FMCG

30 Jun

Monsoon – One of the key growth drivers of the Indian economy?

Southwest monsoon arrives early in the mainland of India and it covered many Indian states and union territories but many of those states have received deficit rainfall in early June.

But wait, why does it matter to us, how the excess or deficit rainfall is going to affect the Indian economy and Investors?  So, let’s discuss

In India, the monsoon season starts in June and lasts till September. India receives more than ~70% of rainfall in this period. India is an agrarian economy and more than half of the workforce is engaged in agriculture and the allied sector. The farm sector also has a double-digit contribution to India’s GDP.

*LPA – Long Period Average

Here is the equation – Good monsoon = Good farm output = Strong consumer demand and vice versa

The monsoon has a direct relationship with the agricultural and allied sectors. Approximately half of India’s total food output is contributed by Kharif crops that are largely dependent on monsoon. A good monsoon season accelerates the farm output and boosts the income of the farmer community. This improves the spending power of rural areas which leads to strong demand sentiments. There is a hidden part of the above equation which is “Inflation”. Normal monsoon and bountiful harvest keep inflation under control since food contributes ~45% in the consumer Price Index (CPI). That is why a normal monsoon is a crucial factor for the inflation.

If we record deficit and a drought-like situation, it will directly weaken the farm production and lowers the income of the farmers. This reduces the consumption demand. At the same time, we get a hit from inflation as lower food production accelerate the food inflation. The government may have to spend towards import of food and adversely impacts the overall economy.

Sectors that have a large exposure to monsoon –

  • Consumer –India’s rural market contributes a significant share of the revenue of the Indian companies. Many Indian consumer companies are expanding their reach and significantly stepping up direct distribution in rural markets. The normal monsoon will improve the purchasing power of the rural population and may revive the sluggish rural demand and drive revenue growth.
  • Automobiles and farm equipment – Tractor companies have a direct relationship with the monsoon. A good monsoon improves the farmers’ spending capacity for better farm equipment. This will effectively result in better crop yields. Major Indian 2W makers derive ~50% of their revenue from the rural areas. This demand is again dependent on the agricultural growth.
  • Agro chemicals and fertilizers – Agrochemicals and fertilizers business directly depends on farmers’ income and agricultural growth. Companies derive their major revenues during the monsoon period. As the good monsoon sentiments enable farmers to spend more on crop care protection chemicals and fertilizers.

In the short, we need a normal monsoon for the smooth economic activity, especially in rural areas, So, let’s hope and pray for a good and normal monsoon every year.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

By Agro chemicals, Auto, Consumer, FMCG 0 Comments Read more...
11 May

Expect to maintain 20% EBITDA margins – DABUR

Update on the Indian Equity Market:

On Wednesday, NIFTY ended lower at 16,167 (-0.5%). Among the sectoral indices, REALTY (+0.7%), BANK (+0.6%), and PRIVATE BANK (+0.5%) were the gainers, whereas IT (-1.2%), AUTO (-0.9%), and CONSUMER DURABLES (-0.7%) led the losers. Among the stocks, ONGC (+3.1%), AXISBANK (+2.5%), and INDUSINDBK (+1.7%) led the gainers, while SHREECEM (-3.3%), BAJAJFINSV (-2.2%), and LT (-2.1%) led the losers.

Excerpts of an interview with Mr. Mohit Malhotra, CEO of Dabur India (DABUR) with CNBC-TV18 on 6th May 2022:

  • On the back of the price increases that have happened across the industry, DABUR foresees a reduction in the volumes of the overall FMCG market.
  • In 4QFY22 the FMCG market declined by ~4%. As compared to the FMCG market, DABUR’s volumes grew by ~2%. The tonnage growth for the 4QFY22 stood at ~12%. While evaluating the volume growth it becomes 2% as the company sells juices in the beverage segment which have a lower value.
  • The company expects that it will grow at a mid-single-digit volume growth and low double-digit value growth with the support of price hikes and increases in volumes. It expects to grow ahead of the market and continue to gain market share across all categories.
  • The oral care business has grown at ~2.5% on a high base of last year and in toothpaste, DABUR gained a market share of 20bps. The oral care business is performing well in terms of revenue and profitability, and the company has also taken some price hikes to mitigate the cost inflation.
  • Dabur Red and Meswak also growing significantly. Herbal toothpaste which is a new category is also performing significantly well.
  • The overall hair care business grew by 16% on a YoY basis. In the hair care business, the market declined by ~6.5% but DABUR grew by ~3%.
  • In the overall hair oil market, DABUR gained ~70bps of market share and in all sub-segments of hair oil, it continues to gain market share. In the shampoo segment also the company grew ahead of the market and gained ~40bps market share.
  • On the back of the high base of 4QFY21, the growth looks a little bit muted in 4QFY22. However, the full-year growth numbers are very robust, the businesses are in good positions and the fundamentals also remain intact.
  • On operating margins the company targets to maintain ~20% EBITDA margins through further price hikes and cost-cutting measures.
  • The company also taking some measures to expand distributions as rural contributes ~47% of total business. The company expects by the end of 1QFY23 the rural consumption to be back to normal levels on the back of good monsoon and crop sentiments. It expects the rural business will continue to grow higher than urban business.
  • The company continues to invest in its brands and the company is in a good position in advertising spending.

Asset Multiplier Comments

  • The geopolitical tensions coupled with high inflation are liked to impact the demand for discretionary items in the near term. Though companies have taken measures such as reduction in grammage or price hikes, these have not been sufficient to abate the high inflation. The margins of the companies are expected to remain under pressure in the medium term.
  • Market share gains from its peers in all categories, entry into adjacent categories and focus on premiumization position DABUR well despite shorter-term headwinds.

Consensus Estimates: (Source: Market screener website)

  • The closing price of DABUR was ₹ 510/- as of 11-May-2022.  It traded at 44/ 38x the consensus earnings estimate of ₹ 11.5/13.4 for FY23E/FY24E respectively.
  • The consensus target price of ₹ 628/- implies a P/E Multiple of 47x on the FY24E EPS estimate of ₹ 13.4/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Dabur, FMCG 0 Comments Read more...
05 May

Q1 festive sales indicating a bumper quarter  – Titan

Update on the Indian Equity Market:

The Indian indices closed flat. NIFTY ended at 16,683 led by TECHM (4.2%), HEROMOTOCO (4.1%), and INFY (3.3%). INDUSINDBK (-4.1%), BRITANNIA (-3.4%), and SUNPHARMA (-3.1%) were top losers.

Among the sectoral indices, IT (+2.1%), METAL (+0.6%), and AUTO (+0.4%) were the top gainers. REALTY (-1.6%), HEALTHCARE (-0.8%), and PHARMA (-0.8%) led the sectoral laggards.

Excerpts of an interview with Mr. CV Venkatraman, MD, Titan with ETNow on 04th May 2022: 

  • 4QFY22 was a challenging quarter because of Covid 3.0, because of the global crisis in March which put the price of gold in a spin, rising a lot and also being very volatile. Naturally, consumer sentiment in the jewelry market was dampened and thus Company was not surprised by a decline in sales in Q4.
  • The management looks at annual performance as opposed to every quarter. For FY22 as a whole, the management was exceedingly satisfied despite Q4 pressures FY22 ended well.
  • The company’s sales growth for FY22 is upwards of 35% on a pretty normal base. The jewelry business in FY21 itself had recovered to the FY20 level. The profit grew almost 100% over FY21, indicating sustained momentum and growth.
  • The management gives a lot more weightage to the company’s competitive position in the industry which is tracked in real-time. The management is very confident that it is rising demonstrating one more step towards its ability to continue to compete much better in the future.
  • Titan has begun April on a very good note. Management is very confident about how April and early May are showing signs that the issues which clouded Q4, particularly Covid on one hand and the intense global crisis which was in its early stages in March. Both the threats look watered down and therefore the environment is very conducive to growth and it expects Bumper Akshay Tritiya sales.
  • The Bharat story is very strong for Titan across all formats and it’s seeing that playing out month after month and particularly in the April-June quarter, there will be a lot of semi-urban, and rural weddings which will certainly benefit through. The company has been penetrating deeper and deeper into small towns with around 50% tier-3 cities where large format Tanishq stores are being opened.
  • The Watch segment is a 30-year plus business and in the WFH situation, the demand for new watches and different kinds of watches is low. So it is the most challenged category out of all the categories.
  • The Titan EyePlus brand is well positioned and therefore the management is unmoved about one quarter’s EBIT margin dilution as it is looking at a two-three-year window for the category and a similar two-three-year window for a category like Analog Watches which are intrinsically an accessory that has been under some kind of pressure.
  • The jewelry category is a Rs 300,000 crore plus category; Titan accounts for less than Rs 30,000 crore. There is no brand like Tanshiq in this country that has multiple dimensions and therefore the management believes the runway of growth for Tanishq is very long as the majority of the market is unorganised.

Asset Multiplier Comments:

  • Titan Company has suffered over the last 2 years due to Covid-19 waves washing out traditionally bumper quarters for the company. The under penetration of organised players, strong brand image, and an inherent uptick in jewelry demand make it one of the best-placed players in the segment and has significant tailwinds for growth.
  • Titan’s other segments such as Eyewear, and Apparel (Taniera) are also dominated by local small-scale players. The Titan brand, increasing consumer preference towards branded goods, and rising per capita income are key levers for the company’s growth in these segments.

 

Consensus Estimate: (Source: Marketscreener website)

 

  • The closing price of Titan was ₹ 2,262/- as of 05-May-2022.  It traded at 69x/ 54x the consensus earnings estimate of ₹ 33/42 for FY23E/FY24E respectively.
  • The consensus target price of ₹ 2,720/- implies a P/E Multiple of 65x on the FY24E EPS estimate of ₹ 42/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

By Titan , , 0 Comments Read more...
31 Mar

Travel returning to pre-pandemic levels – VIP Industries


Update on the Indian Equity Market:

On Thursday, NIFTY settled at 17,465 (-0.2%) near the day’s high of 17,334. FMCG (+1.2%), MEDIA (+0.8%), and PRIVATE BANK (+0.3%) were the top sectoral gainers. HEALTHCARE (-1.3%), PHARMA (-1.2%), and PSU BANK (-0.8%) led the sectoral losers. Among the NIFTY50 components, JSWSTEEL         (+2.2%), M&M (+2.1%), and BRITANNIA (+2.0%) led the gainers. HINDALCO (-4.8%), DIVISLAB (-2.5%), and APOLLOHOSP (-2.0%) led the losers.

Travel returning to pre-pandemic levels – VIP Industries

Excerpts of an interview with Mr. Dilip Piramal, Chairman, VIP INDUSTRIES (VIP) with CNBC-TV18 on 29th March 2022:

  • Demand has been good since Q3FY22, but it was still 8% lower than pre-pandemic levels. The company expects a significant bounce back in Q1FY23 owing to the lifting of COVID-19 induced international travel restrictions ending. There are signs of pent-up demand and revenge travel.
  • Marriages have been subdued due to COVID-19 which is now getting into full swing ahead of the wedding season. Another driver for volume growth for the company is that educational institutions have been opening up after almost 2 years, which has boded well for the backpacks segment.
  • 60% of the previous raw material supplies of the company earlier used to come from China, which has now come down to around 10%. The company is increasingly sourcing key raw materials for soft luggage from Bangladesh fulfilling about 50% of the requirement.
  • The demand for hard luggage is picking up and the company has enough in-house capacity in Sinnar, to provide for the increasing demand, it expects Q1FY23 to be a bumper quarter owing to seasonality. However, the company is wary about supply-side issues that are prevalent currently.
  • Margins have been topsy-turvy over the past year. Raw material cost escalation from China, as it is the largest supplier of the key raw materials to VIP’s suppliers, freight and logistics costs are at an all-time high, so it’s difficult for the management to give EBITDA margin guidance. However, it is targeting the margins to be in the mid-teens.
  • The company has taken a price hike in Q4FY22 of 5% over Q3FY22, following a price hike in October-21. As the input cost inflation persists due to extreme fluctuations in the pricing it’s difficult to take calibrated price hikes.
  • The company has currently a market share of 47%, the company has an aspirational target of crossing Rs. 20 bn in sales with mid-teen EBITDA Margins and increasing the market share to 50%.

Asset Multiplier Comments

  • Luggage being a proxy play to the travel & tourism industry was among the worst impacted sectors owing to pandemic in FY21, FY22. With school and offices re opening, travel resuming and wedding season around the corner we see demand visible. VIP Industries is well positioned to tap this opportunity due to increased movement of leisure and business tourist both domestically and internationally..
  • Strong manufacturing capabilities in Bangladesh (for soft luggage) gives VIP an edge over its peers. By reducing dependence on China and sourcing from Bangladesh, we expect VIP to be able to manage margin pressures effectively.

Consensus Estimate: (Source: market screener website)

  • The closing price of VIP was ₹ 745/- as of 31-March-2022. It traded at 57x/ 41x the consensus earnings estimate of ₹ 13/ 18/- per share for FY23E/FY24E respectively.
  • The consensus target price of ₹ 705/- implies a P/E Multiple of 39x on the FY24E EPS estimate of ₹ 18/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By VIP , , 0 Comments Read more...
22 Nov

Increasing prices of products a last resort – ITC

Update on the Indian Equity Market:

On Monday, NIFTY closed in the red at 17,417 (-2.0%). The top gainers in NIFTY50 were BHARTIARTL (+3.8%), JSWSTEEL (+1.6%), and ASIANPAINT (+1.0%). The top losers were BAJFINANCE (-5.6%), BAJAJFINSV (-4.8%), and TATAMOTORS (-4.6%). Sectoral losers were PSU BANK (-4.5%), REALTY (-4.2%), and MEDIA (-3.9%). There were no sectoral gainers for the day.

Excerpts of an interview with Mr. B Sumant, Executive Director, ITC with Business Standard dated 22nd November 2021:

  • Responding speedily to some of the emerging trends, ITC launched 120 products in FY21 and many of them were first to market products. These included sanitization products, such as Savlon disinfectant spray and for ease of cooking, the ITC Master Chef frozen snacks, pastes, and gravies were launched.
  • Innovations of ITC are crafted based on long-term consumer trends. ITC expects the demand for smart cooking solutions to be sustainable in the longer term and health and nutrition products gain strength with increasing awareness among people.
  • To enhance accessibility from the lower end of the market, ITC come up with low-unit-price products across segments like deodorants, ghee, and hygiene.
  • The demand for top-end innovative products as well as low-unit-price products from top-end people continued as they have money in their hand, they are looking for avenues to spend.
  • Raw material inflation affected the entire industry in 2QFY22. ITC did not pass the effect of raw material price hikes to consumers, as increasing the prices of the products is the last option. Rather than price hikes, ITC is focusing on effective cost management, premiumization, favourable business mix to mitigate costs and enhance efficiency.
  • The urban demand recovered faster after the 2nd Covid wave; it has moved from -5% to 14% for the industry as well as rural demand also increased from 1% growth to 17% growth over the FY21.
  • For ITC, the rural percentage has gone up even further, the share of rural sales has increased from 28% to 29%, while the urban share is around 71%. ITC has a steady focus on driving distribution penetration into rural India by various strategies.
  • Out of total sales, 7% of sales comes from E-Commerce. The modern sales also seeing a resurgence after the 2nd Covid wave because all outlets are opened. all other channels are higher than pre-Covid levels, but the wholesale which was impacted by the restrictions in inter-state movement during the pandemic.
  • ITC is witnessing encouraging results in supply chain optimization and cost efficiency due to the digitalization and use of technology. ITC leveraged digital technology across every node of supply chain.
  • ITC E-Store has been an effective platform to gain consumer insights and ITC reconstruct their entire strategy for E-Commerce.

 Asset Multiplier Comments

  • Hygiene products such as sanitisers and disinfectant sprays gained prominence during CY20 when the spread of the virus was rampant. Now, as the economy is returning to normalcy, demand for these products has reduced.
  • Rising commodity costs, freight rates and logistical challenges are the headwinds facing the industry and company.

Consensus Estimate: (Source: market screener and Tikr.com websites)

  • The closing price of ITC was ₹ 231/- as of 22-November-2021.  It traded at 19x/17x/15x the consensus earnings estimate of ₹ 12.2/13.8/15 for FY22E/23E/24E respectively.
  • The consensus price target is ₹ 270/- which trades at 20x the earnings estimate for FY23E of ₹8/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Consumer, FMCG, ITC 0 Comments Read more...
28 Oct

People are getting more comfortable with shopping online- Titan

Update on the Indian Equity Market:

On Thursday, the Indian equity benchmarks declined the most in six months amid broad-based selling in the market. The Nifty50 ended the day at 17,857, down 1.9%. Among the Nifty50 components, ADANIPORTS (-7.4%), ITC (-5.6%), and ONGC (-4.4%) were the top losers. INDUSINDBK (+2.6%), LT (+1.8%), and ULTRACEMCO (+1.2%) were among the few stocks that ended in the green. Among the sectoral indices, PSU BANK (-5.2%), REALTY (-3.8%), and METAL (-3.4%) led the losers. There were no sectoral gainers.

Mr. Ajoy Chawla, CEO of Titan’s jewelry division highlighted the impact of the pandemic and the way forward in an interview with Business Today on 26th October 2021:

  • Titan’s jewelry division witnessed a strong recovery in demand after the second wave of COVID-19 pandemic across its brands and posted a 78 percent growth year-on-year in 2QFY22.
  • Titan’s jewelry arm comprises 4 brands- Zoya, Tanishq, CaratLane, and Mia. Tanishq is their most known brand, with over 350 stores in 200 cities. Zoya is their luxury brand while CaratLane is an omnichannel brand. Mia offers contemporary, workwear jewelry.
  • The pandemic impacted their operations. Zoya only had three boutiques, two in Mumbai and one in Delhi. Since Mumbai and Delhi form the bulk of the customer base, the impact was severe during the lockdown. A boutique in Bengaluru was opened just after the first lockdown.
  • Zoya bounced back strong, on the back of multiple initiatives, and reported 15% retail growth in FY21 over FY20. The Bengaluru boutique has taken off, and six Zoya galleries have been added in some Tanishq stores in metros. As a result of digital and remote shopping initiatives, the recovery was quick.
  • While people are comfortable buying jewelry online, not all of the purchase is online. A part of the journey- shortlisting aspect happens online and then the final part takes place offline. The offline could be at the person’s home or at the store.
  • In the case of Tanishq, revenue per pure online transaction has jumped from ₹ 14,000-15,000 to 30,000-35,000. This indicates more customers are willing to buy slightly higher ticket prices purely online without any offline element.
  • Zoya’s HNI customer base was pretty scared of the pandemic and did not want to venture to the stores. All engagement had to move online or through personal interactions over a video call. The company is curating experiences for its customers at home, such as serving them a Starbucks coffee or getting a special meal delivered from a Taj hotel in case of special occasions.
  • In the case of the combination of online and offline- phygital, the ticket sizes are comparable to what the company gets purely offline.
  • With travel restrictions and few celebrations, customers have not spent money on many other things. All that saved money is being spent and the jewelry category is up there in terms of wallet share.
  • The company currently has four boutiques and six galleries across seven towns for Zoya. They plan to have two-three more boutiques in FY23. The company plans to have 8-10 boutiques and 15-20 galleries in the next 18-24 months.

Asset Multiplier Comments

  • Titan has managed to come out of the pandemic with a strong consolidated position in urban markets due to its unique customer experience-centric approach and brand trust it has garnered throughout the years.
  • Titan is one of the foremost adopters of BIS Jewellery Hallmarking. It has managed to increase its market share from the unorganized players who are unable to offer the same level of assurance for purity that is commonly associated with jewelry purchases.
  • Segment-wise brands, expansion across geographies, phygital and omnichannel strategies are the drivers for the long-term growth of the company.

Consensus Estimate (Source: market screener and investing.in websites)

  • The closing price of Titan was ₹ 2,392/- as of 28-October-21. It traded at 101x/ 79x/ 65x the consensus EPS estimate of ₹ 23.7/ 30.4/ 36.6 for FY22E/ FY23E/FY24E respectively.
  • The consensus target price of ₹ 2,072/- implies a PE multiple of 57x on FY24E EPS of ₹ 36.6/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By FMCG, Titan , 0 Comments Read more...
01 Sep

Tanishq stands to benefit from Hallmarking – Titan

Update on the Indian Equity Market:

On Wednesday, NIFTY closed 0.3% down at 17,076. Top gainers in NIFTY50 were ASIANPAINT (+3.1%), TATAMOTORS (+2.6%), and SBILIFE (+1.9%). The top losers were M&M (-3.0%), CIPLA (-2.7%), and TATASTEEL (-2.7%). The top gaining sectors were REALTY (+5.6%), CONSUMER DURABLES (+2.0%), and PSUBANK (+0.9%), while the top sectoral losers were METAL (-1.8%), IT (-1.3%), and FINANCIAL SERVICES (-0.2%).

Tanishq stands to benefit from Hallmarking – Titan

Edited excerpts of an interview with Mr. Ashok Sonthalia, Chief Financial Officer, Titan with CNBCTV18 on 1st Sep, 2021:

  • At the time when brokers can no longer sell digital gold, Tanishq has launched digital gold.
  • While explaining the rationale behind the idea, Mr. Sonthalia informed that digital gold was one of the ways consumers wanted to lock-in the gold price. So, the company decided to experiment with it.
  • Digital gold has been launched recently in some pockets, response of which is yet to be seen. Company hopes that digital gold provides another way to consumers who want to invest with Tanishq in gold. They can buy at appropriate time and convert it into physical form.
  • Smaller players are facing severe challenge due to Hallmarking and it has led to lot of supply chain challenges.
  • Titan has been preparing for gold hallmarking for long time, without expecting any extension from the government. The well advance preparation has helped Tanishq to be 100% hallmarked currently.
  • The whole Hallmarking Unique ID (HUID) process is creating some teething trouble, due to which supply chain has gotten elongated by 5-7 days. This leads to having more inventory to that extent. But other than that, Tanishq is going to be fine on hallmarking and the company believes that these teething issues will also be sorted out going forward.
  • Government has been flexible regarding hallmarking as it has given a lot of time to the industry. The rule was introduced in Jun-21, no penalties were imposed until the end of Aug-21, so that manufacturers, wholesalers, and retailers of gold jewelry get enough time to comply.
  • Hallmarking will be positive for industry as consumers will be confident of buying gold from anywhere.
  • According to Mr. Sonthalia, the earlier model of pure gold and low making charges will be challenged now. Tanishq is in a favorable position as it always had pure gold plus making charges.
  • Tanishq will gain from hallmarking as it will be challenging for unorganized and small player to correct and re align their model now.
  • Mr. Sonthalia commented that the recovery of Tanishq has been pretty good post the second wave of COVID-19. Everyone in the organised sector including Tanishq is doing well.
  • According to him, the shift from unorganised to organised was a slightly longer-term story, but some of the elements have given an impetus and to that extent, organised sector is gaining from the unorganised sector and Tanishq is also benefitting.
  • His comments on 2QFY22E:
    • Tanishq jewelry and eyewear are in the growth phase.
    • The stores are still not fully operational. They are running between 80%-90%.
    • While Physical stores are operating at a slightly less capacity, digital and omni have supplemented to some extent.
  • According to company guidance given earlier, Titan plans to open 35 stores in FY22E. 11 stores have already been opened.
  • Company is working on physical and digital sales point aggressively. In 1QFY22, the physical retail stores expansion plan got impacted due to second wave but it is confident of completing the target by Mar-22E.The focus and investment on digital and omni is also going in a big way.
  • Many time the enquiry and selection of jewelry starts digital or in video calls but ends in physical stores. So, stores are not going to lose their importance and Titan plans to be very aggressive there too.

 

Asset Multiplier Comments

  • We believe that Mandatory hallmarking will standardize the purity of gold jewelry. It will take the industry towards being more structured and even further push the ongoing shift of business and customers from the unorganised to the organised jewelry segment.
  • With re-opening of stores, increasing wedding sentiments and rising vaccination pace, jewelry demand is expected to improve further. Hallmarking will benefit Tanishq as it has competitive edge over other small players who are facing issues.

 

Consensus Estimate (Source: market screener website)

 

  • The closing price of Titan was ₹ 1,944/- as of 1-Sep-21. It traded at 94x/68x/57x the consensus EPS estimate of ₹ 20.4/28.4/33.8 for FY22E/ FY23E/FY24E respectively.
  • The consensus target price of ₹ 1,737/- implies a PE multiple of 51x on FY24E EPS of ₹ 33.8/-.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

By Titan 0 Comments Read more...
14 Jul

Not very concerned about 3rd wave impact on biz– Dabur India

Update on the Indian Equity Market:

On Wednesday, NIFTY ended marginally higher at 15,809 (+0.3%) as it could not sustain the intraday higher levels. Among the sectoral indices, IT (+3.2%), PHARMA (+0.3%), and MEDIA (+0.2%) ended higher while REALTY (-1%), PSU BANK (-0.5%), and AUTO (-0.3%) led the losers. Among the stocks, WIPRO (+7%), TECHM (+2.6%), and INFY (+2.1%) led the gainers while MARUTI (-1.4%), ADANIPORTS (-1%), and HINDUNILVR (-1%) led the losers. 

Excerpts of an interview with Mr. Mohit Malhotra, CEO of Dabur India (DABUR) published in Business Standard on 14th July 2021:

  • Share of Dabur’s healthcare portfolio went up to 45 percent from 30 percent and essentials like oral did well, while the share of skincare, hair oil, and foods shrank. 
  • Being well aware that the discretionary portfolio may not do well, the company has diversified into areas like edible oil and launched several other products.
  • The inflation has increased the input costs by 5-6 percent as it has hit the entire bucket of the business. 
  • The company has taken a 3 percent price hike and initiated cost optimisation measures. The company has planned to cut down Rs 1000 mn worth of costs in FY22, which won’t be enough. The pressure on operating margin can’t be ruled out till the December quarter.
  • Sales through e-commerce channels have grown to 8 percent from 2 percent before Covid. In FY21, in spite of travel restrictions, Dabur earned 6 percent of the sales through e-commerce.
  • The company has begun construction of their eighth plant, in Madhya Pradesh at an estimated cost of Rs 5,500 mn to meet current and future demand, taking advantage of the incentives provided by the government under its ‘Atmanirbhar Bharat’ program. The plant will help the company meet the demand for the next 10-12 years.
  • Earlier, the company was spending 5-6 percent on advertising through digital media, but now the company is putting 25 percent of its budget into digital. Last year, the company increased its media spending, but now it has cut it down to 8-10 percent of sales as growing costs are a threat.

Asset Multiplier Comments

  • People being eager to go back to offices and as the government has ramped up vaccination, it seems that the impact of the 3rd covid wave may not be as severe on the operations of Dabur as the second wave.
  • The increase in demand for health and wellness products is expected to continue post-Covid. The increase in market penetration of these products bodes well for Dabur.

Consensus Estimate: (Source: market screener website)

  • The closing price of DABUR was ₹ 586/- as of 14-July-2021.  It traded at 56x/ 49x the consensus earnings estimate of ₹ 10.5/ 12.1 for FY22E/FY23E respectively.
  • The consensus target price of ₹ 590/- implies a PE multiple of 49x on FY23E Earnings of ₹ 12.1/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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21 Jun

We are clearly looking for sustained profitable growth – ITC

Update on the Indian Equity Market:

Nifty 50 closed with gains of 63 points to 15,746 on Monday. Dalal Street investors defied the global trend to rescue benchmark indices from the negative territory on Monday.

Among the sectoral indices, PSU BANK (+4.11%), REALTY (+2.33%), and BANK (+0.91%) were top gainers while AUTO (-0.41%) and IT (-0.28%) were top losers.

Among the stocks, ADANIPORTS (+5.13%), NTPC (+3.96%), and TITAN (+1.79%) were the top gainers. UPL (-4.38%), WIPRO (-1.16%), and TATAMOTORS (-1.01%) were the top losers.

 

We are clearly looking for sustained profitable growth: ITC

Edited excerpts of an interview with Mr. Sanjay Puri, Chairman and Managing Director at ITC with Business Standard dated 21st June, 2021:

The second wave of the Covid-19 pandemic has hit business sentiment, but ITC chairman and managing director, Sanjiv Puri, says that with vaccination picking up pace, consumers will gain confidence and the economy will recover progressively.

  • He says that certain business segments of the company were impacted by the pandemic last year, but recovered in the second half and revenues from the non-cigarettes FMCG business – created organically and inorganically– grew 16 per cent on a comparable basis in FY21, which is nearly twice that of the industry peer group average.
  • The second wave have impacted sentiments severely, both in rural and urban centers. There has been a surge in cases in rural India this time and therefore rural sentiment has been under some pressure resulting in tendency to conserve.
  • Monsoon is expected to be good and given the fact that manufacturing was not shut during the lockdowns this time, the loss of non-agricultural income could be lower than that of last year. With pace of vaccination increasing, cases reducing, increasing mobility and consumer confidence economy is expected to recover.
  • ITC’s FMCG revenues and margins were higher on YoY basis but lower sequentially in 4QFY21. Mr. Puri commented that ITC is clearly investing for sustained profitable growth. Following a strategic review of the portfolio, the lifestyle retailing business has been shrunk. The food business has been reorganized into clusters to enable sharper focus. In addition, purposeful innovation, multi-channel growth engines, scaling up market reach, and digitalization are enhancing competitiveness. The interventions are evident in FMCG margins, which have gone up by 640 bps in the last four years.
  • He suggested to look at the growth of the business on YoY basis. In 4QFY21 the FMCG margins were up 115 bps YoY except the education and stationery products business, lifestyle retailing business and Sunrise which has been acquired in FY21.
  • ITC will continue to look for value accretive inorganic opportunities. ITC has acquired Sunrise, Savlon and Nimyle in the past few years. These have grown manifold since their acquisition.
  • ITC is exploring an “alternative structure” for hotels. Given the pandemic, this decision will be revisited and final decision will be taken when things normalize.
  • ITC have adopted an asset right strategy for the hotels business, which is making appreciable progress with a healthy generation of leads and pipeline for management contracts.
  • ITC have progressively invested in a number of Integrated consumer goods manufacturing and logistics facilities (ICMLs) in the first phase and any further expansion will be paced out over time. However, investments across segments will continue towards capacity gearing in line with demand, technology upgrades and cost reduction to strengthen competitiveness and accelerate growth.
  • ITC have been trading at 2013 levels when the benchmark indices have gone up sharply. His message to the investors is that ITC is sharply focused on creating long term sustained value for stakeholders. From FY17 to FY20, ITC’s EPS grew by 47%. The Return on segment capital employed have moved up from 61% in FY17 to 72% in FY20. In FY21, some business segments were impacted on account of the pandemic, but they recovered in 2HFY21. A number of structural interventions have been made to sustain higher levels of competitiveness, growth and profitability.
  • The company is building an FMCG business at scale, leveraging unique enterprise strengths, purposeful innovation, investment ibn digitization, among others. In other segments like agriculture and paperboards, ITC continues to strengthen their leadership position and build new levers of growth and competitiveness.
  • In the agri business, ITC is accelerating value added agricultural products, while in paperboards, sustainable and plastic substitute packaging solutions will be a new vector of growth. ITC will continue to explore more opportunities that lie at the inter-section of their unique enterprise strengths, sustainability, and digital.

 

Asset Multiplier Comments

  • ITC’s business segments have been performing well on the back of demand growth, aiding topline performance. With margins expected to improve moving forward we believe profitability to grow further.
  • We believe lockdowns are temporary hurdles and expect recovery post 1QFY22E. We believe stable cigarette taxation and FMCG profitability are key positives in near term.

 

Consensus Estimate (Source: tikr. com and market screener websites)

  •  The closing price of ITC was ₹ 205/- as of 21-Jun-21. It traded at 16x/15x the consensus EPS estimate of ₹ 12.5/14.0 for FY22E/ FY23E respectively.
  • The consensus target price of ₹ 250/- implies a PE multiple of 18x on FY23E EPS of ₹ 14.0/-.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

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15 Jun

Green shoots visible as unlock begins – Titan

Update on the Indian Equity Market:

On Tuesday, Nifty closed in the green at 15,869 (+0.4%). Among the sectoral indices, Realty (+1.3%), PVT Bank (+1.1%), and Media (+2.0%) closed higher. Pharma (-0.9%), PSU Bank (-0.3%), and Metal (-0.1%) closed in the red. Asian Paints (+2.9%), HDFC Life (+1.8%), and Axis Bank (+1.7%) were the top gainers. Divis Labs (-1.6%), Adani ports (-1.6%), and Coal India (-1.4%) were among the top losers.

Excerpts of an interview of Mr Ajoy Chawla, CEO, Jewellery Division, Titan with CNBC-TV18 dated 14th June 2021:

  • Speaking about the shop openings, Mr Chawla said the company is focusing to reopen shops for the past 2 weeks.
  • The recovery is expected to be slow, but there are green shoots visible as the unlock begins in certain states.
  • Speaking about pent-up demand, he said the wedding demand is likely to come back in 2HFY22E. Wedding buying is complex and people do take time to buy.
  • The company is witnessing pent-up demand for small occasion buying like birthdays, and anniversaries.
  • The overall market share is in 5-6% mark from 4%, 2 years back.
  • The company is gaining market share as new customers are coming in. The recovery is better in the case of a new buyer where unlock has begun.
  • Independent jewellers are under stress financially. The trust factor and safety protocol are higher in organized players like Titan, which attracts more people.
  • The company is targeting 100% vaccination for all partners, front line, and store staff.
  • He said that few people have started buying on e-commerce channels on the digital play, which is surprising. However, the ticket size is smaller (below Rs 50,000).
  • Speaking about products, he said, the gold prices have again gone up. The biggest customer need will be lightweight jewellery as the budgets don’t increase in the same proportion. The company is working on lightweights products and will launch as markets open up.

Asset Multiplier comments:

  • We believe people will not postpone weddings beyond 1QFY22E as the future situation is uncertain. This might lead to higher jewelry buying from 2QFY22E.
  • Stress in the organized sector might help Titan to increase its market share by adding new first-time customers.

 Consensus Estimate: (Source: market screener and Investing.com website)

  • The closing price of Titan Ltd was ₹ 1,722 as of 15-June 2021.  It traded at 79x/62x the consensus Earnings per share estimate of ₹ 21.8/27.9 for FY22E/FY23E respectively.
  • The consensus average target price is ₹ 1,532/- which implies a PE multiple of 55x on FY23E EPS of 27.9/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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