Tag - lockdowns

23 Apr

This week in a nutshell (18th – 22th April)

Technical talks
NIFTY opened the week at 17,183 on 18th April. The index closed 1.7% lower at 17,172 on 22nd April. RSI (14) of 47 and MACD are trending upwards. On the upside, the 17,465 could act as resistance while 16,965 could act as support.

Auto (+3.1%) was the only sectoral gainer in the week. IT (-5.6%), Financial Services (-4.3%), and Media (-4.2%) led the laggards.

Weekly highlights

  • The US indices closed the week lower as the market priced in persistent inflation and US Fed’s imminent 50 bps interest rate hike. S&P 500 was down by 2.6%, Nasdaq 100 by 3.7%, and Dow Jones was down by 1.7%.
  • Q4 result season continues to be in the fray as various Nifty 50 companies reported results, increasing input costs, supply, and logistical challenges and margin pressures continue to be a persistent challenge across the board.
  • Data from the National Bureau of Statistics showed on Monday that China’s economy slowed in March as consumption, real estate, and exports were hit hard, taking the shine off faster-than-expected first-quarter growth numbers and worsening an outlook already weakened by COVID-19 curbs and the Ukraine war. Gross domestic product (GDP) expanded by 4.8 percent in the first quarter from a year earlier.
  • The International Monetary Fund (IMF) has cut its growth forecast for India for FY23 by 80 basis points to 8.2 percent, warning that Russia’s invasion of Ukraine would hurt consumption and hence, growth, by way of higher prices reflecting in part weaker domestic demand – as higher oil prices are expected to weigh on private consumption and investment – and drag from lower net exports.
  • The blockades by groups in Southern and Eastern Libya citing political demands have caused National Oil Corporation to declare force majeure on output from several major fields and ports in recent days. Libya is currently losing more than 550,000 barrels per day in oil production from blockades on major fields and export terminals, creating supply challenges in an already affected market due to the Russia-Ukraine conflict.
  • The number of Americans filing new claims for unemployment benefits fell moderately last week, still suggesting that April was another month of strong job growth. The report from the Labor Department on Thursday also showed unemployment rolls shrinking to the lowest level in 52 years in the first week of April, reinforcing the tightening labor market conditions. An acute shortage of workers is keeping layoffs low, helping to fuel inflation, and forcing the Federal Reserve to adopt a restrictive monetary policy stance.
  • Federal Reserve Chair Jerome Powell stated that a 50 bps interest rate hike is imminent when the Fed meets next on May 3rd. The Fed is expected to be aggressive in its actions going ahead as inflation in the US is running roughly three times the Fed’s 2% target.
  • Wholesale inflation in India – measured by the Wholesale Price Index (WPI) — worsened to 14.55 percent in March from 13.11 percent in the previous month, data released on Monday showed. WPI for March was the highest in four months indicating worsening inflationary challenges.
  • FII (Foreign Institutional Investors) continued to be sellers this week and sold shares worth Rs 1,84,433 mn while DII (Domestic Institutional Investors) continued to be buyers and bought shares worth Rs 1,43,943

Things to watch out for next week

  • Continuing with the Q4 results season, management commentary about demand slowdown, and cost inflation would be key things investors would be concerned with.
  • Rising Covid-19 Cases in Shanghai, China, and subsequent lockdowns will be on investors’ minds as fears of a Chinese slowdown have been impacting the securities markets over the past 2 weeks.

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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12 Apr

Marginal impact of localized lockdown; essentials & hygiene to see uptick: Godrej Consumer

Update on the Indian Equity Market:

 

On Monday, Nifty plunged 3.5% at 14,310 due to rising COVID-19 cases, vaccine supply issues and the possibility of a lockdown in various parts of the country. Within NIFTY50, DRREDDY’S (+7.1%), CIPLA (+2.7%), and DIVISLAB (+1.1%) were top gainers, while TATAMOTORS (-9.7%), ADANIPORT (-8.9%), and INDUSINDBK (-8.6%) were the top losing stocks. Among the sectoral indices, PSU BANK (-9.3%), MEDIA (-8.1%) and REALTY (-7.5%) were the highest losers, and there were no gainers.

 

Marginal impact of localized lockdown; essentials & hygiene to see uptick: Godrej Consumer

 

Excerpts of an interview with Mr. Sunil Kataria, CEO, India and South Asian Association of Regional Cooperation (SAARC) at Godrej Consumer Products (GODREJCP), aired on CNBC-TV18 dated on 9th April 2021:

  • All the SAARC countries have continued to do well and growth has been robust for Godrej Consumer. Exports faced challenges in the 1HFY21 primarily because of lockdown, but it bounced back strongly in 2HFY21.
  • Thumb rule for FMCGs is whenever FMCG grows well, the Indian rural growth lead by 1.5x of urban growth. Pre covid, rural growth had gone down to 0.8x of urban, but the good news is now it has regained to 1.5x-1.7x of urban growth.
  • Mr Kataria expects
    • Good monsoon and with strong rural investment done, rural story will continue to hold very strong.
    • In this Budget, there is a lot of investment gone behind infrastructure sector which will stimulate demand and growth in core sectors. This will lead to good urban growth.
  • The top 3 important areas for Godrej Consumer are:
    • Household insecticides: Godrej Consumer is the category leader in this segment and have done most of the innovations here. India’s outlook towards health and hygiene has changed permanently, a strong momentum in this category is seen by Godrej Consumer this year and expects to continue to hold this momentum
    • Health and Hygiene: Godrej Consumer have done a lot of investment will continue to invest in this segment. It has moved beyond personal wash into being personal and home hygiene portfolio.
    • Go-To-Market Strategy: Sharp investments done in building a next level of GTM, this will be a big enabler in future.
  • Godrej Consumer Products posted a strong Q4FY21 update. The company said it has clocked in broad-based sales across all key categories and sees India sales growth around 30 percent this quarter.
  • This time, the COVID upsurge will see more of localized lockdowns rather than very far-ranging, wide impacting lockdowns. Therefore, a localized geography-based limited impact will happen on demand, which could impact certain discretionary categories.
  • People have started taking hygiene categories more casually and some stabilizing of demand is happening. Essentials and hygiene categories are expected to see an uptick again.
  • The whole consumption demand has looked up well across most of the segments and Mr. Kataria is pleasantly surprised with the kind of recovery in the demand that has happened even after the festive season.
  • Growth has been broad-based across all segments and that gives a lot of confidence and it talks about the quality of company’ growth across all the 3 segments – soap, hair color and household insecticides.
  • The company has taken calibrated price hikes across the portfolio and it is going to keep a close watch on price and demand of the products. More price increases are expected going forward if inflation continues, but not at the cost of volume growth. Therefore, some short-term pressure on gross margins is expected to be seen.

Asset Multiplier Comments

  • Post the virus outbreak, FMCG companies have stepped up supply chain agility and increased the GTM approach to ensure adequate stock. Teams have been put on “hyper-alert” to ensure that supply chains are uninterrupted in the case of disruptions due to localised lockdowns and curfews.
  • Overall, FMCG companies might get impacted due to regional lockdowns but this time it would be milder than last time lockdowns.

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

  • The closing price of GODREJCP was ₹ 715 as of 12-April-2021. It traded at 40x/ 35x the consensus EPS estimate of ₹ 18.5/20.9 for FY22E/ FY23E respectively.
  • The consensus target price of ₹ 814/- implies a PE multiple of 39x on FY23E EPS of ₹20.9/-.

 

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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