Tag - ecommerce

05 Oct

Multi-Year growth potential for all verticals – Infoedge

Update on the Indian Equity Market:

On Tuesday, NIFTY ended higher at 17,822. The top gainers in NIFTY50 were ONGC (+10.8%), INDUSINDBK (+5.0%), and COALINDIA (+4.2%). The top losers were CIPLA (-2.4%), HINDALCO (-2.1%), and SHREECEM (-1.8%). The top gaining sectors were OIL & GAS (+2.8%), IT (+1.2%), and MEDIA (+0.8%), while the top sectoral losers were REALTY (-1.4%), HEALTHCARE (-0.7%), and PHARMA (-0.5%).  

Edited excerpts of an interview with Mr. Hitesh Oberoi, CEO & MD, Info Edge with CNBCTV18 aired on 04th September 2021:

  • In the last few quarters, the job market, especially for engineers has not been of the type one has seen in maybe the last two decades. It’s a super-hot market with attrition rates for most companies going through the roof, talent is impossible to hire.
  • The company believes it is a rock-solid market, and it is slowly spreading now to the non-IT sectors as well. Starting with the IT market, which has been growing for the last three quarters but now, it’s now beginning to spread to the other sectors as well, as the Indian economy starts to recover.
  • There is a limited pool of talent, every company wants to go digital and companies have brought forward their multi-year plans. Companies that were hoping to get 30-50 percent of their business to come from digital in the next five years are now hoping that 70 percent of their business will be digital in the next two years.
  • The fact that there are remote working opportunities, people are able to get jobs not just in India but even overseas. There is this massive surge right now, one cannot overnight produce a lot of engineers, or overnight upskill them. Unless the demand is hit for some reason, the situation will continue to be like this for the next few quarters as well.
  • The company is a pure-play internet company that runs an online job portal Naukri.com. It has massively benefitted from this uptick in the employment market and has managed to translate that to revenue growth as well.
  • The company is also bullish on the growth prospects of its other website 99acres.com, a real estate classifieds platform due to demand pick-up post lock down impact. According to him, growing prices, demand pick up across the country, cheaper credit availability are all signs of a multi-year growth cycle for real estate.
  • The Wedding cycle is also poised to pick up with more liberal government policies and the pent-up demand due to lockdowns that had brought this industry to a stand -still, the upcoming festive and wedding season bodes well for Matrimony.com.
  • Infoedge continues to be a startup incubator and aggregator with investments across startups like Zomato and Policy Bazaar and the company will continue to be on the lookout for strategic acquisitions in the startup ecosystem which is currently in a valuation bubble.
  • The Company is planning to launch an in-house blue-collar job portal called JobHai which is currently in the test marketing stage and also has made strategic investments in real estate, jobs, and education verticals.
  • The company has significant cash and capital balances to fund more startups and acquisitions to expand its portfolio and will look at listing each of its businesses separately if it believes that will help shareholders unlock more value.

Asset Multiplier Comments

  • The intensity of digital penetration across India has increased over the past few years, however, there is a lot more value to be unlocked for companies like Infoedge by expanding across India.
  • Infoedge has created a value chain through its verticals and strategic acquisitions that range from education to jobs, insurance to real estate, and now food delivery, which will likely consolidate its presence as the undisputed leader of internet-based aggregators in India.

Consensus Estimate (Source: market screener website)

  • The closing price of Infoedge was ₹ 6,493/- as of 05-Oct-21. It traded at 193x/148x/118x the consensus EPS estimate of ₹ 36/47/59 for FY22E/ FY23E/FY24E respectively.
  • The consensus target price of ₹ 6,520/- implies a PE multiple of 111x on FY24E EPS of ₹ 59/-.

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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05 Nov

Covid tailwinds led to a 50% growth in Healthcare – Dabur India

Update on the Indian Equity market:
Amid the uncertainty surrounding the US Presidential election outcome, Indian markets remained volatile on Wednesday. The Nifty50 ended marginally higher at 11,909 (+0.8%). Among the stocks, INDUSINDBK (+4.9%), SUNPHARMA (+3.7%), and DIVISLAB (+3.6%) ended the day higher. UPL (-3.9%), AXISBANK (-2.6%), and HDFC (-2.2%) led the losers. Among the sectoral indices, PHARMA (+2.2%), IT (+1.8%), and AUTO (+0.7%) led the gainers. REALTY (-1.9%), METAL (-0.3%), and FINANCIAL SERVICES 25/50 (-0.1%) led the losers.

Excerpts of an interview of Mr. Mohit Malhotra, CEO, Dabur India published in Mint on 4th November 2020:
• Dabur India recently reported 2QFY21 numbers with ~17% domestic volume growth compared to a year ago. There has been an all-around recovery- economy, rural, urban opening up, modern trade opening up, and e-commerce.
• Healthcare got a tailwind and continues to do well; home and the personal care portfolio have seen a sequential recovery in all the sub-categories.
• Healthcare has grown by 50%, out of which health supplements grew by 70%. That is the one that has driven growth.
• Consumption is very muted and the whole mindset is about saving and not splurging. That is why most discretionary products have not yet picked up. In-home consumption continues and this will sustain over a period of time.
• This quarter, the contribution of new products was ~5-6%. The new product launches are not just in categories but also specific to channels, such as e-commerce first products. Dabur is also trying to get into adjunct categories around its power brands, so it is both line and brand extensions. These new launches have also helped drive growth in revenue.
• Covid-19 has been an inflection point for Dabur. There are some fundamental changes being made, in both go-to-market and the way they look at categories, and capitalizing on the opportunities. Capitalizing on e-commerce will help connect with the millennials and urban consumers while strengthening the rural distribution will help resonate with the rural consumer.
• The casual labor force suffered the most due to the outbreak of the virus and they were the ones who went back. Since that labor didn’t come back, there was some hiring from the remote parts of Jharkhand and some other states. Initially, there was some productivity fall and now, post-training, they are at 100% of pre-covid levels.
• The rural growing significantly ahead of urban is expected to continue for a while.

Consensus Estimate: (Source: market screener website)
• The closing price of Dabur India was ₹ 519/- as of 04-November-2020. It traded at 55x/ 48x/ 42x the consensus earnings estimate of ₹ 9.5/ 10.9/ 12.4 per share for FY21E/FY22E/FY23E respectively.
• The consensus target price of ₹ 544 implies a PE multiple of 44x on FY23E 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.”

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02 Nov

E-commerce sales doing well – Blue star

Update on the Indian Equity Market:
On Friday Nifty closed 0.24% lower at 11,642. Among the sectoral indices Metal (+1.6%), Media (+1.5%), and IT (+0.2%) closed higher. Auto (-1.1%), Private Bank (-0.9%), and FMCG (-0.8%) closed lower. Bharti Airtel (-4.0%), Hero Motocorp (-3.1%), Maruti (-2.5%), closed on a negative note. Adani Ports (+4.5%), BPCL (+3.5%), and Coal India (+3.4%) were among the top gainers.

Excerpts from an interview of Mr. Vir Advani, VC & MD, Bluestar with CNBC-TV18 dated 29th October 2020:

● On cost-cutting, Mr. Advani said the revenue recovered 72% as compared to the same quarter last year and EBITDA recovered 75 percent. The Company was able to sustain the margins. It was supported by overheads and changes in the cost structure.
● The company has made some structural changes to the cost structure which will help to save costs in the current year as well as next year.
● On business, he said in projects the recovery is still slow which ~ 60-65% of last year is. The project sites have not fully opened and there is a tight cash position in some customers.
● On the retail side, he said there are some green shoots visible. For September month the recovery is high at 90%. The company is looking to reach a 90% level of last year’s demand in Q3. The company expects a normal Q4.
● The company has held on to the Market share of ~12.8% as they had strong sales in Tier II & III.
● E-commerce sales are doing well for the company.
● In 1HFY20 the online sales were 3% of the company’s sales, in 1HFY21 it crossed 13%. Water purifiers are doing better and ~75% of Water purifier sales happening online.
● The company has made progress on the working capital front. The company generated Rs100 cr of positive cash flow on a standalone basis.
● On Exports, he said the company has reached 90% of last year on an H1 basis and expects growth in FY21E on exports.

Consensus Estimate: (Source: market screener and Investing.com websites)
● The closing price of Blue star was ₹ 629 as of 30-October-2020. It traded at 59x/ 34x/ 25x the consensus Earnings per share estimate of ₹ 10.7/18.7/25.0 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for Blue star is ₹ 566/- which implies a PE multiple of 23x on FY23E EPS of ₹25/-.

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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05 Jun

Not looking at a huge change in distribution : Britannia

Update on the Indian Equity Market:

On Thursday, the indices ended lower after a six-day gaining streak. The Nifty ended slightly lower at 10,029. Among the sectors, Media (+4.1%), Pharma (+2.2%), and IT (+1.9%) were the top gainers. Private Bank (-3.1%), Financial Services (-2.6%), Bank (-2.6%) led the losers. VEDL (+7.7%), BHARTIARTL (+5.7%), and ZEEL (+5.5%) led the gainers while ASIANPAINT (-4.6%), BAJFINANCE (-4.0%), and HDFC (-4.0%) ended in the red.

Britannia recently declared its fourth-quarter results. In a post-result interview, Britannia Industries MD, Mr. Varun Berry discussed distribution network, market share, and margins. Here are the edited excerpts of his interview with ET Retail on 4th June 2020:

  • Britannia has a reach of about 5.5 million outlets. During the lockdown period, e-commerce has witnessed a massive 300% growth, which is about a percentage of their total sales. In the time to go, it is expected to grow from 1% to 2% to 5%.
  • Though e-commerce is growing exponentially, there is a huge base of the supply chain pyramid which has to be kept serving. Hence, he does not believe that distribution strategies are going to change in a hurry.
  • It will remain to be a situation where you will have to service kirana stores because they are so entrepreneurial in their way, they operate that they service their own markets wherever they are in a way e-commerce would do in a large city. As long as they have the infrastructure, kirana stores will be serviced by companies like Britannia.
  • There are some strong brands where they will prefer taking a pull strategy, rather than a push strategy. A couple of years back, they had adopted a modified pull strategy which has a disastrous impact.
  • Since they are not looking at adopting the strategy in a hurry, they will continue to have direct distribution to 2.5 million-odd retailers. The strategy of servicing the wholesalers will continue. There will be a disproportionate focus and nurturing of modern trade, e-commerce, and alternate channels, but the base strategy will not change.
  • A lot of freebies have been cut out due to the lack of availability. A lot of costs from the sales and marketing system have been cut down. They will continue doing that going forward.
  • Ad spends have been cut till now. Once a normal stocking of brands starts, normal ad spends will resume. This month itself, they will get back to advertising for some of the brands once they have enough product, which will be a temporary phenomenon.
  • They will continue to nurture and build brands for the future. Since it seems everyone is sitting at home and watching television, Mr. Berry is of the opinion that it is the right time to advertise and they will start doing that.
  • Investments will be made in creating new brands and launching new products. But there is the labor shortage issue. Since migrant workers have gone back, Britannia is operating at a lower capacity in every factory. Due to this, prioritization has become important and thus they are staying away from innovations. As soon as there are sufficient workers, they will start unleashing some of the innovative products.
  • Britannia is at the operating leverage cusp and has witnessed a disproportionate jump in margins in the last quarter results. However, its sustainability after a period of time will have to be looked at. The focus will be on unearthing opportunities and making the business efficient going forward.
  • From a 4% margin seven-eight years ago to around 15% now, operating margins have certainly improved. There will certainly be progress on the margin but in a slow and steady fashion.

Consensus Estimate: (Source: market screener website)

  • The closing price of Britannia was ₹ 3,458/- as of 4-June-2020. It traded at 51x/ 45x the consensus earnings estimate of ₹ 68.0/76.8 per share for FY21E/ FY22E respectively.
  • The consensus target price of ₹ 3,540/- implies a PE multiple of 46x on FY22E EPS of ₹ 76.8/-.

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.”

 

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28 Nov

Bata to use multi-channel retail strategy to reach more customers: Sandeep Kataria, CEO, Bata India

Update on the Indian Equity Market:

On Wednesday, NIFTY50 closed 0.5% higher. NIFTY50 gainers include Yes Bank (+8.3%), Ultratech Cement (+3.1%), and SBI (+2.9%). NIFTY50 losers include Infratel (-3.2%), Cipla (-2.2%), and L&T (-1.7%). Realty (-0.6%) and Media (-0.4%) were the only losing sectors while PSU BANK (+1.8%), Auto (+1.3%), and Metal (+0.9%) were the top gaining sectors.

Excerpts from an interview with Mr Sandeep Kataria, CEO, Bata India, published in the Economic Times dated 27th November 2019:

  • Bata will continue its growth journey in India with the multi-retail channel approach along with the e-commerce platform to reach out to as many customers as it can.
  • The company has a retail network in 450 towns and wishes to further expand by adding new stores in smaller towns through the franchise route.
  • Bata has been using three engines – a) their own stores, b) franchise partner store, which is a big drive for them in tier III & IV, and c) multi-brand outlets.
  • To add to all this is their E-commerce channel, whether through their own website or through other marketplaces, that helps them to get as many customers as they can.
  • The Company will strengthen its presence by adding 500 stores in the next five years, focusing mainly on small markets as it has identified tier II, III and IV cities where it has plans to broaden its sales network through the franchise model.
  • India is much bigger and Bata’s brand image is also bigger. So, they have decided to expand their reach to as many Indians and take advantage of their equities.
  • Online channels are providing opportunities in multiple ways to reach consumers. Bata can use digital channels to increase the productivity of their stores and enhance the satisfaction of their consumers.
  • Bata is working hard to reconnect with the country’s millennials. Bata India has a whole battery of brands in Bata as North Star, Bata Red Label, Marie Claire and Footin which talk to millennials. The Company does not have to rely on Bata as the main brand.
  • When asked whether Bata has any plans to introduce new brands from its global fold, Mr Kataria said the Company is not very keen to do that as there is a huge opportunity for them to play with the brands which they have here. The Company has a license for the manufacture and sale of several global brands as Hush Puppies and Naturalizer. Bata has introduced outdoor brand shoes from Caterpillar in its top selected outlets this season.

Consensus Estimate (Source: market screener website)

  • The closing price of Bata India Ltd was ₹ 1,615/- as of 27-November-19. It traded at 52x/ 44x/ 36x the consensus EPS estimate for FY20E/ FY21E/ FY22E of ₹ 30.8/ 36.9/ 44.3 respectively.
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