Tag - supply chain

    • Tag -
  • supply chain
10 Jun

Expect robust demand but need to watch for supply issues– Galaxy Surfactants

Update on the Indian Equity Market:

On Thursday, Nifty snapped its two-day losing streak to end at 15,738 (+0.7%). Among the sectoral indices, MEDIA (+4.6%), REALTY (+3.3%), and PSU BANK (+2.4%) led the gainers while AUTO (-0.1%) was the only sectoral loser. Among the stocks, BAJFINANCE (+7.7%), BAJAJFINSV (+3.8%), and SBIN (+2.6%) led the gainers while BAJAJ-AUTO (-1.0%), EICHERMOT (-0.7%), and UPL (-0.7%) led the losers.

Excerpts of an interview with Mr. U Shekhar, Founder, and MD, Galaxy Surfactants (GALAXYSURF) with CNBC TV-18 on 9th June 2021:

  • Operating margins have gone down in 4QFY21 due to a sharp increase in raw material prices. As a result, revenue increase has been in direct correlation with the increase in material prices.
  • Overall, for the year sales volume growth was ~5.2% with specialty care products growing 15.7% in 2HFY21 over 1HFY21. Performance surfactants volume grew ~8.8% in FY21.
  • FY21 and FY22E are going to be focused on mitigating supply chain disruptions. Demand will be strong with a focus on GALAXYSURF’s response to customers’ supply chain requirements.
  • New products have been launched and expect EBITDA per ton to increase sequentially.
  • The delay in the arrival of raw material along with sustained higher freight costs remains a concern for the regular availability of raw material.
  • There could be certain costs to maintain an inventory that might have a marginal impact on margins.
  • FY21 was a ten months performance, especially for India. The US and Egypt business was not impacted as much, in terms of operations. The growth in terms of specialty care was in 2HFY21 when customers’ demand improved. With the introduction of new products in FY22, they are confident of additional revenues from new customers. A 6-8% volume growth is expected.
  • International sales have remained stable at ~65%. Mr. Shekhar expects a ratio of 65-35/67-33 for international and domestic sales.

 

Asset Multiplier Comments

  • The Company has given a Capex guidance of Rs 1.5bn for FY22, with a large part to be spent on the specialty care portfolio. The ongoing capex projects are expected to be completed in 1HFY22, resulting in the introduction of new products, which will aid volume growth post 2HFY22.
  • With clients’ focus on reducing carbon footprint, the launch of new green products will strengthen the Company’s market position in specialty care products.

 

Consensus Estimate: (Source: market screener website)

  • The closing price of GALAXYSURF was ₹ 3,061/- as of 10-June-2021. It traded at 34x/ 30x the consensus earnings estimate of ₹ 89/102 for FY22E/FY23E respectively.
  • The consensus target price of ₹ 2,742/- implies a PE multiple of 27x on FY23E EPS of ₹ 102/-.

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 Chemicals, Galaxy Surfactants , , 0 Comments Read more...
19 Apr

Semiconductor shortage to resolve in 3-4 months: Eicher Motors

Update on Indian Equity Market:

An alarming increase in the number of Covid-19 cases resulted in a bloodbath in India’s Equity Markets, with Nifty slipping 258 points to 14,359. Adani Ports (-4.8%), Power Grid (-4.1%), ONGC (-4.0%) were the top losers on the index while Dr Reddy’s (+1.4%), Britannia (+0.9%), and Cipla (+0.9%) were the top gainers for the day. Among the sectoral indices, PSU Bank (-4.3%), Realty (-4.1%), and AUTO (-2.8%) led the losers while Pharma (+0.2%) was the only index to end in the green.

 

Excerpts of Interview with Mr. Vinod Dasari, Whole-time Director, Eicher Motors and CEO, Royal Enfield with CNBC-TV18 dated 16th  April 2021:

 

  • Demand has picked up strongly owing to backlogs from last year. The industry is facing some problems due to fresh restrictions owing to the rising COVID-19 cases. 
  • Learning from the past lockdowns, the industry is better equipped to deal with the short-term uncertainties and continue to keep up with the demand in the short term.
  • Royal Enfield expects supply-chain constraints in the first couple of months of FY22 and expects the recovery to be along the lines of FY21.
  • Metals inflation is putting pressure on margins, and the import restrictions on steel have resulted in an increase of 20% in prices which is unfathomable.
  • Optimistic about the semi-conductor and Anti-lock braking system (ABS) shortages, in the short run, there’s a notable pressure however recovery is expected within the next 2-3 months as all the stakeholders are coordinating to mitigate the issue.

 

Asset Multiplier Comments:

  • Demand is poised to recover in the FY22, however, Q1FY22 may see muted growth due to lockdowns and supply-side issues.
  •  As witnessed in Q4FY21, the demand is robust irrespective of the ongoing pandemic, the outlook for the auto industry is favourable for FY22 subject to supply-chain improvements.

 

Consensus Estimates (Source: market screener website):

 

  • The closing price of EICHER MOTORS was ₹ 2,377/- as of 19-April-2021.  It traded at 27x/ 21x the consensus EPS estimate of ₹ 87/ ₹ 115 for FY22E/23E respectively.
  • The consensus price target is ₹ 3,105/- which trades at 27x the EPS estimate for FY23E of ₹ 115/-

 

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 Eicher Motors , , , 0 Comments Read more...
13 May

Maruti Suzuki to resume production with 50% workforce at Manesar plant: RC Bhargava

Update on the Indian Equity Market:

On Tuesday, Nifty ended 0.5% lower at 9,196. The top gainers for Nifty 50 were Vedanta (+12.4%), NTPC (+5.9%) and ITC (+4.5%) while the losing stocks for the day Reliance (-5.7%), GAIL (-3.7%) and Asian Paints (-3.0%). The gaining sectors for the day were Media (+1.7%), Metal (+1.2%) and Realty (+0.8%). The worst performing sectors were Pvt Bank (-0.7%), Pharma (-0.6%) and Bank (-0.5%).

Edited excerpts of an interview with Mr RC Bhargava, Chairman, Maruti Suzuki India; dated 12th May 2020 from CNBCTV18:

  • The carmaker will resume partial operations at their Manesar plant in Haryana with a 50% workforce. Manpower permission is around 75% with one shift only.
  • The Company is allowed to start operations with one shift now and it will focus on a limited number of models.
  • The Company will be able to assess the demand-side situation only after a few weeks. He added that it is difficult to predict the demand side as it is too early. The dealerships have started functioning, but not all of them are functioning. The level of inquiries is also respectable but at this moment there is some supply-side constraint.
  • The overall volumes are bound to be impacted because of the ongoing restrictions and reduced manpower capacity. Normally the workings hours for the Company are 8 hours in one shift but with the various restrictions, the working hours are expected to come down to 6.5 hours in a shift. This reduces the capacity according to him. At the same time, the Company will be operating in only one shift with all other restrictions impacting the production quantity.
  • For a clear demand side pictures, dealers should at least work for 2-3 weeks.
  • Some of the suppliers for Maruti are in the containment zones. Therefore, the suppliers cannot produce in those areas. Maruti had to look for some alternative supplier for some components. Some models of the Company cannot be produced because those components cannot be found. Thus, the Company has to adjust the production volumes and models in accordance with the supply chain.
  • There is no certainty as to which supplier will remain a supplier and that he will not come under a containment zone in the next 10 days according to Mr Bhargava.
  • The Company may also face issues because the temporary workers at their Manesar plant have gone back to their villages.
  • Maruti has given cash advance against supplies to many of its vendors.
  • Overall, the auto industry could end up with 20-25% less sales compared to last year.
  • The cars are taxed very heavily in India, making the affordability of cars an issue. He expressed hope that the government will keep taxes on cars at a reasonable level.

 Consensus Estimate: (Source: market screener website)

  • The closing price of Maruti Suzuki India Ltd was ₹ 4,955/- as of 12-May-2020. It traded at 24.9x/ 19.0x the consensus EPS estimate of ₹ 199/260 for FY21E/ FY22E respectively.
  • The consensus target price of ₹ 6,308/- implies a PE multiple of 24.3x on FY22E EPS of ₹ 260/-.

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 Maruti Suzuki , , , 0 Comments Read more...
13 Mar

Covid-19 impact on demand is yet to be felt in India – Mr. Sharma, Bajaj Auto

Excerpts from an interview of Mr Rakesh Sharma, Executive Director, Bajaj Auto with CNBC -TV18 dated 12th March 2020

Update on the Indian Equity Market:

On Thursday, NIFTY continued its losing streak, closing at 9,590 (-8.3%). The top losers in NIFTY50 were Yes Bank (-13.0%), UPL (-13.0%) and Vedanta (-12.6%). None of the Nifty stocks ended on a positive note. All the sectors ended on a negative note and the top sectoral losers were PSU Banks (-13.2%), Media (-10.3%) and Realty (-9.8%).

  • Speaking on demand Mr. Sharma said that the impact of Covid-19 in India is yet to be felt.
  • The supply chain is improving for Bajaj Auto and the imports from China have resumed.
  • The attendance of the tier-II, tier-III suppliers in China who supply to vendors of Bajaj Auto had dropped to 10% but now the attendance is steadily rising. Now attendance is about 75%.
  • There could be new linkages emerging between Italy, Germany, and China and if that happens the company will have to watch out but at this point, the supply chain situation is improving and the demand situation within the country is not yet seeing much of an impact.
  • Some congestion at ports is causing 6-7 days delay, but it is an insignificant issue for Bajaj Auto.
  • Speaking about the next quarter, he said, the recovery process will be slow as underlying demand was impacted because of the BS-VI shift and the sentiment is now affected because of the coronavirus.
  • Q1FY21 will be a difficult quarter, the virus will act as a negative force and adjustment of people to new cost which requires positive sentiment is difficult in this scenario.
  • Speaking about the current market scenario, he said the cost of money will not be an issue but due to the economic backdrop the logic on lending is becoming severe.
  • About the autos, he said 30-40 percent of sales in March have shifted to BS-VI.

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

  • The closing price of Bajaj Auto was ₹ 2,350/- as of 12-March-2020.  It traded at 13.5x/12.8x/ 11.4x the consensus earnings estimate of ₹ 173/ 183 /205 for FY20E/21E/22E respectively.
  • The consensus target price for Bajaj Auto is ₹ 3,280/- which implies a PE multiple of 16x on FY22E EPS of ₹ 205/-.
By Auto, Bajaj Auto , , , 0 Comments Read more...
30 Dec

Mr Rajendra Gogri on why Aarti Industries will continue to be a multi-bagger.

Update on the Indian Equity Market:

On Friday, Nifty closed 1% higher at 12,245. Among the stocks, Coal India (+3.5%), Axis Bank (+3.3%) and BPCL (+2.7%) were the gainers. Yes Bank (-1.4%), Wipro (-1.0%), and Infratel (-0.8%) ended in the red. Nifty PSU Bank (+2.9%), Nifty Realty (+1.6%) and Nifty Bank (+1.3%) were the top sectoral gainers. All the sectors ended in the green. 

Excerpts from an interview of Mr Rajendra Gogri, CMD, Aarti Industries Ltd (Aarti Ind) with ET NOW on 24th December 2019

  • Aarti Industries is a specialty chemical manufacturer with B2B sales to major global companies for a variety of end-use – polymer, agrochemicals, dyes, and pigments. The company has a value-added product chain. Because of this business model and multi-customer relations, Aarti Ind has been able to grow the business sizably. In the last few years, the overall competitiveness of India against China has increased, which has expanded margins for the chemical industry and also for Aarti Ind as well. That is a major reason for both volume growth as well as bottom-line growth.
  • According to him, India is in a very sweet spot as far as the specialty chemical industry is concerned because the cost-wise, now Chinese labour cost is double that of India and because of the trade war issue also, there is a big appetite for India. Now the buzz word is that the company is getting extra benefits in the global supply chain because they do not import anything from China for their specialty chemical business. They are totally backward integrated.
  • According to Mr Gogri, the key in the chemical industry will continue to be backing businesses with relatively better chemistry skills, operating in molecules, markets with oligopoly. With more chemistry skill and with a strong customer base, Aarti Ind is able to have a substantial market share in their line of products.
  • Two factors have impacted the growth this year:
  1. climate impact on US agrochemical market is specifically restricted this year.
  2. the global automobile sector slowdown was led by a slowdown in China, for some of the products which are going in the auto sectors, there is some demand pressure.
  • Aarti Ind is well spread in the product line as well as geography and is expected to grow.
  • There is a sizable scope for an import substitution with about $1 billion worth of chemicals within Aarti Ind chain being imported. The Company has identified quite a few products now which are virtually not made in India. The entire chlorotoluene chain which they have identified is not made in India and some of the downstream products are also not manufactured in India. They have also considered import substitution. That is one of the major criteria for identifying the products in addition to the direct demand for global markets.
  • Aarti Ind has signed 2-3 major contracts. Out of this, the first two contracts will be commissioning in 4QFY20 and that has the potential to give a substantial boost to their top line going forward. A first contract is a 10-year contract. It is a high value-added product and EBITDA is almost expected to be about 40%. Topline growth will be relatively less from that project but EBITDA growth will be substantially more.

Consensus Estimate: (Source: market screener website)

  • The closing price of Aarti Industries Ltd was ₹ 833 /- as of 27-December-19. It traded at 25x/ 20x/17x the consensus EPS estimate for FY20E/ FY21E/ FY22E of ₹ 33.0/40.9/48.2 respectively.
  • Consensus target price of ₹ 925/- implies a PE multiple of 19x on FY22E EPS of ₹ 48.2/-.
By Aarti Ind, Chemicals , , , , , 0 Comments Read more...