Author - Richa Varu Rathod

  • Richa Varu Rathod
05 Nov

Growth at Bajaj Auto has outperformed industry

Update on the Indian Equity Market:

On Monday, Sensex ended at record closing high of 40,302, up 137 pts; Nifty ended at 11,943; IT index was the biggest sectoral gainer, while auto stocks bled the most. Infosys share price closed 3% higher at Rs 709 after the firm said it has not received any prima facie evidence so far to corroborate any of the allegations made by the anonymous whistle-blower. Infosys, VEDL, Tata Steel, HDFC, ONGC were among the biggest gainers, jumping up to 3%. On the other hand, Maruti Suzuki, Hero MotoCorp, IndusInd Bank, Tata Motors were among the biggest losers, shedding up to 2.5%. Among sectoral indices, NIFTY IT (+0.8%) NIFTY Metal (+2.8%) closed higher while NIFTY Auto (-1.4%), NIFTY media (-3.3%) ended on a negative note.

Growth at Bajaj Auto has outperformed industry

Key takeaways from the interview of Mr Rakesh Sharma, Executive Director, Bajaj Auto; dated 4th November 2019:

  • Mr Sharma stated that the company reported the highest ever retails of all business in its history by a wide margin. The motorcycle business turned in a retail sales performance of 400,000 units plus, which is ~50% growth YoY. It grew by 28% over the festive period of last year. Small commercial vehicle (CV) business reported retail sales of 43,000 plus and KTM business doubled reporting the highest ever retail performance. So, it was a wonderful month for Bajaj Auto and the company is happy that almost half of the growth in domestic motorcycle by newly launched products (in the last six months) which have done exceedingly well and brought down the inventory levels.
  • Mr Sharma said that they had proactive engagements with the channel where it was informed that come October Bajaj Auto will be easing the burden.
  • Mr Sharma added that he has not seen such low channel inventory in the last 18 months and suspects that the company should have moved the market share needle as well.
  • When asked about the future performance he said that the economy is entering a naturally lower part of the quarter now. Post the festive seasons, the sales do drop so there is obviously a combination of postponement that has occurred from July-August and a bit of advancement that would have occurred from November. All of these combine to give the surge during the festive season. So, there is a natural down cycle that we will now hit and added on this will be the uncertainty in the minds of a lot of people about the BSIV-BSVI transition.
  • He refrained from commenting that Bajaj Auto would see similar kind of numbers, but he confirmed that this festival season has served as a very good trigger to bottom out what the Indian industry was experiencing.
  • Mr Sharma said that the company still needs to navigate the turbulent change that is impending, which is BS-IV to BS-VI, and will have to see how the consumer behaviour will occur during this change.
  • Mr Sharma informed that Bajaj Auto has always been outpacing the market by 5-8% points and thinks that Bajaj Auto outpaced the industry growth by at least 15% points on the back of new products. Therefore, he is confident of market share expansion.
  • When asked about the price cuts and margins he commented that the company’s strategy of uplifting the consumer step by step has helped the realisation per vehicle to move upwards. The stocks are now in a very manageable zone.
  • Mr Sharma said that softer raw material costs, steady foreign exchange rate (45% of revenues come from overseas sources), improved portfolio and favourable business mix is contributing to margin expansion but would not like to further comment on margin as they are in an ambiguous situation in November-December-January.

Consensus Estimate (Source: market screener website)

  • The closing price of Bajaj Auto was ₹ 3,212/- as of 04-November-19 and traded at 18.4x /17.2x /16.7x the consensus EPS for FY20E / 21E / 22E of Rs 176/188/194 respectively.
  • Consensus target price of ₹ 3,049/- implies a PE multiple of 15.7x on FY22E EPS ₹ 194/-.
By Auto, Bajaj Auto 0 Comments Read more...
25 Oct

SBI chairman: Economy in the transition phase, growth to come back

Update on the Indian Equity Market:On Thursday, BSE benchmark Sensex ended 38 points lower, while Nifty ended below 11,600. Among the sectors, PSU Banks (-3.5%) dragged the most. Bharti Airtel and Reliance Industries were the top gainers. Infratel and Grasim were among the top losers. Maruti Suzuki on Thursday posted a 39% year-on-year (YoY) fall in September quarter profit, which was better than Street expectations. The market was moved by SC decision relating to telecom industry and the trends of Maharashtra and Haryana assembly poll results.

SBI chairman: Economy in the transition phase, growth to come back

Key takeaways from the interview of Mr Rajnish Kumar, Chairman, SBI Bank; dated 24th October 2019: The Indian economy is in a transition phase largely owing to important reforms undertaken in the last few years. Mr. Kumar is exuding confidence that the country’s growth rate will be back on track.

  • Due to a lot of reforms, the economy is in transition. Reforms like GST (goods and services tax) and IBC (insolvency and bankruptcy code) have been implemented in the last three years because of which India is in a transition period. As a result, a lot of cleanup has happened in the corporate sector. He is of the view that disruption is bound to happen in the transition phase.
  • Mr Kumar said that in terms of development, India is still not in the “developed” category. Besides, the per capita income is still low. There is a huge scope for growth in India, and demographics are also not against India. Unlike many other developed countries where they are facing challenges on account of demographics, India does not have that kind of challenge at least for the time being.
  • According to Mr Kumar, the Indian economy is seeing the bottom as far as economic growth is concerned. He expects the market to go up from now because each sector is now starting to perform well. For example, in agriculture, this year’s position is better even in terms of credit. He also mentioned manufacturing and private sector investment in infrastructure is still slow.
  • Observing that the Modi government over the past few years has brought banking to the doorsteps of every household, Mr Kumar said the activation of these accounts have reached almost 90 per cent. Besides, balances of these accounts are now reaching a level where servicing these accounts is “not a loss-making proposition” for the banks.
  • He stated that the average balance in these accounts is touching ₹1,900 and about ₹230 bn in June was the balance in the savings bank account. This itself benefits the economy as such a large population is brought under the banking channels.
  • Noting that the biggest challenge in the banking sector was about the functioning of the public sector banks, Mr Kumar said that recapitalization has happened in a big way but sectoral issues need to be addressed like the power, road and telecom sectors. As these sectoral issues impact the working of the banks, particularly on the asset quality front.
  • He further said that in this government there is no political interference in the banking sector. State Bank of India has been more immune to any pressures because the systems are such that it is very difficult for any Chairman/MD to influence any decision-making process.
  • When asked about cryptocurrency, which has been banned in India, the SBI chairman said that the way the world is moving towards digitisation, at some stage, a regulated cryptocurrency would be a better bet than an unregulated one. He also cautioned about the dark side of the internet as there can be a misuse of the digital currencies. He further added that regulation is a must adding that efforts are on how to bring technologies like blockchain into functioning of the banks.

Consensus Estimate (Source: market screener website) 

  • The stock price was Rs 262/- as of close price of 24-10-19 and traded at 1.03x /0.92x /0.79x the consensus Book Value for FY20E / 21E / 22E of Rs 254/286/331 respectively.
  • Consensus target price of ₹ 275/- implies a Price to Book Value multiple of 0.83x on FY22E Book Value of ₹ 331/-.
By SBI 0 Comments Read more...
16 Oct

IndusInd Bank says growth will bounce back to mid-20% from 3QFY20

Update on the Indian Equity Market:
On Tuesday, BSE benchmark Sensex gained 291 points, while Nifty ended above 11,400-mark. Nifty Auto was the outperformer, FMCG and private bank stocks were strong while IT stocks dragged. Nifty Bank rose 1.3%, Bandhan Bank jumped 11% while Vedanta, ONGC, Maruti Suzuki were among the biggest Sensex gainers. Railway PSU IRCTC shares closed down 1.6% down at Rs 716.65. Indian Railway Catering and Tourism Corporation (IRCTC) got listed at Rs 644 on Monday on the BSE, more than doubling investor wealth since its IPO.

Key takeaways from the interview of Mr Sobti, MD & CEO, IndusInd Bank; dated 11th October 2019 with CNBC TV18:

  • Loan growth comes in at a multi-year low for IndusInd Bank in 2QFY20 while stressed assets woes added to the bank’s worries. Mr Sobti shared his views and outlook.
  • In terms of the pain in the banking sector, he said that compared to last year, net slippages are lower, gross slippages are the function of some technical issues because there are downgrades and then there are upgrades within a few days. The net figure for gross slippages is Rs 1700 mn. The Bank has had handsome recoveries in the stressed groups which were never non-performing assets (NPAs). The Bank is still hopeful that these stressed accounts will not leave any residual cost which hits the profit and loss (P&L).
  • He clarified that they have been more than transparent on disclosures as far as real estate exposures are concerned, they have remained steady in terms of percentage. Special mention accounts (SMA) data and the SMA-I data has been provided every quarter and the overdue is just Rs 280 mn of the whole lot.
  • In terms of market share, Mr Sobti mentioned that the Bank has gained market share in the vehicle finance area, it has grown 21 percent and in the auto industry, commercial vehicles (CVs) grew around 14 per cent, cars grew 19 per cent, two-wheelers grew 24 per cent. According to him, it’s a very handsome growth in a market which is shrinking.
  • Microfinance grew by 32 per cent; the bank has not lost market share anywhere and has received some repayments towards the end of Sep-19 quarter.
  • Mr Sobti thinks the underlying fundamentals are sound and the bank will bounce back to the mid-20s, if not better, Q3 onwards in terms of growth rate.
  • The total exposure to non-banking financial companies (NBFCs) is around 3.5 per cent.
  • Speaking about IndusInd Bank’s exposure to Indiabulls group, he said that exposure was 0.35% of the bank’s exposure which has come down to 0.27%.
  • Exposure to real estate financers remains steady at 3.8 per cent and has always remained below 4 per cent.
  • On loan growth, he further mentioned that in Q1 the loan growth was 28 per cent. So, for 1HFY20, the bank is in the mid-20s. In 2QFY20, the bank got some nice and strong repayments. For IndusInd Bank to get back to the mid-20s and beyond, might not require doing unusual sort of a stretch. Mr Sobti thinks IndusInd Bank should be ending the full year at least in the 25 per cent range if not better.
  • When asked about the next CEO appointment he mentioned that the next CEO will be appointed sooner than later.

 Consensus Estimate (Source: market screener website)

  • The stock price was ₹ 1,272/- as of close price of 15-10-19 and traded at 15x /12x /9x the consensus EPS for FY20E / 21E / 22E EPS of ₹ 84/108/133 respectively.
  • Consensus target price of ₹ 1,704/- implies a PE multiple of 13x on FY22E EPS of ₹ 133/-.
By IndusInd Bank 0 Comments Read more...
07 Oct

IndusInd Bank’s Romesh Sobti: We have seen significant recoveries in stressed accounts

Updates on Indian Market:

On Friday, BSE benchmark Sensex plunged over 434 points, while Nifty slipped below 11,200-mark as growth concerns overshadowed rate cut. Earlier in the day, the Reserve Bank of India cut interest rates for a fifth straight time by 25 basis points to 5.15 per cent, stepping up efforts to kick-start economic growth. In its fourth bi-monthly policy meet for FY20, the monetary policy committee cut FY20 GDP growth forecast sharply to 6.1 per cent from 6.9 per cent, taking into account the lower-than-expected growth rate in Q1FY20. Bank majors, including HDFC Bank (-2.8%), ICICI Bank (-3.1%), Kotak Mahindra Bank (-3.3%), State Bank of India (-1.7%) and Axis Bank (-1.8%) together dragged Sensex by over 340 points. All sectoral indices except BSE IT and Teck closed lower.

IndusInd Bank’s Romesh Sobti: We have seen significant recoveries in stressed accounts

 Excerpts from an interview with Romesh Sobti – Managing Director & CEO, IndusInd Bank

·       Mr Sobti mentioned that because of the heightened speculation and conjecture on a particular account – a housing finance company, the bank was obliged to inform the stock exchanges what was the actual exposure to the entity.

·       He added that one of their big initiatives was the provision coverage ratio (PCR) which had fallen after one large infrastructure relationship they classified as NPA (non-performing asset. INDUSINDBK made large provisions for it and the same was communicated to the market as well. Their aim is to take that PCR back to at least the 60s and there is a good beneficial impact that it has come as a consequence of the tax savings. A large part of tax savings will help them to raise the PCR and is expected to reflect from Sep-19 quarter itself.

·       He clarified that exposures in various sectors have remained constant. There has not been a residual loss because of so-called stressed account. In fact, there have been very significant recoveries in the stressed accounts. They were not stressed in their books as they are not overdue.

·       Mr Sobti said even though there has been some conjecture and speculation on the higher-margin businesses like a commercial vehicle or microfinance institutions (MFIs) these portfolios are performing very robustly and well up to their credit standards seeing no adverse trends.

·       He mentioned that the deposit growth has been strong in the last few quarters and has remained robust in this quarter because of the huge drive to raise retail fixed deposits.

·       Mr Sobti expects deposit growth to show the same trend as seen in the past since INDUSINDBK is getting Rs 50-60 bn of retail deposits every quarter.

 Consensus Estimate (Source: market screener website)

 ·       The stock price was Rs 1282/- as of close price of 04-10-19 and traded at 14x /11x /9x the consensus EPS for FY20E / 21E / 22E EPS of Rs 88/112/133 respectively. Consensus target price of ₹ 1807/- implies a PE multiple of 16x on FY21 EPS of ₹112/-

By Bank, IndusInd Bank 0 Comments Read more...
26 Sep

India should aim to become largest FDI recipient: Ravi Shankar Prasad

Update on the Indian Market:

On Wednesday, Indian stock markets fell sharply. Sensex declined over 500 points (-1.29%) while NIFTY fell nearly 150 points (1.28%) and breached the 11,450 mark. Nifty Midcap and Smallcap indices plunged 2 % each. All sectoral indices, except IT, traded in the red on NSE, led by Nifty Auto (-3.84%) and Nifty Realty (-3.1 per cent). Biggest Nifty losers were SBI and Tata Motors, each of which was down over 6%. Other major losers included Maruti Suzuki, M&M, HDFC and Tata Steel.

India should aim to become largest FDI recipient: Ravi Shankar Prasad

Key takeaways from the interview of Mr Ravi Shankar Prasad, Communications and IT minister

  • Communications and IT minister Ravi Shankar Prasad expressed that India should aim to become the largest foreign direct investment (FDI) recipient globally as the country offers a huge market and investor-friendly policies.
  • With the recent announcements on tax-relief for manufacturing, India is now at par with the tax regime of countries like Vietnam and Thailand.
  • He also mentioned that country offers a huge market for companies like Apple and others to make for India and export while adding that the far-reaching decisions taken by Government of India has also been heard by Apple. Apple has started production in India in a very effective way.
  • He assured that he will make his team open and accessible for foreign investors as we need investments.
  • The minister said India has become the 5th largest economy globally and FDI has seen a jump over the last few years and grossed USD 64 bn in FY19.
  • Telecom sector attracted FDI worth USD 2.67 bn, and in electronics, computer software and hardware, the amount stood at USD 6.4 bn.
  • He further said India has been leveraging technology not just for benefits to economy and commerce but also digital empowerment.
By Macro , , 0 Comments Read more...
11 Sep

Varun Beverages raise Rs 9,000 mn via Qualified Institutional Placement (QIP)/Tech M expanding its collaboration with telecommunication giant AT&T

Update on Indian market: On Monday, Nifty ended above 11,000 mark led by a rally in the heavyweight financial stocks. Yes Bank, Maruti Suzuki, L&T were among the biggest gainers in Sensex, surging up to 4.2%. HCL Tech, Infosys, Tech Mahindra emerged among the biggest losers, shedding up to 1.5%

Varun Beverages raise Rs 9,000 mn via Qualified Institutional Placement (QIP)

VBL completed its QIP of Rs 9,000 mn on 4th Sept 2019. VBL approved the allotment of 1,47,05,882 equity shares of Face Value Rs 10/- each to the eligible qualified institutional buyers at issue price of Rs 612 per equity share aggregating to ~ Rs 9,000 mn pursuant to the Issue. Total Borrowings as on Jun-19 was Rs 32,533 mn and after this issuance, the debt will reduce to Rs 23,533 mn. VBL plans to use the QIP proceeds to repay the debts, this will reduce the interest cost and may help PAT margins to expand.

Tech M expanding its collaboration with telecommunication giant AT&T

Tech Mahindra Ltd., a leadingprovider of digital transformation, consulting and business reengineering services and solutions, announced expansion of its strategic collaboration with AT&T to accelerate AT&T’s IT network application, shared systems modernization and movement to the cloud. Tech Mahindra will assume management of many of the applications which support AT&T’s network and shared systems.

Tech M’s deal with AT&T is a multi-year agreement which will enable AT&T to focus on core objectives, including having the most advanced software-defined 5G network, and migrate the majority of its non-network workloads to the public cloud by 2024. This comprehensive program will help drive sustainable operational improvement across the network and software development domains.

When asked about the deal Mr. Jon Summers, CIO of AT&T Communications stated that their agreement with Tech Mahindra is another step forward in delivering greater flexibility across their IT operations. This includes optimizing core operations and modernizing internal network applications to accelerate innovation as AT&T march forward to their goal of a nationwide 5G network by the first half of 2020. He also mentioned that this collaboration with Tech Mahindra will ultimately help accelerate its network operations and overall technology leadership.

MD & CEO of Tech M, Mr. C P Gurnani mentioned that this deal is a step towards elevating Tech Mahindra’s long-standing strategic relationship with AT&T to help make the vision of a 5G-enabled future, a reality. As part of TechMNxt charter, Tech Mahindra is betting big on 5G — the network of the future and is focused on technology-led innovation to enable digital transformation for their customers globally.

According to the management, Tech M and AT&T aim to improve the agility in rolling out and supporting networks of the future, while improving returns on investment through technology-led transformation AT&T and Tech Mahindra will integrate several world-class technologies and platforms in areas like artificial intelligence, DevOps, data analytics and 5G.

Consensus Estimate (Source: marketscreener website)

The closing price of VBL was Rs 623/- as of 09-September-19. It traded at 43x/33x/25x the consensus EPS for CY 19E/CY 20E /CY 21E EPS of Rs 14.7/19.0/25.7 respectively· Consensus target price of Rs 720/- implies a PE of 28x on CY21E EPS of Rs 25.7 

The closing price of Tech M was Rs 720/- as of 09-September-19. It traded 15.2x/13.6x/12.3x the consensus EPS for FY20E/FY21E/FY22E EPS of Rs 47.5/53.1/58.7 respectively. Consensus target price of Rs 754/- implies a PE of 14.1x on FY21E EPS of Rs 53.1

By FMCG, Varun Beverages 0 Comments Read more...
05 Sep

VIP Industries Ltd – Weak Yuan positive for VIP

Dated : 4th Sept 2019

Update on Indian market:

Domestic equity indices BSE Sensex and NSE Nifty fell over 2 percent on Tuesday. NSE Nifty ended at 10,798, down 225 points or 2.04 %. Market sentiment got impacted due to subdued auto numbers and a set of macroeconomic data like GDP data showing the country’s growth rate slumped for the fifth straight quarter to hit an over six-year low of 5 %. Growth of eight core industries dropped to 2.1 percent in July, mainly due to a contraction in coal, crude oil, and natural gas production. PMI data showed the country’s manufacturing sector activity declined to its 15-month low in August. The IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) declined to 51.4 in August, its lowest mark since May 2018, from 52.5 in July. The Indian Rupee fell by 64 paise to reach 72 mark against the US dollar and sustained outflows by foreign portfolio investors (FPI). Gainers among Nifty50 stocks were Tech M (1.4%) and HCL Tech (0.5%) while the losers were Tata Steel (-4.5%), Ultratech and ICICI Bank(-4.4%).  

 
VIP Industries Ltd – Weak Yuan positive for VIP

Key highlights of the Interview by Mr. Dilip G Piramal, Chairman of VIP Industries on CNBC TV18

VIP Industries is into manufacturing of luggage and travel accessories and imports less than 50% of the raw material from China. The Chairman of the company in the recent interview stated that a weakening yuan helps.

He also mentioned that:

1.    August and September traditionally weakest months of the year.

2.    Luggage is a narrow segment with limited players, so they don’t see contract manufacturing or single-brand retail having a significant impact on competition.

3.    Weakening of Rupee will benefit as VIP is also getting into exports gradually.

4.      Demand has not picked up yet, VIP Ind is in wait & watch mode. No plans for price cuts to propel demand.

5.      Due to China-US trade war Chinese manufacturers have become more dependent on India which benefits the company to get better schemes and offers from them.

6.      100% Foreign Direct Investment in contract manufacturing will improve the Indian economy gradually and in 5-10 years a lot of the low-end manufacturing from China will move to India because India is a country with a very large population. A lot of the manufacturing is moving already from China to Vietnam, Cambodia but these countries do not have so much of the population. There are so many large industries at the lower-end, readymade garments being the largest and all other consumer goods industries like shoes, toys, everything else will move out of China gradually.

Consensus estimates (Marketscreener website):

·       The stock price was Rs 422/- as of close price of 3rd September 2019 and trades at P/E multiple of 36x / 29x the consensus EPS of Rs 12.2/ 15.0 for FY20E /21E respectively. 

·       Consensus target price is Rs 500/- implying P/E of 33x for FY21E EPS of Rs 15.0/-

By Consumer durable, VIP 0 Comments Read more...
30 Aug

Amazon deal not just for funds; it’s to share payment ecosystem: Future Group Founder Kishore Biyani

Dated: 29th August 2019

Updates on Indian Market:

On Wednesday, BSE benchmark Sensex plunged over 300 points intraday, but recovered to settle at 37,452, down  0.50%, while the Nifty closed below the 11,050-mark led by a rebound in HDFC and gains in IT stocks. Yes Bank, Tata Steel shares emerged among the biggest losers, slumping up to 7%. Concerns over the state of the Indian economy stayed as analysts believe government’s dole-outs may not do much to prop up demand.

Amazon deal not just for funds; it’s to share payment ecosystem: Future Group Founder Kishore Biyani

Global E-Commerce giant Amazon acquired a 49% stake in Future Group’s Future Coupons, with an option to acquire the entire stake later. Future Coupons Limited is engaged in developing innovative value-added payment products and solutions such as corporate gift cards, loyalty cards, and reward cards primarily for corporate and institutional customers. Future Coupons currently does not own a stake in Future Retail but recently subscribed to convertible warrants for Rs 20 bn.

According to the founder of Future Group – Kishore Biyani, the deal is not just to raise money but also to become a part of the payment ecosystem. The deal is basically aimed at enhancing the payments portfolio of both companies.

Mr Biyani mentioned that they have a database of 8 bn transactions and 55 mn customers. Payments are one platform where they can acquire the customer base and if the customer starts using your payment mechanism then loyalty increases. So it’s about getting into the ecosystem. Meanwhile, Amazon had also emphasized the same saying that the tie-up between the two will enhance Amazon’s existing portfolio of investments in the payments landscape in India.

Food distribution centres: Mr Biyani also stated that the company has embarked on Rs 10 bn investment plan to create distribution centres for its food-on-demand venture. The group’s supply chain company, Future Supply Solutions plan to set up about 38 such centres. Named India Food Grid, the project will connect the entire country through a single, multi-layer network.

Media reports that Future Coupons, owned by Future Group promoter Biyani, holds 39.6 million warrants in Future Retail, which when exercised, will convert into a 7.3% stake in the company. Future Coupons said the stake will be acquired for about Rs 20 bn through warrants in February. The first tranche of Rs 5bn was issued in April. Amazon is paying the remaining amount of Rs 15 bn to get 3.5% stake in Future Retail, said officials aware of the development. This translates into Amazon valuing Future Retail at more than double its current market capitalisation of about Rs 210 bn  

Consensus Estimate (Source: market screener website)

Future Retail stock price was Rs 391/- as of close price of 28-08-19 and traded at 45x /37x /28x the consensus EPS for FY20E / 21E / 22E EPS of Rs 17/17.8/19.5 respectively. Consensus target price is Rs 533/- implying PE of 27x for FY22E EPS of Rs 19.5.

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05 Aug

Varun Beverages Ltd. 2QCY19 – Hot summer boosts beverage sales

Dated: 2nd August 2019

Varun Beverages Ltd. (VBL) reported consolidated revenue growth of 36.5% YoY to Rs 28,105 mn in 2QCY19.
• Consolidation of South and West regions from 1St May 2019, extended summers, penetration into existing geographies and good growth from international geographies led to volume growth of 44% YoY. Out of total volume sales of 192 mn cases, 172 mn were sold in India and 24 mn cases in international markets (Sri Lanka, Morocco and Zimbabwe).
• Organic volume growth in India was 18.5% whereas it was 34.2% in international geographies. 
• Realisation per case declined by ~5% due to change in product mix in India post-acquisition of South and West sub-territories, the introduction of packages water in Morocco and lower sales realisation in Zimbabwe to avoid forex fluctuations. 
• Gross Margins declined by 70 bps as sugar prices increased by ~3%. Management expects raw material prices to be stable for CY19.
• Net debt stood at Rs. 37,295 mn as on June 30, 2019, as against Rs. 26,715 mn as on 31st December 2018. Debt: Equity ratio stood at 1.49x as on 30th June 2019 and Debt: EBITDA ratio stood at 2.95x for the trailing twelve months EBITDA. 
Management Commentary
• Company will start selling beverages in Zimbabwe in local currency now instead of USD. Hence, revenues may move up in the coming quarters, but there is a possibility of providing for higher currency depreciation. 
• Production of Tropicana Juices at its Pathankot plant has commenced from 1st Jul’19.
• The company plans to enter the dairy products market under its own brands in the coming quarters. It will be required to pay 1% royalty to Pepsi for selling these dairy brands.
• Capex for CY19 and CY20 is expected to remain less than depreciation cost.
• Company is running at ~60% capacity utilisation levels after the newly acquired regions.
• EBITDAM are expected to be in the range of 21-22% for consolidated business.
• Management expects ROCE levels to improve by 200-250 bps every year.

Consensus Estimate (Source: market screener website)
The closing price of VBL was Rs 623/- as of 02-August-19. It traded at 43x/ 34x the consensus EPS for CY 20E / CY 21E EPS of Rs 14.6/18.6 respectively· Consensus target price of Rs 713/- implies a PE of 38x on CY21E EPS of Rs 18.6

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