. 200 crores. Page Industries ( Jockey brand ) shows an annual profit of Rs. 200 crores and its market valuation in stock market is more than Rs. 11,000 crores. Marico Kaya market valuation is only Rs.1200 crores and hence, there is full chance that its share price can go up 9-10 times in next 5 years. As a conservative estimate we have taken the target price with growth of 4-5 times only by 2019 which is very likely to happen.
4. Kaya products and clinics sale is directly related to working women salaries and incomes. In middle east skin clinics are charging Rs.100,000 per female customer on an average. The average female earnings in middle east is Rs. 80,000 per month whereas in India urban educated females on an average is earning Rs.25,000-40,000 per month. There is likelihood that India female shall be earning Rs. 50,000-80,000 after 5 years. At present, Kaya Indian skin clinics are charging Rs. 14,000 per customer on an average and hence with increased female income, this average charge will increase 3-4 fold. This increase in female salaries in India will ensure manifold increase in spending power for kaya type of products and skin care.
5. Marico Kaya skin clinics provide medical solutions for skin disorders and at present there is hardly any competition. VLCC which is in beauty solutions provider where so many players are there.
6. Marico Kaya has not started marketing of its products and once this is started in full force in malls and through e commerce, the products sale can increase very fast which will ensure sustainability in sales and profits.
7. Marico Kaya products are competitively priced in comparison to MNCs products and its packing, look etc is very good and appealing.
8. Marico Kaya skin clinics being more profitable, are in Saudi Arabia, Oman and UAE. It looks possible to spread the same type of clinics in other countries also and hence expansion of geographical spread is very much possible. Marketing of its entire product range in middle east may also be attempted by the management in future.
9. Therefore, it looks that Marico Kaya will be the future Indian born MNC like Asian Paints.
Thanks for all the hard work and publishing such great insight.
ReplyDeleteBest regards,
Nirav
Sir really eager to read your article on Madhucon. Thanks
ReplyDeleteSir, are you planning to put a page or 2 on Madhucon ?
ReplyDelete