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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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26 May

Confident of double-digit growth in FY22 on pent-up demand – Emami

Update on the Indian Equity Market:

Domestic markets started cautiously positive and witnessed a strong rebound as it gained momentum from expectations of another set of relief measures. The new stimulus package is expected to focus on boosting the worst-hit sectors like tourism, aviation and hospitality along with MSMEs. Nifty ended above 15,300 as value buying was seen in the IT sector while Metals stocks remained in the correction phase due to muted international commodity prices.
Among the sectoral indices, REALTY (+2.8%), MEDIA (+1.9%), and IT (+1.8%) were top gainers while METAL (-1.9%), and PSU BANK(-0.3%) were among the top losers. Among the stocks, BAJAJFINSV (+4.6%), BAJFINANCE (+2.7%), and INFY (+2.5%) were the top gainers. POWERGRID (-3.0%), HINDALCO (-2.5%), and JSWSTEEL (-2.4%) were the top losers.

Edited excerpts of an interview with Mr. Mohan Goenka, Director, Emami with CNBC TV18 dated 26th May, 2021:

• Emami reported good Q4 earnings on a favourable base with 39% volume growth in domestic business. Director, Mohan Goenka says he’s confident of double-digit growth in FY22 on pent-up demand. He added their promoter pledge is at 30% & they will reduce it to 15% in the next 1 year.
• Revenue was over Rs 9000 mn in 3QFY21 v/s ~Rs 7300 mn in 4QFY21. But these numbers are not comparable on QoQ basis due seasonality in business. Emami has shown a decent growth in 2 years horizon and when compared to 4QFY19 the growth is robust.
• All categories like Zandu Balm, Kesh King, Men’s grooming products and Menthoplus has grown much better in 4QFY21 over 3QFY21.
• 40-45% of the sales comes from the winter portfolio.
• Emami started with a good note and first two weeks of April saw a very good demand. Emami has seasonal products and has healthy summer products like Navratna Tel and cool talc, however the demand tapered this season. But it is also seen that the demand really bounces back as soon as cases comes down and this time when market opens up, the company is confident of delivering a double-digit volume growth as the pent-up demand comes through.
• Seeing the input price inflation, Emami has taken 4% price hike which will take care of the input cost pressure leading to a stable Gross Margin.
• Rural demand has been impacted across geographies in second wave. The Company expects demand to pick up quickly as soon as lockdowns are lifted.
• Having the healthcare range in the portfolio, Emami was able to sell products even in the month of April and May. The demand for these products was seen to be robust.
• In the last 2 years contribution of E-commerce has reached ~4% of domestic business from 0.5%. It is expected to reach at least 6% in next 2-3 years.
• Cost reduction was seen in employee cost, other expenses and advertisement, EBITDA margin was at all time high at 30% level and target is to sustain margins going ahead.
• No need to add capacity as of now as the capacity utilization is ~60%.

Asset Multiplier Comments
• We believe that competition in Emami’s key product categories such as skin, and hair oil, will continue to remain high. Nevertheless, we remain optimistic about the favourable base, and robust demand and growth in health and hygiene market, especially in rural markets.

Consensus Estimate (Source: investing. com and market screener websites)
• The closing price of Emami was ₹ 504/- as of 26-May-20. It traded at 42.5x/32.1x the consensus EPS estimate of ₹ 11.8/15.6 for FY22E/ FY23E respectively.
• The consensus target price of ₹ 564/- implies a PE multiple of 36x on FY23E EPS of ₹ 15.6/-.

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.”

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20 Jan

Used data analytics to gain rural market share – L&T Finance

Update on the Indian Equity Market:

 

On Wednesday, Nifty closed 0.9% higher at 14,645. Within NIFTY50, TATAMOTORS (+6.1%), ADANIPORTS (+4.4%), and WIPRO (+3.4%) were the top gainers, while POWERGRID (-2.1%), SHREECEM (-1.8%), and NTPC (-1.6%) were the top losing stocks. Among the sectoral indices, AUTO (+2.3%), IT (+2.2%), and PSU BANK (+2.1%) were the top gainers while FMCG (-0.2%) was the only losing sector.

 

Used data analytics to gain rural market share – L&T Finance

 

Excerpts of an interview with Mr Dinanath Dubhashi, MD & CEO, L&T Finance (L&TFH), aired on CNBC-TV18 on 18th January 2021:

  • L&TFH reported 10% YoY PAT growth in 3QFY21 on the back of good disbursements, good fees, good performance on liquidity and cost of funds, and maintaining asset quality.
  • The industry has seen an uptick in demand from rural India. This is due to a combination of structural as well as seasonal factors. The general wellbeing of farmers due to several government schemes has led to higher discretionary spending ability. Seasonal factors including good rainfall for 3 years, good reservoir levels, excellent Kharif prices, and rabi sowing higher YoY have all contributed to rural demand.
  • L&TFH has used data analytics to benefit from the rural demand surge. It has helped L&TFH to gain market share till 2QFY21 and maintain it in 3QFY21. 
  • In 3QFY21, L&TFH had all-time high disbursements in tractors and 2-wheelers.
  • GNPA has marginally moderated to 5.12% in 3QFY21 vs 5.19% in 2QFY21. NNPA increased to 1.9% in 3QFY21 from 1.6% in 2QFY21.
  • Collection efficiency is better than pre-Covid levels for the farm segment, back to the pre-Covid level for the 2-wheeler segment, good collections are happening even in the wholesale businesses.
  • On provisions, the worry has not ended but new worries are not coming in either. L&TFH has not created more provisions on Stage 1 & 2 assets in 3QFY21.  In 3QFY21, L&TFH has provided Rs 1,440 mn for an HFC exposure to the extent of the entire gap between existing provisions and expected resolution money. 
  • L&TFH is still very much RoE focused, but this year is not the one to be overly concerned about RoE. This year is about remaining liquid, solvent, maintaining excellent asset quality, and maintaining market position.

 

Consensus Estimate (Source: market screener website)

  • The closing price of L&TFH was ₹ 104.2 as of 20-January-2021. It traded at 1.3x/ 1.2x/ 1.1x the consensus BVPS estimate of ₹ 77.7 /85.9 /97.6 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 103.8/- implies a PE multiple of 1.1x on FY23E BVPS of ₹ 97.6/-.

 

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.”

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12 Aug

Healthcare and hygiene portfolio has grown by 29% in Q1 – Emami

Update on the Indian Equity Market:
On Tuesday, NIFTY closed in the green at 11,322 (+0.5%). Top gainers in NIFTY50 were Zee (+5.2%), JSW Steel (+3.9%), and Axis bank (+3.9%). The top losers were Shree Cement (-3.9%), Titan (-3.6%), and UPL (-2.3%). The top sectoral gainers were MEDIA (+1.9%), PVT BANK (+1.7%) and METAL (+1.6%) and sectoral losers were PHARMA (-1.4%), IT (-0.5%), and REALTY (-0.5%).

Excerpts of an interview with Mr NH Bhansali, CEO, Emami with ET now dated 10th August 2020:

● April was impacted badly. They progressed well in May and in June they grew in single digit. The July trajectory is also good. They grew in double digits in July and they expect the growth to resume.
● On the international front also, while they have declined in the first quarter but in the second quarter, they expect to improve on the international front as well. They expect moderate growth in 2QFY21.
● The healthcare and hygiene portfolio has grown by 29% in Q1FY21 and it contributed around 43% of the turnover in the first quarter. While the summer brands and other brands including the male grooming all de-grew by 44%.
● This pulled down the overall growth which contributed around 57%. Going forward they expect good growth from the healthcare and hygiene products kind of sanitizers.
● new launches there in the healthcare and sanitizers like Boroplus Sanitizer, soaps, aloe vera gel, zandu immunity range, chyawanprash they all contributed around 5% of the turnover.
● Navratna and others were declining in the first quarter but now in June-July they have started recovering. Kesh King range was declining in April-May but cumulatively in June, the Kesh King range has been able to wipe out its losses.
● It is stable now, it has maintained its growth and they expect now the growth to come in in the second quarter. Summer brands have also now started picking up while the decline earlier was higher but in June-July the decline has been lesser.
● The gross margins have reduced by 230 bps and EBITDA margins has improved by 480 bps. The gross margin has been mainly because of the benign cost and they expect this kind of margins to continue.
● On the EBITDA level, they had taken many initiatives, right from reducing on the advertisements which was not required in the April as they were completely off air in April, May and June now gradually they are resuming some of the advertisements
● They have internally targeted to improve their costs by around Rs 80-100 crore in the next 12 months and they are well on the path and they would continue to achieve it.
● They have made 12 new launches in this quarter and which were all around health and hygiene and sanitizers and all. In the times to come, they are planning to get into the home hygiene products which may include disinfectants, toilet cleaners and bathroom cleaners and other things.
● Rural demand has picked up well, in fact, it is visible in the rural areas compared to the urban but there is no significant down trading on LUPs.
● They have initiated so many things, they have done digital marketing because their focus is more on addressing the consumers digitally without physical touch so while the retail and modern trade has been impacted, and they are exploring other channels also.
● They are doing a lot many initiatives by telemarketing, digital marketing, tele-calling for taking the orders and ensuring that the supplies are done on time. In fact, the E-commerce business has more than doubled in this first quarter despite such a decline and it is continuing to grow.

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

● The closing price of Emami was ₹ 337/- as of 11-August-2020. It traded at 34x/ 31x the consensus earnings estimate of ₹ 9.9/ 10.8 for FY21E/22E respectively.
● The consensus price target is ₹ 301/- which trades at 28x the earnings estimate for FY22E of ₹ 10.8/-
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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06 Jul

Resurgence of demand across India, exports to take a little longer – Bajaj Auto

Update on the Indian Equity Market:

On Friday, the Indian market ended higher, making it the third straight week to end with gains. The Indian government’s approval of the acquisition of missiles, ammunition, and weapon systems worth Rs 38,900 crores led to the rally in defense stocks’ shares. Nifty ended 0.5% higher at 10,607. EICHERMOT (+4.2%), ADANIPORTS (4.1%), and BHARTIARTL (+4.1%) were the top gainers, while JSWSTEEL (-1.8%), TATASTEEL (-1.8%), and INDUSINDBK (-1.5%) were the top losers. Among the sectoral indices, IT (+1.1%), REALTY (+1.0%) and AUTO (+0.9%) ended in the green, while PSU BANK (-0.9%), PRIVATE BANK (-0.5%) and BANK (-0.5%) ended in the red.

Mr. Rakesh Sharma, Director, Bajaj Auto discussed the June auto sales data with CNBC TV18 on July 2nd, 2020. Here are the edited excerpts of the interview:

  • A lot of pent-up demand was witnessed in the past month wherever the dealer network was opening up.
  • In the last couple of weeks, they have noticed even spread of resurgence in demand. Initially, it was thought to be a semi-urban, and rural area phenomenon. Now, it is the urban areas that are responding and coming back extremely well.
  • There is optimism in the rural areas driven by the agricultural sector. In the urban areas, there is a revaluation of the mode of transport and a lot of the urban areas are driven by the need to adopt a safer mode of transport. In the last 10-15 days, demand has returned on both, the urban and rural sectors. Bajaj Auto is hopeful that this will continue into the next quarter.
  • Talking about production, he said there was a little bit of turbulence towards the end of June. Otherwise, production including their vendors and plants is completely geared up. In the niche areas of high-end bikes and electric scooters, their response rate was lower. Overall, they have responded to 90-95 percent of the market demand.
  • Had the logistical disturbances not existed in the last days of June, they could have catered to about 100 percent of the demand, except for the niche products.
  • The June story is a ramp-up story of the vendors, of the plant and of the dealers. Bajaj Auto has been able to increase their market share and share of exports. It can be said the June story is not so much of the demand coming up but the supply side coming up to speed to a very different situation.
  • Taking into consideration the fact that more Covid cases could break out, in the dealerships, and at the back end, Bajaj Auto is much better prepared and would not face any restraining issue going forward.
  • At the Aurangabad pant, there have been 40 cases and 3 casualties and there is no escalation. There is a constant effort for testing and contact testing. Production had gone way down to ensure rigorous contact testing, reporting, and sanitization. Now, production is back to normal, people are reporting to work.
  • Moving to exports, Africa has come back well and running at about 80 percent levels. ASEAN is slightly behind, at about 65 – 70 percent. Latin America is a bit of a concern as the recovery is only at 50 percent level. From shipment point, the return to normalcy will most likely be by August or September, as in transit stocks in exports are much higher and have to be calibrated with the low demand of the first quarter. Now that calibration is continuing to occur and is expected to be completed by August and expect to see some kind of normalcy in shipments coming back.

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

  • The closing price of Bajaj Auto was ₹ 2,935 on 03-07-2020. It traded at 20x/ 17x/ 15x the consensus EPS estimate of ₹ 147/175/198 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 2,774/- implies a PE multiple of 14x on FY23E EPS of ₹ 198/-.

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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