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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...
24 Jan

Inflationary headwinds reducing, topline growth outperforms – Asian Paints



Update on the Indian Equity Market:

On Monday, NIFTY closed in the red at 17,149 (-2.7%). Among the sectoral indices REALTY (-5.9%), METAL (-5.2%), and MEDIA (-4.6%) were top losers, and there were no sectoral gainers. CIPLA (+2.9%), and ONGC (+0.9%) were the only gainers. BAJFINANCE (-6.4%), JSWSTEEL (-6.9%), and TATASTEEL (-5.9%) were among the top losers.

Excerpts from an interview of Mr. Amit Syngle, MD & CEO, Asian Paints with Economic Times dated 21st January 2022:

  • In 1HFY22 the company had taken a 7% hike and in Q3FY22, they had already taken two hikes in November and in December totaling about 15%. Quarter on quarter, the company had a very strong volume growth at 18% and value growth of 26%.
  • With a healthy topline growth quarter on quarter, the margins have gone up because of the price hike which has been taken and so has the EBITDA margins being impacted in a very strong way.
  • The company is on a very good footing now because they have taken the pressure of inflation head-on and raised prices to the tune of about 22% for the year so far. The next quarter looks good from the point of view of addressing the inflation by the company.
  • The price increases have been unprecedented. Notwithstanding that, the company has seen quite a strong volume growth as well as value growth because October and November were very good for the company given the festive period.
  • The COVID-19 pressure was off to that extent, the consumer sentiment was quite good even in December. The company got a little bit hit in the second fortnight of December because of the third wave emerging but overall the company saw very healthy volumes, very good value growth. The company has gained a good quantum of market share in the third quarter as seen forward.
  • People have been experiencing COVID for the last year and nine months and the experience has been that there is an impact on consumer sentiment, which happens immediately when such a wave starts. But overall, there is only a little bit of a deferment of sales because people do not put off their painting or the renovation cycles.
  • The company’s outlook is that while in January there might see some impact of price hike and COVID-19, going forward, in February and March, it expects to see recovery with sales coming back strongly.
  • Going forward, it sees the environment as still inflationary. Despite taking price hikes or the crude hitting high prices and as prices of some of the crude derivatives go higher, some prices of select raw materials might come down. So overall, it expects the impact of Q4 over Q3 to be mild but the environment would remain inflationary.

Asset Multiplier comments:

  • Asian Paints has been an undisputed market leader in the paints category, despite inflationary near-term headwinds. We believe the company is likely to outperform based on its strong brand image and execution capabilities.
  • The expected boom in real estate augurs well for the company as we are entering a multi-year cycle of developmental activity that’ll help the top line of the company.

Consensus Estimate: (Source: Market screener website)

  • The closing price of Asian Paints was ₹ 3,155/- as of 24-January-2022.  It traded at 93x/67x/55x the consensus Earnings per share estimate of ₹ 34/47/57/- for FY22E/FY23E/FY24E respectively.
  • The consensus average target price is ₹ 3,380/- which implies a PE multiple of 59x on FY24E EPS 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 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 Asian Paints , , 0 Comments Read more...
06 Jan

Seeing demand uptick for second-hand CVs- Shriram Transport Finance

Update on the Indian Equity Market:

On Thursday, NIFTY closed in the red at 17,746 (-1%) near its high of 17,795. Among the sectoral indices, MEDIA (+0.9%), AUTO (+0.5%), and CONSUMER DURABLES (+0.5%) closed higher while IT (-1.5%), REALTY (-1.5%), and FINANCIAL SERVICES (-0.9%) closed in the red. Among stocks, UPL (+2.2%), INDUSINDBK (+1.8%), and BAJAJ-AUTO (+1.7%) were the top gainers while JSWSTEEL (-3%), ULTRACEMCO (-2.7%), and SHREECEM (-2.6%) were among the top losers.

Excerpts from an interview of Mr. Umesh Revankar, Vice Chairman & Managing Director, Shriram Transport Finance Corporation (SRTRANSFIN) with CNBC-TV18 dated 5th January 2022:

  • The demand for CV is increasing but not at the expected levels as the economy is not recovering as much as it was expected to. As a result, new CV (commercial vehicles) sales are lower than expectations.
  • Light Commercial Vehicles (LCVs) are showing good demand but it’s not as expected for heavy vehicles. However, demand for used vehicles is good.
  • The resale values have gone up significantly by 15-20% over the year and this reflects that people prefer to buy used vehicles in the current market situation rather than choosing a new vehicle. This eventually works for SRTRANSFIN and they are confident that as the market heats up, as the resale value goes up beyond 20%, eventually demand will come back.
  • The Omicron spread has increased in the last one week but they are not seeing any impact as such even though the city traffic has slowed down a bit. SRTRANSFIN hasn’t seen any downfall in Commercial Vehicle transportation even though mobility had come down in December. Overall, the long-distance movement has increased and hence the CV transportation has not seen any challenge as compared to what was seen in wave 2.
  • Revankar doesn’t expect many challenges as the covid variant is not supposed to be as strong and more people are getting vaccinated.
  • Marginal growth in disbursement can be expected on a QoQ basis and the AUM will be around 10% for FY22E. Larger growth in AUM is expected in FY23E because economic activities will reopen and demand for infrastructure will lead to a huge demand for heavy commercial vehicles and construction equipment.
  • As far as freight rates are concerned, margins for customers have improved because there was some decrease in the excise duties and the fuel prices had come down. Hence there were temporarily higher margins for customers. However, freight rates got corrected as they are linked to fuel prices and are a contractual obligation. But overall margins for truckers have remained strong.
  • Collections have been more than 100% in December. Hence, this shows that business is viable.
  • Revankar doesn’t look at GNPAs of 8% as a problem since the kind of customers they are lending to are individual operators who have to earn and pay. Hence there will be some delay in their collection. Individuals depend on corporates or entities for timely payments.
  • Credit cost for the long term is 2% on average and they are comfortable as long as it stays around 2%. So the GNPA is not an indicator for stress levels in their portfolio.
  • In terms of Net Interest Margin (NIM), SRTRANSFIN has always been eyeing a rate of 7% which has come down to 6.45% due to the higher liquidity they are carrying on their balance sheet due to the ongoing uncertainty in the market. Margins will move towards 7% once there is more certainty in the market.
  • Credit costs have been hovering around 2.5% due to the higher provisioning done in the last year. By March FY22, SRTRANSFIN hopes to bring down credit costs from last year’s mark of 2.48%

Asset Multiplier comments:

  • The company delivered good results in the impacted part of 1HFY22.
  • CV demand is gaining momentum and the company is the largest player in this space.
  • Appropriate provisioning, improving asset quality and strong growth strategy may contribute to the SRTRANSFIN’s topline.

Consensus Estimate: (Source: Market screener website and Tikr)

  • The closing price of Shriram Transport Finance Corporation was ₹ 1,216 as of 5-January-2022. It traded at 1.3x/1.1x/0.9x the consensus Book Value per share estimate of ₹ 968/ 1,087/ 1,219/- for FY22E/FY23E/FY24E respectively.
  • The consensus average target price is ₹ 1,660/- which implies a PB multiple of 1.4x on FY24E BVPS of ₹ 1,219/-.

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 NBFC, Shriram Transport Finance , , 0 Comments Read more...
06 Dec

Real Estate demand growth driven by rising income levels – HDFC

Update on the Indian Equity Market:

On Monday, markets plunged sharply in continuation to Friday’s fall. After the flat start, weak global cues and updates on the new COVID variant started weighing on the sentiment as the day progressed.

NIFTY ended 1.7% down at 16,912. IT (-2.7%), HEALTHCARE(-1. 9%), and PHARMA (-1.9%) were the top losers and there were no sectoral gainers. The top losers were INDUSINDBK (-3.7%), TATACONSUM (-3.4%), and BAJAJFINSV (-3.3%) while UPL (+0.4%) was the only stock in green.

Real Estate demand growth driven by rising income levels – HDFC

Edited excerpts of an interview with MR. Keki Mistry, Vice-Chairman and Managing Director of Housing Development Finance Corporation (HDFC Ltd) with CNBCTV18 on 3rd December 2021:

  • On new norms on recognition of Non-Performing Assets for Banks and NBFCs issued by RBI: He stated that a few years back NPA were recognized on a 180 days basis that got changed to 90 days. According to the new guidelines published by RBI, once the account is recognized as NPA, Banks won’t be able to upgrade it to standard assets till the whole loan has been repaid. Earlier, an NPA account, after payment of 1-2 installments could be categorized as a standard asset. Temporarily, there will be limited impact on Profit and Loss Account for most of the companies including HDFC but the reported Gross NPAs number will look higher for next 3-4 quarters.
  • The real estate market has steadily picked up after the slowdown in the 1HCY21 due to the COVID-19 pandemic and the resultant lockdowns.
  • Mr. Mistry thinks that the interest rates have been bottomed out but he doesn’t see that having a significant impact on the market.
  • He thinks that the runway for growth is across the country. In the period from CY17-CY20, the demand was largely focused on the tier-II tier-III towns in the outskirts of big cities. In the last one or two years, cities like Delhi, Mumbai, Bangalore, Pune, Hyderabad, and Chennai are reporting strong growth. A pickup in demand in the metro cities has been witnessed recently.
  • Mr. Mistry attributed the rise in demand to
    • Income levels rising in the past few years. He explained that the real estate prices have been stable but the income levels grew on an average by 8% per annum in the last 4 years resulting in cumulative 34-35% growth in income levels.
    • Low-interest rates
    • Feel good factor: He stated that the malls, hospitals, shops, hotels, and restaurants are full as the feel-good effect is driving and keeping people motivated.
    • The myth that there is oversupply in Mumbai and Delhi markets has disappeared, so people are not waiting for property rates to subside anymore.
  • The HDFC chief believes that affordability has increased in the market and it is an opportune time to buy real estate. To supplement this, he said that October-21 saw the highest level of loan disbursements by HDFC. This indicates strong demand and he expects it to sustain for a long time.
  • Mr. Mistry also believes that the lending rates have bottomed out but he does not expect the RBI to start raising rates in a hurry. But throughout the next 6-12 months rate hike is possible. It depends a lot on global factors like inflation, oil prices, and other factors which are not within our control.
  • The yield curve, according to him, has been steep due to excess liquidity in the system. This has been reflected in the demand seen in the high-end market which has seen a pickup after being subdued from CY17 to CY20.

Asset Multiplier Comments

  • Looking at the macro growth drivers, well-diversified loan portfolio, and adequate liquidity on hand our outlook over the long term remains positive on HDFC Ltd.
  • We think the new rule would impact in the near short term but in long term we expect the NPA levels to normalize. Stable collection efficiency and provisions higher than regulatory requirements will help support the company to maintain a healthy Balance Sheet.

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

  • The closing price of HDFC Ltd was ₹ 2,769/- as of 06-December-21. It traded at 4.2x/3.9x/3.5x the consensus BVPS estimate of ₹ 659/705/781 for FY22E/ FY23E/FY24E respectively.
  • The consensus target price of ₹ 3,251/- implies a PBV multiple of 4.2x on FY24E BVPS of ₹ 781/-.

 

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 HDFC , , 0 Comments Read more...
10 Nov

Demand recovery expected to continue – Bata India

Update on the Indian Equity Market:

On Wednesday, Indian benchmarks declined for the second consecutive session with NIFTY closing at 18,017 (-0.2%). Among the sectoral indices, OIL & GAS (+0.8%), AUTO (+0.5%), and PHARMA (+0.2%) were the only gainers. PSU BANK (-2.4%), METAL (-1.8%), and REALTY (-1.4%) led the laggards. Among the stocks, UPL (+3.4%), BHARTIARTL (+3.3%), and M&M (+3.0%) led the gainers, while HINDALCO (-3.4%), INDUSINDBK (-3.3%), and TATASTEEL (-2.9%) led the laggards.

Excerpts of an interview with Mr. Gunjan Shah, CEO, Bata India (Bata) with CNBC-TV18 on 8th  November 2021:

  • Bata had a tough time the last 18 months due to the 2 lockdowns. With things opening up, the company is seeing some recovery.
  • In 2QFY22, the company has seen a MoM recovery. He believes that with more stores opening up, recovery is sustainable in the medium term in terms of consumer demand perspective.
  • The immediate priority is getting the company back to pre-pandemic performance levels. Going forward, the portfolio is in line with consumer demand, towards casuals and sneakers. The company is seeing initial progress in this direction but there is a long way to go in that segment.
  • To leverage the Bata brand equity, it is looking for a franchise model in tier 3-5 towns or through multi-brand outlets. The distribution expansion is one of the big areas they are working on.
  • They are also focusing on the digital footprint. The current omnichannel strategy contributed in teens to the revenue in 2QFY22 and the company wants to increase it.
  • The company has taken significant steps towards cost reduction during the pandemic. Some of these are expected to sustain. With business coming back to normal, the quantum of cost savings may not be similar as seen during the pandemic months.
  • Sneakers are used not just for sports but also for other occasions. There is a longer-term trend that consumers will prefer to the extent the comfortable footwear usage once lockdowns are lifted.
  • Casual ranges such as Power, North Star are seeing 40% growth in demand, and the company wants to improve that further. Bata has expanded its merchandise, in casual footwear and launched open footwear.
  • It is ensuring customers connect with the Bata merchandise. For this, they have piloted a big initiative, Sneaker Studio which ensures the entire sneaker range is displayed in a cohesive form in the stores. While this initiative is currently rolled out in major metros, the Company is expanding it in the next 12 months.
  • To conserve cash, Bata had reduced its ad spend during the pandemic period. With the demand recovery, it has started investing in ad campaigns.
  • The company will witness the highest ever addition in franchise stores in FY22. It sees strong penetration potential in Tier 3-5 towns, championed through the franchise model.
  • The next stage of expansion is planned through multi-brand outlets. The company’s coverage has increased from 450 towns to over 900 towns in the last 2 years. It plans to add another 500 towns in FY23 and expects a 20% contribution to the topline from multi-brand outlets.
  • Raw material inflation is witnessed especially in synthetics and plastics. About 25-30% of the portfolio has a significant amount of synthetics and plastics which go into it, where there is significant pricing pressure.
  • It is also focusing on the premiumization story, where realizations are better.

 

Asset Multiplier Comments

  • With Bata’s revenue recovery rate reaching 85% of pre-Covid levels in 2QFY22, we are confident of the company’s performance. We think Bata’s new strategies and focus on cost reduction, omni channel, change in product mix (higher proportion of casual footwear) and calibrated expansion of retail network through asset light franchisee route would aid in providing thrust to revenue growth.
  • We expect the company to benefit from market share gains on account of store expansion in lower-tier cities where the unorganized segment is dominant and who would face pressure on passing on RM inflation through price hikes.
  • We believe a strong balance sheet with healthy cash on books and efficient working capital should support Bata through these testing times.

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

  •  The closing price of Bata India was ₹ 2,182/- as of 10-November-21. It traded at 182x/ 61x/ 50x the consensus EPS estimate of ₹ 12/ 36/ 44 for FY22E/ FY23E/FY24E respectively.
  • The consensus target price of ₹ 1,808/- implies a PE multiple of 41x on FY24E EPS of ₹ 44/-.

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 Bata, Consumer , , 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...
08 Sep

Recovery on cards, high volume growth ahead – Marico

Update on Indian Equity Market:

On Wednesday, markets ended flat with Nifty closing 9 points lower at 17,354. KOTAKBANK (+3.6%), POWERGRID (+1.8%), and GRASIM (+1.6%) were the top gainers on the index while DIVISLAB (-2.4%), NESTLEIND (-2.4%), and WIPRO (-1.7%) were the top losers for the day. Among the sectoral indices, BANK (+0.8%), PRIVATE BANK (+0.7%), and CONSUMER DURABLES (+0.7%) were the top gainers, while IT (-0.8%), MEDIA (-0.6%), and AUTO (-0.5%) were the laggards.

Excerpts of an interview with Mr. Saugata Gupta, MD, and CEO at Marico on CNBCTV18, dated 07th September 2021:

  • Marico’s portfolio is concentrated on items of daily use, which saw a faster recovery in June itself. The entire FMCG sector is witnessing volume recovery due to its inherent nature and the company expects 8-10% volume growth for H2FY22. 
  • The company expects a muted 3rd wave if it occurs on the back of rapid vaccinations and an adequate monsoon which will help demand to improve significantly.
  • The only issue that the company expects to face is rising inflation in its input costs. However, the company believes this won’t persist beyond Q3FY22 and that it will see an eventual softening in raw material prices.
  • The company expects that it’ll meet its revenue targets of Rs. 4.5-5 bn in FY22 and double them to Rs. 8.5-10 bn by FY24 on the back of strong growth drivers like diversification and premiumisation. 
  • The company is on track to meet its diversification targets, with the discretionary food segment demonstrating robust recovery. Now the company plans to focus on premiumisation in Personal Care and digital brand growth.
  • Digital Brands are an important segment for the company. Its recent acquisition of Beardo Brand is now fully integrated, and the company plans to expand into a couple of more digital brands either organically or inorganically.
  • The worst margin pressure for the company is over as Copra prices (a key raw material for the company) have settled down. The company expects vegetable and other oil prices to cool off towards Q3FY22 and EBITDA margins to reach a comfortable 19-20% level.

Asset Multiplier Comments:

  • The food and FMCG Industry has adapted to the pandemic imposed changes. Despite the pandemic, the volumes have improved and may recover sharply soon with further unlocking. With an expanding product portfolio, the growth rates may be significantly higher.
  • Marico has an established portfolio, brand awareness with consumers, and a focus-induced approach to premiumisation which it can leverage to expand volumes to grow further and deliver value to shareholders.

Consensus Estimates (Source: market screener website): 

  • The closing price of Marico was ₹563/- as of 08-September-2021.  It traded at 56x/47x/40x the EPS estimates of ₹10/ 12/ 14  for FY22E/23E/24E.
  • The consensus price target is ₹ 600/- which trades at 43x the EPS estimate for FY24E of ₹ 14/-

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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03 Aug

Volume recovery on cards, Margins to improve in H2FY22: Marico

Update on Indian Equity Market:

On Tuesday, markets ended higher with Nifty closing 246 points to close at 16,130. TITAN (+4.0%), HDFC (+3.8%), and INDUSINDBK (+3.5%) were the top gainers on the index while JSWSTEEL (-0.8%), SHREECEM (-0.3%), and BAJAJ-AUTO (-0.3%) were the top losers for the day. Among the sectoral indices,  FMCG (1.7%), FINANCIAL SERVICES (1.7%), and AUTO (1.6%) were the top gainers, while MEDIA (-0.8%), METAL (-0.1%) were the only losers.

Excerpts of an interview with Mr. Saugata Gupta, MD & CEO, Marico on CNBCTV18 dated 2nd August 2021:

  • 1QFY22 began with the momentum that was handed over from the last quarter of FY21. May sales were affected due to the 2nd wave of lockdown. Recovery was seen in June, and supply-side issues are slowly improving.
  • Growth rates are improving drastically in the South, which is the company’s stronghold. Barring major disruptions, the company expects to deliver 8-10% volume growth.
  • Gross margins declined both sequentially and YoY. This was due to raw material costs pressure, both in copra and vegetable oil-based products. The company took price hikes which resulted in less pressure on margins.
  • The company expects Copra prices to come down and some deflationary easing on margins and hopes to record 19%+ margins for the rest of the year. 
  • The company makes lower gross margins in the food business and expects margins to improve with scale. The company expects volumes to grow in soya, honey and oodles, and add around 100 crores to the top line.
  • The company’s focus is to add volume growth and expects margins to grow with scale. However, the company expects more product diversification over the next 4-5 years.

 

Asset Multiplier Comments:

  • The food and FMCG Industry has adapted to the pandemic imposed changes. Despite the pandemic, the volumes have improved and may recover sharply soon with further unlocking. With expanding product portfolio, the growth rates may be significantly higher.
  • Marico has an established portfolio and brand awareness with consumers which it can leverage to expand volumes to grow further and deliver value to shareholders.

 

Consensus Estimates (Source: market screener website): 

  • The closing price of Marico was ₹544/- as of 03-August-2021.  It traded at 54x/45x the EPS estimate of ₹10/₹ 12 for FY22E/23E.
  • The consensus price target is ₹ 560/- which trades at 47x the EPS estimate for FY23E of ₹ 12/-

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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27 Jul

Recovery seen in June, growth momentum ahead – SBI Cards

Update on Indian Equity Market:

On Tuesday, markets ended lower with Nifty closing at 15,746 (-0.5%). HINDALCO (+4.3%), SBILIFE (+3.2%), and TATASTEEL (+2.7%) were the top gainers on the index while DRREDDY (-10.3%), CIPLA (-3.5%) and AXISBANK (-3.3%) were the top losers for the day. Among the sectoral indices, METAL (+1.5%) and PSU BANK (+0.4%) were the gainers, while PHARMA (-4.3%), PRIVATE BANK (-0.9%) and REALTY (-0.7%) were the top losers.

 

Excerpts of an interview with Mr. Rama Mohan Rao Amara, MD & CEO, SBI Cards on CNBCTV18 dated 26th July 2021:

 

  • The Company suffered stress from the 3rd week of April till mid-June. Reduction of lockdown restrictions provided the push for the company to ramp up sales and sourcing, and July shows further signs of progress.
  • The company’s New Account Acquisition in the first quarter was lower due to the lockdown effect, however, the company has achieved its run rate of 3,00,000 card issuance per month.
  • Consumer sentiment and discretionary spending are coming back to pre-pandemic levels. The company is optimistic about further growth in sourcing, which is mostly done through bankers, which was affected due to lockdown.
  • Average monthly spending per card was at Rs 11,000 but it’s slowly inching up to indicate increased levels of discretionary spending and rebounding of economic activity in July. The company expects it to grow to Rs 13,000-13,500 levels barring any major disruptions.
  • Recovery is seen in both distribution channels- Bankers and Open Market distributions. With the opening up of the economy further, the company expects to grow from its minimum run rate of 3,00,000 card issues per month by leveraging multi-channel partnerships that the company has developed.
  • 52-53% of FY21 sourcing was done through banker channels which leverages its presence in tier 3, tier 4 towns, and rural areas, indicative of an increased digital penetration in rural areas.
  • Expansion of E-commerce and other online platforms into rural areas has seen a shift to digital transactions across rural areas, which has helped the company tap into its existing banking customer base, which also helps the company keep a track of its delinquencies.
  • The impact of the entire Mastercard ban accounts for less than 2% of monthly sourcing for the company, so the company has little risk. Even so, the company is proactively negotiating with its partners to mitigate the effects.

Asset Multiplier Comments:

  • Credit Cards Industry in India, is in its nascent stages of penetration, and there’s tremendous growth potential with digital penetration in Indian Rural Markets a thrust area for everyone.
  • SBI Cards can leverage the SBI Brand and its penetration across India to unlock growth potential that can rarely be done so easily by any other of its competitors.

 

Consensus Estimates (Source: market screener website): 

  • The closing price of SBI Cards was ₹ 1,017/- as of 27-July-2021.  It traded at 54x/38x the EPS estimate of ₹19/₹ 27 for FY22E/23E.
  • The consensus price target of ₹ 1,184/- implies a 44x PE multiple for FY23E EPS of ₹ 27/-.

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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