Vaibhav Global

Update on the Indian Equity Market:

On Tuesday, NIFTY closed up at 15,805 (+0.7%). Top gainers in NIFTY50 were ICICI Bank (+2.7%), HDFC (+2.6%), and Grasim (+2.6%). The top losers were Adani Ports (-2.0%), Dr Reddy (-1.1%), and HCLT (-0.9%). The top sectoral gainers were FIN SERVICES (+1.4%), PVT BANK (+1.3%) and BANK (+1.2%) and sectoral losers were MEDIA (-0.6%), IT (-0.3%) and FMCG (-0.2%).

Excerpts of an interview with Mr Vineet Ganeriwala, Group CFO, Vaibhav Global (VAIBHAVGBL) with ET Now dated 12^th July 2021

• In FY21, they grew their unique customer base by about 39% and reached the half-million mark. A part of it was induced by the pandemic. A lot of people were at home and there was high TV viewership and heightened web traffic throughout last year.
• Their business model is such that it works in all kinds of economic cycles. They have been working on it, expanding their product portfolios, and are getting good traction by retaining old customers and getting new customers on board.
• When the economies open up, some softening might be seen in certain periods but they are pretty confident of delivering their guidance to the market which is 16% to 18% constant currency revenue growth for FY22.
• They are an omnichannel player. They sell via TV as well as the web. They are present in marketplaces like Amazon, eBay, etc. They use all kinds of social platforms — Facebook, Instagram, etc. This unique positioning gives a fantastic shopping experience to their customers, a high recall value, and the value positioning which they command.
• Talking about the TV viewership, he said pay-TV may see a decline in the next few years. The decline in TV viewership of their customer demographics (above 45-50 years) is very low.
• While the pay-TV decline is seen in the US, at the same time, over the air (OTA) moves are growing. From 13 million homes, maybe seven years back now the OTA which is free-to-air homes in the US has already crossed 20 million. They are constantly increasing their presence there.
• In the new age stream of OTT, they are consciously investing and are increasing their presence there as well. They recently revamped their Roku app and tied it up with YouTube. They are present in almost all prominent digital, OTT, and streaming devices.
• While they gave guidance of 16-18% constant currency growth in FY22, they gave guidance of 15-17% for the medium and long term as well.
• While they will keep working on increasing their market share in the US and the UK, the B2C revenue has been growing at a CAGR of 16% for the last six years. Still, they have a market share of about 2.5-3%. Even in these two geographies, they are pretty confident of increasing the market share there.
• They announced their German company in January this year. Their team is physically there in Germany already. Their website is already launched in Germany. TV is already live in their partner studio. Their studio which is under construction will be live in a few days. They are pretty excited about the German venture.
• Part of the growth will come from the US and the UK; part of the growth will come from newer geographies like Germany. Once they stabilize and operationalize the German operation, they would look into other geographies like Japan.
• They will keep the cash on the balance sheet. They want to build a kitty for the future, both organic and inorganic opportunities. They plan to invest about US$2 million of capex in rolling out the German business this year and similar other organic opportunities for plans as well. Otherwise, they will look at any inorganic opportunities which come their way.
• Their inventory in terms of holding number days has been going down in the last 2-3 years. in March-20, they had about $60 million of inventory. In terms of the number of days of sales gone down by about 20% year-on-year. While the absolute number might have increased slightly, the sales growth has been much faster.
• Being a regional supply chain player, in case of any transit delays, they are able to procure material from other countries and even procure locally from the US and the UK. To that extent, their operations are very smooth and they do not see any challenge on that front.
• As a result of a delay some transient inventory would shoot up in the 2QFY22 but that would be a timing difference. As soon as the shipment situation improves, they will bring that down like they did last year.

Asset Multiplier comments:

• We believe that the company has good growth prospects due to its presence in different geographies. Also, presence in both B2B and B2C will drive the growth faster.
• consumer attention is constantly shifting. So, their omnichannel presence strengthens their positioning in the industry.

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

• The closing price of VAIBHAVGBL was ₹ 813/- as of 13-July-2021. It is trading at 54x FY21 EPS of Rs 15.
• Consensus estimates are not available for VAIBHAVGBL.

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.”