Tag - recovery

03 Feb

Product Specific Price Erosion in US Markets – Sun Pharma


Update on the Indian Equity Market:

On Thursday, NIFTY closed in the red at 17,560 (-1.2%). Among the sectoral indices IT (-2.1%), REALTY (-1.7%), and FINANCIAL SERVICES (-1.4%) were top losers, and AUTO (+0.4%) and CONSUMER DURABLES (+0.1%) were sectoral gainers. HEROMOTOCO (+2.3%), BAJAJ-AUTO (+2.1%) and DIVISLAB (+0.9%) were the top gainers. HDFC (-3.5%), ONGC (-3.0%), and SBILIFE (-2.9%) were among the top losers.

Excerpts from an interview of Mr. CS Muralidharan, CFO of Sun Pharma, with CNBC-TV18 dated 02nd February 2022:

  • The government’s focus on healthcare initiatives and push for modernisation in the Union Budget 2022 bodes well for the industry, the incentive for manufacturers is something to look for considering the medium-term horizon.
  • US Specialty Revenues for 9MFY2022 exceeded full-year FY2021 Revenues, the growth in revenues was fuelled by contribution from all the products. Winlevi was recently launched in the US in November 2022 is showing good traction.
  • The company is on a very good footing now because they have been focusing on increasing their prescription of core products which has helped the company record good growth in the global specialty business.
  • The company is now increasing its geographical presence across the globe as a part of the strategy to leverage its pipeline across global markets, it recently launched its Derma-Specialty products Illumya and Cequa in Canada which is seeing good traction.
  • Price Erosion in the US has been a product-specific issue for the company as compared to its other peers which have seen pricing erosion across the board. The company has seen pricing erosion in the ex-Taro generic business but it has managed to control the same by leveraging new launches and efficient supply chain management.
  • Global uncertainty around COVID-19, especially the caseload in the US has impacted the company’s ability to give guidance over the medium term. The company has plans to continue its growth momentum by focusing on specialty revenues and Indian business and the rest of the world emerging markets.
  • EBITDA margins are seeing some pressures due to rising costs. However, the company has reiterated that margins will say stable due to increased operational efficiencies and cost-saving measures.
  • Despite strong competitive pressures, the company has consistently managed to improve its market share in the domestic business and outperform the industry growth by a large margin.

Asset Multiplier comments:

  • US Generic Business has been seeing competitive pricing pressures for all pharma manufacturers. Sun Pharma has effectively managed to mitigate pricing pressures due to prudent policies.
  • Domestic India and the Rest of the World Emerging Market Business has seen good traction in the past few quarters, Sun Pharma can leverage its presence to unlock the next stage of the growth cycle in these markets.

Consensus Estimate: (Source: Market screener website)

  • The closing price of Sun Pharma was ₹ 885/- as of 03-February-2022.  It traded at 28x/25x/22x the consensus Earnings per share estimate of ₹ 32/35/40/- for FY22E/FY23E/FY24E respectively.
  • The consensus average target price is ₹ 972/- which implies a PE multiple of 24x on FY24E EPS of ₹ 40/-.

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 Sun Pharma , , 0 Comments Read more...
01 Dec

Short term challenges persist– Minda Industries

Update on the Indian Equity Market:

On Wednesday, Indian benchmarks ended in green with NIFTY closing at 17,166 (1.0%). Among the sectoral indices, PHARMA (-1.6%), HEALTHCARE (-1.9%), and CONSUMERDURABLES (-0.4%) were the only losers. PSU BANK (+2.7%), METAL (+2.3%), and BANK (+1.9%) led the gainers. Among the stocks, INDUSINDBK (+5.8%), JSWSTEEL (+5.0%), and TATAMOTORS (+4.3%) led the gainers, while CIPLA (-4.4%), DIVIS (-2.3%), and ULTRACEMCO (-1.5%) led the laggards.

Short term challenges persist– Minda Industries

Excerpts of an interview with Mr Sunil Bohra, Group CFO, Minda Industries with CNBC-TV18 on 30th  November 2021:

  • There’s a significant impact on volumes in Europe, with the numbers down significantly at ~30% sequentially. The important thing to notice is that the volume numbers are also down year on year indicating the severity of the impact on a low base.
  • The recovery is expected to be volatile as the true impact of the new variant remains to be seen. International travel has also been impacted, it is expected that volumes will continue to be depressed until restrictions are eased.
  • The Industry is currently working to minimise the impact of low volumes through various cost optimisation measures, however, there’s a lack of assurance as to when will the volumes recover whether it will be in Q3 or Q4FY22.
  • However, the Industry expects pent up demand and volume recovery post this crisis to continue and thus keeps its long term outlook of double-digit growth unchanged.
  • Semi-conductor shortage volatility is expected to continue till H1CY22. There is some recovery seen, however, it’ll take another 6-8 months to indicate a semblance of normalcy. Over-stocking of inventory due to the existing shortage crisis is creating a mismatch between actual demand and supply further worsening the situation.
  • EV segment is at a nascent stage, but the company expects demand to grow exponentially once it picks up. The company is focusing on creating a base for this additional supply. The company benefits from having an agnostic product supply- i.e. it is ICE/EV neutral and the company plans to add value-added products to specifically cater to EV segments and has already launched 9 new products.
  • The company’s ICE toolkit currently tickets at Rs 7,000/-, however, the company’s new EV Value-added toolkit tickets at Rs 28,000/- The company will benefit from increased EV volumes and it’ll be margin accretive in the long run.

Asset Multiplier Comments

  • The auto industry has been severely impacted by intermittent lockdowns and supply chain issues, however, the underlying demand for the industry is set to stay and only increase in the medium term.
  • EV segment is a very value and margin accretive segment for the company, the recent shift in demand to EVs will augur well for the company’s profitability in the medium term.

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

The closing price of Minda Industries was ₹ 899/- as of 01-December-21. It traded at 69x/ 41x/ 32x the consensus EPS estimate of ₹ 13/ 22/ 29 for FY22E/ FY23E/FY24E respectively. The consensus target price of ₹ 927/- implies a PE multiple of 33x on FY24E EPS of ₹ 29/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Auto , , , , , 0 Comments Read more...
16 Aug

Production loss to be minimal despite semi-conductor Shortage: Bharat Forge

 

Update on Indian Equity Market:

On Monday, markets ended higher with Nifty closing 34 points higher to close at 16,130, TATASTEEL(3.7%), BAJFINANCE (3.4%) M&M (2.4%) were the top gainers on the index while MARUTI (-2.6%),SHREECEM (-2.3%) and EICHERMOT (-2.3%) were the top losers for the day. Among the sectoral indices,  METAL  (1.5%), OIL & GAS (0.9%) and  FINANCIAL SERVICES (0.4%) were the top gainers, while MEDIA (-1.4%),  PSU BANK (-1%) and AUTO (-0.9%) were the top losers.

 

Excerpts of an interview with Baba Kalyani, CMD of Bharat Forge on CNBCTV18 dated 13th August 2021:

 

  • Despite mounting input cost inflation, Company managed to expand its margins by 100 bps sequentially and posted robust growth on both Revenue and Net profit Fronts in Q1FY22
  • Semi-Conductor shortage is a universal phenomenon that’s affecting industries and businesses across the world. In the case of OEMs, most of them have taken adequate steps to address this issue. 
  • In the short term, everyone is suffering some loss in production, however, the company expects no adverse impact on production in the medium-long term. The company reiterated that the situation was outside the control of anyone and its a matter of when and not if the issue will be resolved,
  • He stated that the industry has resorted to rationing of semiconductors to produce higher-value products. This will impact the supply in the short term. 
  • A lot of Passenger vehicle manufacturers have resorted to reducing the production of lower end passenger cars against higher value cars that offer better realisations.
  • Cost Reduction was the company’s important priority in the past 2 years and the company has optimised costs through downsizing, IoT and WC Management, to produce the best margins this company has seen.
  • The company has a strong balance sheet and healthy cash balance, the company plans to take forward its growth through inorganic acquisitions aimed at future technologies like e-mobility, renewables etc as the company gears itself for the future.

 

Asset Multiplier Comments:

 

  • The Semi-Conductor shortage will be dealt with sooner rather than later, barring any major disruptions, OEM and the entire Auto and Ancillary sector is recovering well.
  • Bharat Forge has managed to improve its margins and its plans to grow across all segments through strategic investments as it gets ready for the future are on the right track.

 

Consensus Estimates (Source: market screener website): 

  • The closing price of Bharat Forge was ₹803/- as of 16-August-2021.  It traded at 45x/29x /26x the EPS estimate of ₹18/₹ 28/₹ 31 for FY22E/23E/24E.
  • The consensus price target is ₹ 900/- which trades at 30x the EPS estimate for FY24E of ₹ 31/-

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 Bharat Forge , , , 0 Comments Read more...
11 Aug

Price hikes neutralised material price increase – Berger Paints

Update on the Indian Equity Market:

On Wednesday, Indian stocks recovered from sharp declines and closed the session almost unchanged. The Nifty50 ended marginally higher at 16,282 led by TATASTEEL (+4.0%), JSWSTEEL (+3.5%), and IOC (+2.5%). SHREECEM (-2.1%), KOTAKBANK (-1.9%), and SUNPHARMA (-1.8%) led the laggards. Among the sectoral indices, METAL (+3.1%), OIL & GAS (+1.2%), and PSU BANK (+0.5%) led the gainers. PHARMA (-1.5%), PRIVATE BANK (-0.7%), and BANK (-0.6%) led the laggards.

Excerpts of an interview with Mr. Abhijit Roy, MD & CEO, Berger Paints (BERGEPAINT) with Economic Times on 10th August 2021:

  • April and May months were impacted due to the lockdown restrictions. In June and July, demand bounced back to normal. Demand is likely to remain strong in the subsequent months.
  • The Company has taken price hikes in the water-based paints which contribute to a bulk of their sales. This hike neutralised the entire raw material price increase. In solvent-based enamel paints, they are yet to pass on the entire price increase. In industrial paints, negotiations are ongoing and expected to be finalised soon.
  • Some erosion in terms of gross margin is expected to be made up by cost savings and BERGEPAINT expects to retain the current level of margins.
  • The price increase is about 5-6%, taken in stages. Despite the discretionary nature of their products, demand hasn’t really been affected.
  • The revenue from new construction projects declined in FY21. With the easing of restrictions, there has been a surge in new construction projects. New construction projects and repainting are contributing to overall growth in the business.
  • The inventory levels are low at the company level. With every price increase, there was an increase in dealer-level inventory.
  • BERGEPAINT has always welcomed competition. The company has its own strengths and built its own network over time. Brand building takes a long time in the paints category, and BERGEPAINT continues to maintain its market share.

Asset Multiplier Comments

  • BERGEPAINT 1QFY22 results beat street estimates as the impact of lockdowns was not as severe as anticipated. Most companies have been bearing the brunt of higher crude oil prices. BERGEPAINT was no exception and reported margins were lower sequentially.
  • Though near-term headwinds remain due to higher raw material prices, we believe BERGEPAINT to benefit from rising distribution reach, a strong presence in urban markets, and calibrated pricing.

Consensus Estimate: (Source: market screener website)

  • The closing price of BERGEPAINT was ₹ 820/- as on 11-August-2021. It traded at 88x/ 71x/ 59x the consensus earnings estimate of ₹ 9.3/11.5/13.8 for FY22E/ 23E/ 24E.
  • The consensus target price of ₹ 696/- implies a PE multiple of 50x on FY24E EPS of ₹ 13.8/-.

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.”

By Berger Paints, Paints , , 0 Comments Read more...
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.”

By SBI Card , , , , 0 Comments Read more...
07 Jul

Steel prices to be under pressure in the short term – Jindal Steel and Power

Update on Indian Equity Market:

On Wednesday, markets ended higher with Nifty closing 61 points higher at 15,879. TATASTEEL (+5.0%), JSWSTEEL (+2.7%), HINDALCO (+2.1%) were the top gainers on the index while TITAN (-2.0%), ONGC (-1.2%), and MARUTI (-0.9%) were the top losers for the day. Among the sectoral indices,  METAL (+2.2%),  REALTY (+2.0%), and FINANCIAL SERVICES (+0.6%) were the top gainers, MEDIA (-0.2%), and AUTO (-0.1%) were the only losers.

 

Excerpts of an interview with Mr. V R Sharma, MD, and CEO of Jindal Steel and Power on CNBCTV18 dated 5th July 2021:

 

  • Short-term pressure on Steel Prices is seen in International and European Spot Markets, with the prices hovering around USD 1,100 and 1,200 per tonne. This due to lower exports to Europe due to tariff and quota fears.
  • There is a value difference of around USD 200-250 per tonne between export and Indian domestic markets. There is a scope of reducing the delta to around USD 150 per tonne.
  • There is pressure on the demand for hot-rolled coils which forms part of the company’s exports which are 35-40% of the company’s total sales. This has resulted in the prices reducing to USD 1,020 per tonne.
  • The prices of other products are stable. 
  • There is a softening of about Rs 1,000-1,200 per tonne across all the products, which is normal because international prices play a vital role in today’s markets.
  • In terms of domestic demand, steel plates have shown a good demand and hot-rolled coils have shown moderate demand. The demand is very sluggish in the structural steel, construction steel, and rebar segments.
  • The company has produced 2.03 million metric tonnes of steel in 1QFY22 and is on track to manufacture 8.3 million metric tonnes for FY22. The exports for 1QFY22 were 0.6 million metric tonnes with full-year exports expected to be around 2.8 million metric tonnes.
  • The Company has Rs 165bn of debt as of 1QFY22 which the company is planning to reduce below Rs 100bn over FY22.

 

Asset Multiplier Comments:

  • Due to the Covid-19 pandemic, the demand for steel across domestic and international markets has been impacted. With the economic recovery,  there’s optimism for the sector.
  • The Company is taking efforts to deleverage its balance sheet in order to improve its performance across key operating metrics which will help the company grow further.

 

Consensus Estimates (Source: market screener website): 

  • The closing price of Jindal Steel and Power was ₹ 400/- as of 7-July-2021.  It traded at 5x/ 8x the EPS estimate of ₹ 75/ ₹ 51 for FY22E/23E respectively.
  • The consensus price target is ₹ 513/- which trades at 10x the EPS estimate for FY23E of ₹ 51/-

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 Jindal Steel & Power Limited, JSW Steel , , , 0 Comments Read more...
20 May

Good Momentum seen in Asset and Wealth Management segments- IIFL Wealth

Update on Indian Equity Market:

On Thursday, markets were in the red, with Nifty declining 124 points to close at 14,906. CIPLA (2.4%), M&M (2.3%), and BPCL (2.1%) were the top gainers on the index while TATA STEEL (-5.1%), HINDALCO (-4.2%), and COALINDIA (-3.4%) were the top losers for the day. Among the sectoral indices, REALTY (1.0%), and PSU BANK (+0.4%) were the only gainers, while METAL (-3.2%), BANK (-1.0%), and PRIVATE BANK (-1.0%) lead the losers.

Excerpts of an interview with Mr. Karan Bhagat, CEO of IIFL Wealth aired on CNBC TV-18 on 19th  May 2021 :

  • The revenue recognition on a trailing basis instead of upfront basis has seen a strong cyclical recovery over the past 8 quarters. The Wealth Management business is poised to grow from here on.  
  • The Asset Management business has seen a stellar recovery over the past year with an increase in both listed and unlisted equity segments. 
  • NBFC business is seeing a difficult recovery due to the pandemic. The Loan against Shares segment is fairly collateralized and thus the company hasn’t seen any rise in impairment costs. The stable Net Interest margins and lower operating costs are good tailwinds going ahead.  
  • AUM growth is expected in the low teens with organic growth and around 20% on a Mark to Market basis.
  • The company has improved its revenue mix to Annual recurring revenue contributing to around 70-80% as opposed to the brokerage-centric business model over the last 2 years. The management expects this to stabilize at these levels going forward.

Asset Multiplier Comments:

  • India is in the midst of a transformation in its savings and investing habits, going forward Asset and Wealth Management are going to see manifold growth as market penetration increases.
  • The company is well poised to reap the rewards of compartmentalization and operating efficiencies going ahead in both the Asset and the Wealth Management business.

Consensus Estimates (Source: market screener website): 

  • The closing price of IIFL Wealth was ₹1,100/- as of 20-May-2021.  It traded at 23x/ 19x the consensus EPS estimate of ₹ 48/ ₹ 59 for FY22E/23E respectively.
  • The consensus price target is ₹ 1360/- which trades at 23x the EPS estimate for FY23E 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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10 May

Expect a demand recovery once restrictions are lifted – Blue Star

 

Update on Indian Equity Market:

On Monday, markets were on the rise, with Nifty increasing 128 points to close at 14,950. COAL INDIA (8.2%), UPL (8.0%), and HINDALCO (6.2%) were the top gainers on the index while SHREECEM (-1.9%), BRITANNIA (-1.28%), and ULTRACEMCO (-1.28%) were the top losers for the day. Among the sectoral indices, Metal (4.7%), PHARMA (2.8%), and MEDIA (+2.5%) led the gainers. There were no sectoral losers for the day.

 

Excerpts of an interview with Mr. B Thyagarajan MD of Blue Star with CNBC- TV 18 dated 7th May 2021:

 

  • Till 15-April-21, secondary sales were growing at a healthy pace. The increased restrictions have resulted in the slow down of Air- Conditioning and Commercial Refrigeration verticals.
  • The company feared a washout as evidenced in Q1FY21 but it actually posted a 20% lower compared to its earnings in Q1FY20. The Company hopes sales could normalize by the end of May and sees recovery in the months of June-July owing to a hot extended summer.
  • Blue Star had already hiked prices as of 1st April. As the Company has significant inventories owing to slow down, it doesn’t expect any more margin pressure and expects it to stabilize around 8%.
  • The company witnessed a stellar growth in the pharma-health care sectors across air-conditioning and commercial refrigeration verticals due to covid-19 developments and vaccine transports.
  • The manufacturing sector in both Electro-Mechanical and Air-Conditioning segments showed good growth in Q4FY21. The 1st financial quarter is seasonally focused on residential air-conditioning sees its growth prospects dampened due to lockdowns. 
  • Capacity expansion will be operational in the Wada plant for Deep Freezers by Q2FY22 and another plant is expected to be operational in H1FY23 for Air conditioning in Sri City.
  • It expects pent-up demand to drive residential air conditioning growth by around 10% for FY22 owing to prolonged work from home exposure and reduced spending on other luxuries.

 

Asset Multiplier Comments:

  • The seasonal nature of the company’s demand may impact the performance in the short term. The improved macro factors, longer summers due to climate change present good growth prospects over the long term.
  • The margins have been beaten down due to various factors, we expect pressure to ease off in the medium term.

 

Consensus Estimates (Source: market screener website): 

  • The closing price of Blue Star was ₹ 833/- as of 10-May-2021.  It traded at 44x/ 32x the consensus EPS estimate of ₹ 19/ ₹ 26 for FY22E/23E respectively.
  • The consensus price target is ₹ 790/- which trades at 30x the EPS estimate for FY23E of ₹ 26/-

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 Blue star, Consumer durable , , , , 0 Comments Read more...
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.”

By FMCG, Godrej Consumer Products , , 0 Comments Read more...
16 Dec

Dramatic recovery in advertising revenues – Sun TV

Update on the Indian Equity Market:
On Monday Nifty closed 0.1% higher at 13,568. Among the sectoral indices, Media (+1.8%), Auto (+0.6%), and Metal (+0.8%) closed higher. Nifty PSU Bank (-1.5%), FMCG (-1.3%), and Pharma (-0.2%) closed lower. Bajaj Finance (+5.1%), Bajaj Finserv (+4.2%), and Eicher Motors (+3.1%) closed on a positive note. HUL (-2.1%), Nestle (-2.1%), and BPCL (-1.8%) were among the top losers.

Excerpts from an interview of Mr. SL Narayanan CFO, Sun Group with CNBC-TV18 dated 14th December 2020:

● Mr. Narayanan said the company has dramatic recovery in advertising revenues.
● The recovery on QoQ basis is better but the kind of set back company witnessed in the 1st half of the year the recovery is not that sharp to recover all the deficits.
● He said the subscription will become the mainstay of media companies like Sun Tv.
● 9 years back, the subscription revenues were averaging around Rs 85 crore a quarter which was Rs 340 crore run rate annually. That number has now touched Rs 2,000cr.
● Speaking on infrastructure, he said the company has prepared in the last 3-4 years for streaming.
● The company is investing in more forms of content.
● He said the telecom companies are sourcing content from media companies.
● The company is looking to spend Rs 400 cr on original content and in addition to this, the company will be producing movies.
● The company will also Rs 200 cr for exclusive content on Sun Next.

Consensus Estimate: (Source: market screener and Investing.com websites)
● The closing price of Sun TV was ₹ 500 as of 14-December-2020. It traded at 14x/ 13x/ 12x the consensus Earnings per share estimate of ₹ 35.5/39.1/41.9 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for Sun TV is ₹ 523/- which implies a PE multiple of 12x on FY23E EPS of 41.9/-.
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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