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29 Sep

Hospitals seeing a 20% plus Return on Capital Employed – Max Healthcare

 

Update on the Indian Equity Market:

On Wednesday, NIFTY closed 0.2% lower at 17,711. Top gainers in NIFTY50 were NTPC (+6.4%), COALINDIA (+6.2%), and POWERGRID (+6.7%). The top losers were HDFC (-2.1%), KOTAKBANK (-1.8%), and ASIANPAINT (-1.8%). The top gaining sectors were PSU (+2.7%), METAL (+2.3%), and PHARMA (+1.7%) while the top sectoral losers were PRIVATEBANK (-1.1%), FINANCIAL SERVICES (-0.9%), and FMCG (-0.6%).

Hospitals seeing a 20% plus Return on Capital Employed – Max Healthcare

Excerpts of an interview with Mr. Abhay Soi, chairman and managing director at Max Healthcare, aired on CNBC TV18 on 28th September 2021:

  • Hospitals are making 20 percent plus ROCE while receiving less than 1% of their income from COVID patients. At the current operating rate, the firm is generating free cash flows of around Rs 1,1000 million.
  • The chairman indicated that a x% rise in revenue would improve free cash flows by roughly 2x%. He also stated that the firm will generate Rs 50 -60 mn in internal accruals alone over the next four to five years.
  • The business’s present debt levels are lower than its EBITDA from the 2QFY22, and the company hopes to be debt-free by the 3QFY22. Over the following four to five years, the business intends to leverage its balance sheet to two times debt to EBITDA.
  • The Company plans to expand its capacity in Gurugram, by building a 500-bed hospital in the next three to four years, at a budget of Rs. 35bn. At the moment, their hospitals are roughly 78% full. The deployment of funds would be limited to brownfields and greenfield, as well as some light asset models. The business has no plans to do Mergers & Acquisitions in the hospital space.
  • The company intends to do acquisitions in the diagnostic space. In the Delhi NCR region, which has a population of 40 mn people it is currently the third biggest diagnostic chain.
  • When speaking about retail business in terms of economic value and volume the company ranks 3rd or 4th in the country.

Asset Multiplier comments:

  • We believe Max is entering a high growth phase led by expansion at Saket (Delhi) and Nanavati (Mumbai). It’s solid balance sheet and production of operational cash flow are anticipated to support organic and inorganic efforts.
  • With a robust development strategy and a positive outlook for the retail sector, we believe Max Healthcare is well-positioned to capitalize on the opportunity in the Indian hospital market for offering quality healthcare services across the country.

 

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

 

  • The closing price of Max Healthcare was ₹ 356/- as of 29-September-2021.  It traded at 47x/37x/34x the consensus earnings estimate of ₹ 7.0/9.6/10.5 for FY22E/23E/24E respectively.
  • The consensus price target is ₹ 385/- which trades at 35x the earnings estimate for FY24E of ₹ 10.9/-

 

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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17 Aug

Infrastructure in place to compete in online pharmacy space – Apollo Hospitals

Update on the Indian Equity Market:

On Tuesday, NIFTY closed 0.3% up at 16,615. Top gainers in NIFTY50 were TATACONSUM (+3.8%), WIPRO (+3.3%), and TECHM (+3.2%). The top losers were JSWSTEEL (-2.4%), ADANIPORTS (-2.3%), and TATAMOTORS (-2.2%). The top gaining sectors were IT (+2.6%), HEALTHCARE (+1.7%), and FMCG (+1.4%) while the top sectoral losers were METAL (-2.3%), PSU BANK (-1.8%), and PRIVATE BANK (-0.8%).

Infrastructure in place to compete in online pharmacy space – Apollo Hospitals

Excerpts of an interview with Ms Suneeta Reddy, MD of Apollo Hospitals (APOLLOHOSP), published on ET Now on 17th August 2021:

  • In 1QFY22, 26% of the total 30% revenue growth was because of Covid revenue. Surgical volumes have started picking up from July 2021.
  • In an attempt to have an omnichannel presence, Apollo’s 247 digital platform offers services, such as online pharmacy and teleconsultations, that are easier to access for the customer. 247 is helping Apollo to expand its reach and funnel patients into the system.
  • 247 is the fastest growing healthcare app in India. Apollo has earmarked Rs 1,500 mn in FY22E as spends for the digital platform, as customer acquisition and marketing are high for the business.
  • Apollo pharmacies have crossed 4,200 stores in India and the company is planning another 150 stores addition. Apollo has a distribution presence in 16,000 pin codes. Due to the wide reach, Apollo has the capability of 24×7 delivery within two hours which is a USP in the e-pharmacy space.
  • In addition to the distribution capabilities, Apollo has 5,500 doctors available for tele-consult within 15 minutes and testing infrastructure. All these factors will help Apollo to compete with other corporate houses entering the online pharmacy space.
  • Apollo plans to spend Rs 2,500 mn on capex in FY22E and Rs 4,500 mn on an acquisition. With a debt-to-equity ratio of 0.48 and cash and equivalents of Rs 8,800 mn, Apollo is fully funded to undertake the investments.

Asset Multiplier comments:

  • Online pharmacies have seen a big growth in revenues during the covid-19 second wave. Consumers are preferring the convenience and limited contact nature of online shopping of common medicines, household medical devices such as oximeters, thermometers, and certain FMCG products sold by these players.

 

Consensus Estimate: (Source: market screener)

 

  • The closing price of APOLLOHOSP was ₹ 4,921/- as of 17-August-2021.  It traded at 86x/ 66x/ 53x the consensus earnings estimate of ₹ 56.9/ 75.1/ 92.8 for FY22E/23E/24E respectively.
  • The consensus price target is ₹ 4,399/- which trades at 47x the earnings estimate for FY24E of ₹ 92.8/-

 

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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11 Nov

Strong 2QFY21 performance, expect 2HFY21 to better – Emami

Update on the Indian Equity Market:

On Tuesday, Nifty closed 1.4% higher at 12,631. Within NIFTY50, BAJFINANCE (+8.9%), INDUSINDBK (+7.3%), and LT (+6.9%) were the top gainers, while TECHM (-5.7%), CIPLA (-5.4%), and HCLTECH (-5.0%) were the top losing stocks. Among the sectoral indices, FINANCIAL SERVICES (+4.1%), BANK (+3.9%), and PRIVATE BANK (+3.7%) were the top gainerswhilePHARMA (-4.3%), and IT (-3.9%) were the only losing sectors.

Strong 2QFY21 performance, expect 2HFY21 to better – Emami

Excerpts of an interview with Mr. N H Bhansali, CEO-Finance& CEO, Emami, aired on CNBC-TV19 on 9thNovember 2020
● In 2QFY21, Emami delivered 10% YoY volume growth, 11% YoY revenue growth and 33% YoY EBITDA growth.
● In 2QFY21, excluding the winter portfolio which had a weak quarter, the revenue growth was 28% YoY.
● The growth was seen across all brands, channels and geographies. Kesh King had highest ever quarterly growth, healthcare sector delivered 50%+ YoY growth in 2QFY21.
● Now winter is setting in and management expects 2HFY21 to be better. Trajectory in October 2020 was good and all brands are performing well.
● Healthcare segment, which includes chyawanprash and other immunity boosters, growth was 40% in 1QFY21 and 53% in 2QFY21.
● There is no extra inventory with the dealers now and the supply chain has settled well from the interim covid-19 disruption. So growth would continue.
● In line with the FMCG industry, Emami’s advertising expenses have now returned to pre-covid levels.
● Management expects EBITDA margin to expand from 26% in FY20 to ~30% for FY21E.

Consensus Estimate (Source: market screener website)
● The closing price of EMAMILTD was ₹ 380/- as of 10-November-2020. It traded at 38x/ 31x/ 26x the consensus EPS estimate of ₹ 10.1/12.1/14.5 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 391/- implies a PE multiple of 27x on FY23E EPS of ₹14.5/-.

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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13 Aug

An opportunity to re-imagine business – Cipla

Update on the Indian Equity Market:
On Wednesday, Nifty50 snapped its six-day winning streak to end 0.1% lower at 11,308. HCLTECH (+4.7%), SBIN (+4.3%), and TECHM (+2.8%) ended the day in the green. KOTAKBANK (-2.1%), CIPLA (-2.1%), and SUNPHARMA (-2.0%) led the laggards. Among the sectoral indices, PSUBANK (+2.7%), MEDIA (+2.4%), and AUTO (2.0%) led the gainers while PHARMA (-1.6%), REALTY (-0.7%), and METAL (-0.7%) led the losers.

Cipla recently declared 1QFY21 results. Mr. Umang Vohra, MD & Global CEO discussed the opportunities provided by the covid epidemic to the business with Economic Times on 11th August 2020. Here are the edited excerpts of the interview:

• He outlined three reasons for the good numbers reported. The first being that healthcare is a part of essential services continues to work despite the pandemic led lockdowns. The second being the tailwinds of the crisis is the increased levels of collaboration and cooperation with every healthcare authority in the world. The third reason being getting more Covid treatments out as soon as possible and ensuring drug supply is not affected.
• The Covid crisis has given an opportunity to reimagine their business. It has given an opportunity to understand what is important to running their business. There were a few costs that could not be incurred. Since all the manufacturing plants are operating, those costs have increased slightly as more precaution for social distancing needs to be taken. The absence of some of the field costs has helped the bottom line.
• The timelines of approvals are at an all-time high and in terms of pricing, the only market that was a concern was the US. In the US, more attention is paid to the availability of the product against price.
• Respiratory is the core therapy for Cipla and they are trying to expand their respiratory franchise. Albuterol is the first one and there is a reasonable pipeline built for unlocking the respiratory franchise in the US over the next 18-24 months.
• Albuterol production has ramped up quite significantly in the first quarter and it being a 60-million-unit market, Cipla will get its fair share in the market.
• Some of the cost control measures were voluntary and some were involuntary. Due to lockdowns, travel costs were not incurred. Some of that would resume again in the coming quarters. There is an ambitious cost program which has been running for the past 2-3 years and which will continue to run.
• The guidance for margins has been to the same level before lockdown; as a large portion of the cost base cannot be maintained so low. So the sustainable basis for every quarter is going to be slightly lower than the first quarter in absolute percentage terms.
• With the crisis lasting a little longer in India, chronic conditions will continue to stay the same. The respiratory linked illnesses, linked to weather and linked to winter will continue. Acute therapy is impacted as patients are healthier and not reporting sick. Hospitals are beginning to uptick now and expect to see a resumption of surgeries and elective procedures in a quarter’s time.
• Cipla’s business is changing and about 15-20% of its market will be very different compared to pre-covid.
• Digital has the ability to penetrate healthcare more significantly compared to physical representatives. Digital provides remote connect which is faster and economical.

Consensus Estimate: (Source: market screener website)
• The closing price of Cipla was ₹ 762/- as of 12-August-2020. It traded at 29x/ 25x/ 21x the consensus earnings estimate of ₹ 26.2/ 30.2/ 36.7 per share for FY21E/FY22E/FY23E respectively.
• The consensus target price of ₹ 769/- implies a PE multiple of 21x on FY23E EPS of ₹ 36.7/-.

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.”

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03 Aug

It’s business as Usual – Dabur India

Update on the Indian Equity Market:

On Friday, disappointing US GDP data led to weakness in the broader Asian markets. Nifty50 ended 0.3% lower at 11,074. PHARMA (+3.6%), PSU BANK (+1.4%), and REALTY (+1.4%) led the sectoral gainers while MEDIA (-0.9%), FINANCIAL SERVICES (-0.6%), and PRIVATE BANK (-0.3%) led the laggards. Among the stocks, SUNPHARMA (+5.5%), CIPLA (+5.1%), and GRASIM (+5.0%) were the top gainers while EICHERMOT (-2.7%), RELIANCE (-1.8%), and HDFCBANK (-1.7%) led the losers.

Mr. Mohit Malhotra, CEO, Dabur India discussed the company’s 1QFY21 performance with CNBC TV-18 on 31st July 2020. Here are the edited excerpts:

  • In oral care, the toothpaste category declined 18.8% in volume terms. In terms of primary sales, grew 2.6% with Dabur Red growing ~8%. They gained market share of 63bps to reach an all-time high of 16.1% market share in toothpaste. In the markets of Orissa, Andhra Pradesh, and Chennai, Dabur is the number 1 brand in the toothpaste category.
  • Sequentially, the business has only improved. Witnessed a decline of 40% in April, in May saw growth of 2%. In June, growth is back to pre-covid levels of 6-7%, as the pipeline filling is happening.
  • July also saw a similar trend, though pipeline filling has happened. This is because DIL’s portfolio has clear tailwinds due to the focus on the healthcare portfolio.
  • Although there are certain categories and certain geographical areas that are still not performing well, overall, DIL is back to pre-covid levels.
  • Healthcare, immunity, and hygiene categories are definitely seeing a tailwind. Despite the healthcare business going down by ~40% in April has shown a growth of 30% plus.
  • The Health & Personal care and Food categories are dragging the performance. Items such as hair oils, skincare, and home care which are more discretionary in nature are not performing as well. The out-of-home consumption is majorly impacted since people are not going out, consumption of 200ml juices has declined.
  • The modern trade channel has declined by almost 25% during the quarter and continues to remain under pressure. Department stores such as Big Bazaar and DMart continue to operate below the normal levels. The open format outlets which offer home delivery to consumers are doing better. E-commerce channel has seen significant growth.
  • Other channels not performing include Horeca, institutional and enterprise business.
  • Barring localized lockdowns, all states seem to be doing well. The highest growth trajectory is seen in the Southern parts of India.
  • The rural markets have always performed very well for Dabur and there is a 1000bps difference in the rural performance vs urban performance.
  • The company is on the growth path now and looking at low to mid-single-digit growth in 2QFY20, with the tailwinds for the healthcare products and new products. Mr Malhotra is of the opinion these tailwinds are here to stay. With the penetration of products like Chyawanprash increasing, habits are formed and these habits will last even if Covid disappears.
  • The HPC category has seen benign raw material and packaging material costs. In healthcare, the surge in demand has caused a 3% inflation in the price of the herbs, which has been offset to a certain extent by an increase in prices. Overall, there will be margin improvement as the healthcare category which is margin accretive grows.
  • DIL is looking to do a capex of Rs 3000-3500 mn in line with business requirements.

Consensus Estimate: (Source: market screener website)

  • The closing price of Dabur India was ₹ 513/- as of 31-July-2020. It traded at 55x/ 48x the consensus earnings estimate of ₹ 9.3/10.7 per share for FY21E/ FY22E respectively.
  • The consensus target price of ₹ 507/- implies a PE multiple of 47x on FY22E EPS of ₹ 10.7/-.

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 Dabur, FMCG , , 0 Comments Read more...
03 Jun

We have a very healthy cash surplus of over Rs 3,800 crores: Dabur

Update on the Indian Equity Market:

On Tuesday, Nifty ended 1.6% higher at 9,979. The top gainers for Nifty 50 were Bajaj Finserv (+9.5%), Zee Entertainment (+9.1%) and Bajaj Finance (+8.2%) while the losing stocks for the day Coal India (-3.3%), Maruti (-1.9%) and BPCL (-1.4%). The gaining sectors for the day were Realty (+4.9%), Media (+3.3%) and Pvt Bank (+3.2%). FMCG (-0.7%) was the only losing sector for the day.

Edited excerpts of an interview with Mr Lalit Malik, CFO, Dabur India Ltd; dated 29th May 2020 from Retail Economic Times:

 

  • Volume growth has seen a decline of 14.6% in 4QFY20 for Dabur which was the lowest growth in 11 quarters. The growth was on track till February and the Company was ahead of other FMCG companies. However, in March, due to the sudden lockdown, there was a supply chain blockage and Dabur was not able to invoice which was due even in case of seasonal goods like juices, glucose etc. This caused a decline of 14.6% in the India FMCG business.
  • For the juice and glucose categories, it was the peak season for the Company, given the summer setting in. If things were normal, Dabur’s growth would have been on track.
  • The healthcare segment of Dabur saw a slow opening in the middle of April. With the launch of the sanitizer during this period, Dabur has gained momentum and things may have been much better.
  • At present, though all manufacturing units are open, Dabur is working at 60-70% capacity. As far as the supply side is concerned with regard to the C&F as well as to the distributors, barring a few areas which are in the red zone and where there are restrictions with regard to supply, other categories including rural have returned to normal.
  • Mr Malik added, E-commerce has been growing at the rate of more than 100%. There are different channels which are giving promising returns in the new normal. However, there are still some pockets which are in the red zone where there are some restrictions and Dabur is waiting for that to get normal so that they will be back to 100%.
  • Dabur has a very healthy cash surplus which is more than Rs 3,800 crores. They don’t see any stress to their balance sheet or liquidity. The Company is being careful with regards to their working capital management as well as its operating cash flow.
  • With 60-70% running capacity, the Company sees no major deviation with regard to their inventory pile-up or shortage because they are monitoring the demand and supply side very carefully. For example, their healthcare category is moving at a faster pace. In the case of Chyawanprash, the growth rate is almost 400%. Thus, Dabur has accelerated production and therefore they are able to meet the increase in demand. There are different pockets where the demand is increasing and therefore they have increased their production and supply.
  • At present, the discretionary item demand is slow and this is where the Company is going slowly with regard to production so that they are able to manage the inventory and there is no loss of sale in case demand comes back.
  • Dabur has extended its village coverage by 52,000 though the target was to reach 65,000 villages because of the lockdown, they were not able to expand.
  • In the current scenario, there are two very important things according to Mr Malik:
  1. It is very important to have healthcare products that they manufacture to be made available to people at large because that is a need in the country right now. Therefore, their focus is to have all their products like Chyawanprash, Tulsi drop, Haldi drop, Giloy etc., made available to the people as these are all immunity boosters.
  2. On the hygiene and sanitiser front, their focus is to reach out. When volumes are affected, there would certainly be pressure on the margins. For that, they have undertaken a cost savings initiative under project Samridhi, where they are focussing on zero-base budgeting and questioning every line item of expenditure and addressing what is essential for them in the new normal scenario.

 

Consensus Estimate: (Source: market screener website)

  • The closing price of Dabur India Ltd was ₹ 461/- as of 02-June-2020. It traded at 51.5x/ 44.8x the consensus EPS estimate of ₹ 8.9/10.3 for FY21E/ FY22E respectively.
  • The consensus target price of ₹ 463/- implies a PE multiple of 45.0x on FY22E EPS of ₹ 10.3/-.

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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