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07 Apr

Business to focus on the non-covid segment  – Dr Lal PathLab

Update on the Indian Equity Market:

On Thursday, NIFTY settled 170 points lower at 17,639 (-0.9%). ADANIPORTS (-3.5%), TITAN (-3.3%), and HDFC (-2.8%) were the top losers. AXISBANK (+2.3%), DIVISLAB (+1.7%), and HINDUNILVR (+1.3%) were the gainers. Among the sectors, OIL&GAS (-2.2%), CONSUMER DURABLES (-1.7%), and METAL (-1.7%) led the losers HEALTHCARE INDEX (+0.6%), PHARMA (+0.4%), and REALTY (+0.03%) were the only gainers.

Excerpts of an interview with Mr. Om Manchanda, Managing Director, Dr Lal PathLabs. (LALPATHLAB) with CNBC-TV18 on 6th April 2022:

  • COVID cases have declined sharply over the last two months. LALPATHLAB’s business is expected to remain focused on non-COVID. If this is the way things move, the entire industry will have to deal with the COVID base in the previous year’s business.
  • LALPATHLAB is looking at multiple growth triggers, one of which is geographical expansion. They recently acquired a lab in Mumbai and are looking at expanding their footprint in the West zone. They are also expanding their organic footprint in South India.
  • The second growth trigger would be a hypothesis that wellness testing will tend to increase. Once things become stabilized, they will focus on wellness testing
  • Revenue per patient has been highly volatile in the last two years because the test mix has been different on a quarter-on-quarter basis. During the second wave, they saw COVID-alike tests going up so the revenue per patient was very high.
  • Pricing of COVID testing has been falling sharply. Initially, it was about Rs 4,000-4,500 and now it is hovering around an average of Rs 500-600 per test. This has impacted revenue per patient every quarter. LALPATHLAB’s revenue per patient for non-COVID has been around Rs 700 for many years. As they have always been dependent on volume growth more than pricing growth, they expect revenues to stabilize around Rs 700 per patient if there is no covid business further.
  • They had a structured transaction where they were waiting for FY22 to get over. Now that it has ended, LALPATHLAB will get a little more aggressive in Direct-to-Consumer activities in Mumbai as well as the West zone.
  • As of now, the Suburban brand after the acquisition is to be kept separate and LALPATHLAB will continue to focus and leverage the Suburban franchise in Mumbai.
  • Companies in this space have found it difficult to grow organically in non-core markets. So many of the regional players have grown in their core markets for them to grow faster from here on especially on a higher base. One will have to resort to inorganic growth as there is no other option.
  • FY23 will be a crucial year for stabilization as the FY21 and FY22 numbers are not correct representatives of the numbers. The inorganic component of driving growth is expected to continue for large companies.
  • Competitive intensity has gone up in the last two years as many players have entered this space. Earlier there used to be traditional business models but now the market has evolved in multiple directions after the pandemic.
  • There are now aggregators, companies with full-stack offerings where they do pharmacy, diagnostics, and even hospitals have become aggressive on retail pathology. So overall, the competitive intensity has gone up in the last two years and how these companies perform financially remains to be seen since there has been a lot of air cover due to covid in the last two years.
  • How this all pans out in the first six months of FY23 remains to be seen.

Asset Multiplier Comments

  • We expect operating leverage to be one of the synergies created out of the suburban acquisition lab in Mumbai.
  • We expect LALPATHLAB’s established brand identity in organized diagnostics to aid cost efficiencies and economies of scale.
  • We expect multiple growth levers such as the shift from unorganized to organized business, and volume growth in the non-COVID segment through organic and inorganic routes to aid revenue growth and improve margin trajectory.

Consensus Estimate: (Source: market screener websites)

  • The closing price of LALPATHLAB was ₹ 2,835 /- as of 07-April-2022. It traded at 59x/ 50x the consensus earnings estimate of ₹ 48/ 57- per share for FY23E/FY24E respectively.
  • The consensus target price of ₹ 3,090 /- implies a P/E Multiple of 54x on the FY24E EPS estimate of ₹ 57/-

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 hshould 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 Dr Lal Path Labs , 0 Comments Read more...
16 Feb

Deal closures in the USD 700mn- 1bn band expected to continue – Tech Mahindra

Update on the Indian Equity Market:

On Wednesday, NIFTY50 ended the volatile session in the red at 17,322 (-0.2%). Among the sectoral indices, REALTY (+1.1%), CONSUMER DURABLES (+0.8%), and PHARMA (+0.5%) were the few gainers. PSU BANK (-1.2%), MEDIA (-0.6%), and METAL (-0.6%) led the laggards.

Among the NIFTY50 constituents, DIVISLAB (+3.1%), ONGC (+2.7%), and ADANIPORTS (+2.3%) led the gainers. SBIN (-1.9%), ICICIBANK (-1.7%), and NTPC (-1.7%) led the laggards.

Edited excerpts of an interview with Mr. Milind Kulkarni, CFO, Tech Mahindra (Tech M) published in Financial Express on 16th February 2022:

  • Due to furloughs, Q3 was a slow quarter. In 3QFY22 the communication, media, and entertainment (CME) vertical grew faster than the enterprise vertical for Tech M.
  • There are supply-side pressures for which the company has various offset actions. It has increased its presence in tier-II and tier-III cities. The company expects to mitigate the supply side pressure over the next few months and be on the path articulated in the past.
  • Attrition has been reduced by 300bps in 3QFY22 on the LTM (last 12 months) basis. This is a reversion of the trend witnessed in previous quarters.
  • The new deals were worth USD 704mn in 3QFY22. This was an increase from the average order book of USD 400mn. The deal pipeline in the last 8 quarters has gone up. The deal closures in the USD 700mn- 1bn range are expected to continue.
  • The company has hired 10,000 freshers in 9MFY22 and plans to hire 15,000 freshers in FY23. The intention is to get freshers, train them, put them on the right project early, and benefit from the structural change. This is the opposite of doing just lateral hiring.
  • Tech M will continue to hire in the business process services segment, and IT as there is a continuous demand for transformation projects- artificial intelligence, metaverse, etc.
  • Tech M is getting into more tier-II cities such as Coimbatore, Vijayawada, Nagpur, Indore, Bhubaneshwar, and Chandigarh to get access to talent and help in containing attrition. It is also expanding existing centers such as Pune, Bengaluru, and Hyderabad. The company is developing virtual centers in Mexico, Costa Rica, Romania, and Latvia.
  • The BFSI vertical was separated into two separate revenue streams as insurance is a prominent vertical that requires different skill sets. This followed the recent acquisition of European IT solutions provider Com Tec Co. As the company has another large insurance company as a customer, it has made a separate vertical for insurance.
  • The M&A strategy is to fill up niche capability gaps, and certain verticals it wants to scale up. The specific verticals are manufacturing, digital engineering, and BFSI. The focus is on areas such as cloud capability, where it will grow organically.
  • On the 5G front, IT firms will be providing support to service providers and for Tech M, it will boost the CME vertical. It will be playing a bigger role to boost demand for services and application in the telecom sector.

Asset Multiplier Comments

  • The entire IT sector faced supply-side pressures in FY22 due to a sudden spurt in demand. With WFH (work-from-home) settling down, in FY23 the focus is likely to be on reducing attrition and improving utilization levels.
  • Tech M has been investing in the areas of 5G, customer experience, data analytics, AI, IoT, and Cloud capabilities through organic or inorganic routes over the past few years. These investments are yielding results in terms of higher deal TCVs.
  • 5G has been a focus area for Tech M for the past few years. With 5G activity gradually picking up among the Indian telecom companies, Tech M’s investments into this vertical will start yielding results in terms of higher revenue growth.

Consensus Estimate (Source: market screener website)

  •  The closing price of Tech Mahindra was ₹ 1,440/- as of 16-February-2022. It traded at 23x/ 20x/ 18x the consensus earnings estimates of ₹ 63/ 72/ 82/- for FY22E/FY23E/FY24E respectively.
  • The consensus target price of ₹ 1,791/- implies a P/E Multiple of 22x on FY24E EPS estimate of ₹ 82/-.

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 IT, Tech M , , 0 Comments Read more...
07 Dec

Acquired biz segment seeing steep growth – Tech Mahindra

Update on the Indian Equity Market:

On Tuesday, Nifty ended in the green amid weak global cues. It ended at 17,176 (+1.6%) after making a high of 17,251. METAL (+3.1%), PRIVATE BANK (+2.5%), and BANK (+2.5%) were the top sectoral gainers and there were no sectoral losers. Among the NIFTY50 stocks, HINDALCO (+5.1%), TATASTEEL (+4.0%), and AXISBANK (+3.6%) were the top gainers while BRITANNIA (-0.6%), CIPLA (-0.6%), and DIVISLAB (-0.4%) were the top losers.

Edited excerpts of an interview with Mr. Vivek Agarwal, President-BFSI and Corporate Development at Tech Mahindra (TECHM) with CNBCTV18 on 6th December 2021:

  • The last couple of years have opened a new segment of WFH, this acquisition helps TECHM service their customers with a new channel and takes. It takes away a lot of dependency on physical infrastructure and helps provide services from anywhere.
  • The entire WFH segment has been witnessing explosive growth over the last couple of years. From a long-term perspective, 55% of customer experience workers are expected to work from home or from anywhere by 2024. This represents huge a addressable market space for TECHM.
  • From a synergies viewpoint, the company will be taking these capabilities to their existing customers and Activus Connect has its customer base as well which represents a significant cross-sell opportunity for TECHM.
  • TECHM expects this explosive growth to continue over the next 3-4 years.
  • The acquired company has industry-standard margins and on the growth front, the business’ organic growth is been exceptional. From a long-term perspective of its core business, TECHM expects to generate 30-40% additional revenues through synergies and take these capabilities to the existing customers.
  • The acquired company has a unique technology platform that lets one apply all the good practices around data, security, and performance management for remote workers.
  • TECHM expects the business to have industry-leading growth on its own and is excited about the synergies that will be created out of this acquisition in the knowledge segment space.
  • The margins of this company are expected to be at par with what TECHM does which is their objective in every acquisition they do.
  • While certain capabilities are specific to particular sectors, the offering per se is sector agnostic.
  • Return to the office for TECHM employees is largely voluntary. Some of them are returning in hybrid mode and this work model is expected to continue. However, 15-20% of their workforce has started coming to the office which mainly comprises of the top management of the company.

Asset Multiplier Comments

  • TECHM has grown organically & inorganically (dollar revenue CAGR FY17-21 of 4%). The company will continue to acquire for scale, synergies, cross-sell benefits, and upselling.
  • We expect healthy deal wins, traction in the communication segment led by legacy modernization, 5G, customer care, automation, network, and cloud to drive revenues.
  • Higher offshoring, synergies in portfolio companies, automation, & operating leverage is expected to help margin expansion.

Consensus Estimate (Source: market screener and Tikr websites)

  • The closing price of TECHM was ₹ 1,575/- as of 07-December-21. It traded at 25x/22x/19x the consensus EPS estimate of ₹ 64/73/81 for FY22E/ FY23E/FY24E respectively.
  • The consensus target price of ₹ 1,783/- implies a PE multiple of 22x on FY24E EPS of ₹ 81/-.

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 IT, Tech M , , 0 Comments Read more...
12 Oct

Exports will be the focus area after the acquisition – Motherson sumi

Update on the Indian Equity Market:

On Tuesday , NIFTY ended higher at 17,991 (+0.26%). All the sectoral indices were gainers, led by PSU Banks (+3.1%), Media (+1.5%), and FMCG (+1.2%). IT was the lone loser, down by (-0.9%). Among the stocks, Titan (+6.1%), Bajaj Auto (+3.3%), and Bajaj Finserv (+3.0%) led the gainers while HCL Tech (-3.7%), HDFC Life (-1.9%), and Coal India (-1.7%) led the losers.

Excerpts of an interview with Mr. Vivek Chaand Sehgal, Chairman , of Motherson Sumi (MS) with ET NOW on 11th October 2021:

  • Acquisition of CIM Tools in aerospace segment will be beneficial for MS. CIM Tools have an order book of more than $200 million and the company will do very well in coming time.
  • Exports will be the focus area because MS set up bases in the different countries with CIM Tools and there will be a rise in exports because of the customers are abroad.
  • CIM Tools is a profit-making company and idea would be to improve it and add to the top line. MS has a clear thinking. They get 40% return on capital employed.
  • MS is acquiring existing profit-making joint venture in China. It is very important because MS is more into in passenger vehicles and this one is all about commercial vehicles .
  • MS has a huge presence in China and company have a huge market that they can then generate in China itself.
  • Opportunity wise in two to three years company will be all over in China. Company is learning about commercial vehicles. It is a wonderful area to get into it because MS is very strong with commercial vehicles globally.
  • Comparing global and domestic business is very difficult. The kinds of cars that are produced outside and the cars in India are very different in terms of value. Every car that produced there has a buyer for it. That means customers are at very good situation. Companies have the orders but they have some supply constraints.
  • The chip shortage and all other things combated with customers in a very strong way. The demand is huge and the situation is also getting better.

Asset Multiplier Comments

  • Auto production cuts and raw material price increase due to inflation might affect company’s performance in the near term.
  • Company is expanding its business in different segments. This will be the growth driver.

 Consensus Estimate: (Source: market screener website)

  • The closing price of Motherson Sumi Systems Limited was ₹ 245/- as of 12-Oct-2021. It traded at 35x/23x/20x the consensus earnings per share estimate of ₹6.89/10.8/12.4 for FY22E/FY23E/FY24E respectively.
  • The consensus target price of ₹ 254/- implies a PE multiple of 20x on FY24E EPS of ₹12.4/-.

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 Auto, Auto Ancillary, Motherson Sumi , 0 Comments Read more...
04 Feb

Entry into new categories with Soulfull acquisition – Tata consumer

Update on the Indian Equity Market:

On Thursday Nifty closed 0.7% higher at 14,896. Among the sectoral indices, PSU Banks (+5.9%), FMCG (+2.5%), and Metal (+2.0%) closed higher. IT (-0.4%) was the only sector which closed in the red. SBI (+6.6%), ITC (+6.1%), and Bajaj Finance (+5.0%) closed on a positive note. Asian Paints (-1.9%), UPL (-1.7%), and Cipla (-1.6%) were among the top losers.

Excerpts from an interview of Mr. Sunil D’souza, MD & CEO, Tata Consumer with CNBC-TV18 dated 03rd February 2021:

  • Tea prices have not started to taper off and the company is confident that proper execution will deliver good results in the future.
  • Starbucks and NourishCo Beverages are showing sequential improvement.
  • On ‘Soulfull’ acquisition, he said the Company looked at strategic and financial filters. It will help to get into new categories including snacking, breakfast.
  • This will lead to entry into new consumer occasions. The company was not previously present in these segments.
  • These new products are margin accretive products. EBITDA margins for Soulful are higher as compare to the current basket.
  • Speaking about the tea business, he said the margins are a transient issue. The company has increased its share by 90 bps (Y-0-Y).
  • The company has also integrated its distributor and digitize its system.
  • The account receivables days are down 50% from where the company started.
  • On future acquisitions, he said the company is juggling around different pieces and the announcement will be made when the company gets closer to it.
  • The gross cash of the company is around Rs 2,500 crores, the company makes judicious of the cash. The company around Rs 156 crore cash for the ‘Soulfull’ acquisition.
  • The company expects double-digit growth across financials.

 

Consensus Estimate: (Source: market screener website)

  • The closing price of Tata Consumer was ₹ 589 as of 04-February-2021.  It traded at 58x/47x/40x the consensus Earnings per share estimate of ₹ 10.2/12.5/14.7 for FY21E/FY22E/ FY23E respectively.
  • The consensus average target price is ₹ 605/- which implies a PE multiple of 41x on FY23E EPS of 14.7/-.

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, Tata Consumer , 0 Comments Read more...
18 Sep

Expects ALTBalaji to break even in Q4 – Balaji Telefilms

Update on the Indian Equity Market:

On Thursday, Nifty ended 0.7%, lower than the previous close at 11,519. The top gainers for Nifty 50 were Dr Reddy (+4.2%), HCL Tech (+2.3%), and Zee (+2.3%) while the losing stocks were Hindalco (-4.3%), Tata Motors (-2.5%), and Shree Cement (-2.4%). The sectoral gainers for the day were Pharma (+0.4%), Media (+0.4%), and IT (+0.2%) while the losers were Realty (-1.7%), Metal (-1.4%), and PSU Bank (-1.2%).

Edited excerpts of an interview with Mr Nachiket Pantvaidya, Group Chief Operating Officer at Balaji Telefilms and CEO ALTBalaji; dated 16th September 2020 from CNBC TV18:

• Proactive cost control measures implemented by Balaji Telefilms helped them stem their losses in the lockdown quarter. Their OTT platform, ALTBalaji remains one of the top 5 paid apps in the country.
• Pre COVID, the company was expecting ALTBalaji’s breakeven to happen in October, November and December this year, but as the production schedules were delayed because of the pandemic impact, now it is looking to breakeven in January, February and March in 2021.
• 1Q has been challenging for the Company as all content production activity came to stop.
• In terms of growth, the same quarter last financial year the Company had a direct revenue stream of 6.7 crores that has grown to 12 crores in this quarter so ALTBalaji is doubling its direct subscription.
• The Company is seeing a very good trajectory for ALTBalaji especially because tier II and tier III markets have opened up during the pandemic and that has got them a whole lot of new subscribers without having to spend a lot of marketing money to acquire.
• The acquisition pace will be very high because now the markets have opened up, according to Mr Pantvaidya.
• He added that the real question is that can the Company retain the acquired subscribers, will they churn out and the reason why he is putting that out-front is that if the Company has to produce new shows for these subscribers to be on the platform. Therefore the race is on for the Company to produce more and more shows.
• The Company is confident that it will launch close to 25 shows in the remaining part of the year starting this month itself which is probably 50% more than a usual clip.

Consensus Estimate: (Source: market screener website & investing.com)
• The closing price of Balaji Telefilms Ltd was ₹ 77/- as of 17-September-2020. The company reported a loss of Rs 5.8/- per share for FY20.
• The consensus target price of ₹ 100/-. The consensus earnings estimate are not available.

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 Balaji Telefilms, Entertainment , , , 0 Comments Read more...