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ICICI Securities Report
3M India Ltd. (75% subsidiary of 3M USA) follows same template of its parent to steadily launch research and development backed niche products at regular intervals.
While 3M products do not cost much to the consumer, they serve critical purposes and add considerable . Hence, there is high stickiness to 3M products, even in B2B segments.
Steady growth (5-10%) in India’s key segments (auto, telecom, healthcare, consumer, construction, mining and safety) will lead to sustainable growth for 3M products.
3M India generated return on equity more than cost of capital and profit after tax compound annual growth rate of 17% over CY08-FY20 due to moats like strong brands (3M, Post-it, ScotchBrite, Command), strong distribution network and 3M car care centres, and access to technology pool of parent.
Increase in domestic manufacturing will lead to structural margin expansion bridging the 600 basis points gap between 3M India and parent’s Ebitda margins.
We model 3M India to report PAT CAGR of 8.2% over FY20-FY23E.
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