Tag - volumes

02 May

The commuter segment has seen a slowdown over the past 3 years  – Bajaj Auto

 

 

Update on the Indian Equity Market:

The Indian indices opened the week in the red. NIFTY ended 0.2% lower at 17,069 led by INDUSINDBK (3.9%), COALINDIA (2.6%), and POWERGRID (2.1%). EICHERMOT (-3.4%), APOLLOHOSP (-3.4%), and TITAN (-2.9%) were top losers.

Among the sectoral indices, METAL (+0.6%), PRIVATE BANK (+0.5%) and MEDIA (+0.4%) were the top gainers. CONSUMER DURABLES (-2.0%), IT (-1.5%), and AUTO (-1.4%) led the sectoral laggards.

Excerpts of an interview with Mr. Rakesh Sharma, ED, Bajaj Auto with CNBC-TV18 on 28th April 2022: 

  • EV transition provides the company with a huge opportunity in the scooter segment. The company is currently not present in the ICE scooter segment, ASEAN Markets are heavily skewed towards the non-motorcycle segment, so EV Scooters provide Bajaj Auto with a global opportunity.
  • The company launched has launched Chetak EV Scooter 2 years ago and will launch soon launch a new version in June-2022. The recent EV Fire incidents will impact buyer behavior in terms of safety concerns and brand preference but the transition to EV is inevitable.
  • The Mass Market segment (~100cc) has lost over 15% volume over the last 3 years due to economic slowdown in the rural parts of the country and decreased purchasing power of low-income groups due to COVID-19 and inflation.
  • The commuter segment contributes about 50% of 2 wheeler industry’s volumes, so the company is on the lookout for how the monsoon performs as it expects a revival in demand if a robust monsoon leads to a rise in disposable incomes which will be critical for the 2 wheeler industry’s turnaround.
  • The export segment has performed steadily with the company reporting the highest-ever volumes from the export segment. The company is a market leader or the runner-up in key export markets of Latin America, Africa, and ASEAN.
  • Demand will be buoyant during Q1, due to pent-up demand and marriage season in rural India, however, that cannot ve extrapolated to the outlook for FY23. Q2FY23 will be crucial to determine whether the 2 Wheeler industry is set for a turnaround after reaching a decadal low due to structural problems of inflation and unemployment across rural India.

Asset Multiplier Comments:

  • Bajaj Auto like other mass-market producers has borne the brunt of rural slowdowns and decline in demand, increasing commodity costs, and supply chain constraints but the issues seem to have bottomed out and the industry as a whole is set for a turnaround in FY23.
  • High export exposure and a robust portfolio of premium brands like Dominar, Pulsar, and KTM-Husqvarna have insulated Bajaj Auto from the slowdown in the commuter segment and made it better placed amongst the all the players in the 2 wheeler industry.

Consensus Estimate: (Source: Marketscreener website)

  • The closing price of Bajaj Auto was ₹ 3,623/- as of 02-May-2022. It traded at 19x/ 16x the consensus earnings estimate of ₹ 194/226 for FY23E/FY24E respectively.
  • The consensus target price of ₹ 4,120/- implies a P/E Multiple of 18x on the FY24E EPS estimate of ₹ 226/-

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 Bajaj Auto , , 0 Comments Read more...
25 Dec

This week in a nutshell (20th-24th December)

Technical talks

NIFTY opened the week on 20th December at 16,824 and closed on 24th December at 17,004. It gained  1.1% during the week. The index is trading below its 10DMA of 17,057 which might act as a resistance. On the downside, the 16,971 level might act as a support. The RSI (44), and MACD turning downward suggests a possible decline.

Weekly highlights

  • The US indices closed the week in green as investors speculated that the spreading Covid Omicron variant may not adversely affect human health, businesses and lockdown-like situations might not arise, and hence the stock buying picked up. S&P 500 was up by 2.3%, Nasdaq 100 by 3.2%, and Dow Jones by 1.7%.
  • The Turkish currency lira tumbled to a record low after its President Recep Tayyip Erdogan pledged to continue cutting interest rates, referring to the Islamic ban of high-interest rates as a basis of his policy. The president feels that Turkey can free itself from reliance on foreign capital flows by abandoning policies that prioritized higher interest rates and strong inflows.
  • The Indian government reduced the import tax on refined palm oil to 12.5%, from earlier 17.5%, in an effort to cool near-record high vegetable oil prices. This would make refined palm oil more attractive than crude palm oil for Indian buyers.
  • Sebi suspended futures and options trading for one year in chana, mustard seed, crude palm oil, moong, paddy (basmati), wheat and soybean and its derivatives. This has not only led to a fall in prices of these commodities, but also to scaling back of inventories by traders, who say the flow of imports will slow down since they do not have a hedging platform.
  • Zee Entertainment Enterprises (Zee) and Sony Pictures Networks India (SPNI) signed a definitive agreement that will let the two merge their networks, digital assets, production operations and programme libraries. The merged entity will have a 27% market share of the general entertainment space. After the completion of the deal, Sony Sony Pictures Entertainment will hold a 50.86% stake in the combined entity, the promoters of Zee will hold a 3.99% stake and the remaining shareholders of Zee will hold a 45.15% in the merged entity.
  • Tata Motors has incorporated Tata Passenger Electric Mobility Limited (TPEML), a wholly-owned subsidiary that is involved in the manufacturing of electric motor vehicles, with an initial capital of Rs 7000 mn.
  • FII (Foreign Institutional Investors) were net sellers of shares worth Rs 65890 mn and DII (Domestic Institutional Investors) were net buyers of shares worth Rs 69156 mn this week.

 

Things to watch out for next week

  • As investors around the world seem to be cautious about the Fed’s announcement of three 25 bps increase in interest rates in CY 2022, we may see a further sell-off in Indian stocks next week by the FIIs.We may see a reduction in the level of activity as most investors in the US and Europe are away on holidays. 

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 Uncategorized , , 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 Nov

Expect H2FY22 to be even better- Ashok Leyland

Update on the Indian Equity Market:

On Tuesday, NIFTY closed at 18,000 (-0.6%) near its low of 17,959. Among the sectoral indices, AUTO (+2.5%), IT (+0.5%) were the only gainers. PSU BANK (-2.1%), OIL & GAS (-1.4%) and PHARMA (-1.3%) led the laggards. Among the stocks, MARUTI (+7.3%), M&M (+3.0%), and TATAMOTORS (+2.4%) led the gainers, while SHREECEM (-3.0%), RELIANCE (-3.0%), and HINDALCO (-2.5%) led the laggards.

Excerpts of an interview with Mr. Gopal Mahadevan, CFO and Whole Time Director, Ashok Leyland (ASHOKLEY) with CNBC-TV18 on 15th November 2021:

  • Things were expected to improve in April-21 but the second wave of covid impacted Q1FY22 for the entire industry and eventually, Q2FY22 saw a sharp recovery. With the reduction in covid cases, increased levels of vaccination, and reopening of economic activities, things are expected to improve quite swiftly in Q3FY22 and Q4FY22.
  • This will have a positive impact on the commercial vehicle industry. The core industries like infrastructure, commodities, and the manufacturing sectors are already showing good growth which augers well for the CV industry, specifically the truck segment.
  • Ashok Leyland is waiting for public transport to improve which hasn’t happened yet. Although offices are resuming, schools are still shut. The impact of office resumption will be seen on increasing bus volumes.
  • From Ashok Leyland’s standpoint, Light Commercial Vehicles are doing well and their market share stood at 23% in Q2FY22.
  • Ashok Leyland is trying its best to improve volumes and share of customers, consistently.
  • They are going to launch their CNG range of intermediate vehicles by Q4FY22 which would again kind of improve their presence in the ICV segment.
  • Ashok Leyland took a price hike of 2-2.5% approximately in Q1 and Q2FY22. They took a price hike in Q3 as well to set off some part of the raw material price increase, especially steel where the prices have gone through the roof due to consistent price increases.
  • They do expect costs to soften as things begin to rationalize. One thing to watch out for would be the semi-conductor demand because it is quite significant. There are constraints not only for the CV sector but also for passenger cars, 2-wheelers, and electronics. When this eases out, a push from the supply-side towards greater delivery will be seen.
  • Gross margins are expected to improve as demand improves.
  • Three reasons why a fraction of market share was lost:

1) Market share is based on wholesale. However, Ashok Leyland doesn’t intend to pump stocks into dealerships beyond a certain point. It is only focused on maintaining customer accounts and adding new ones.

2) Ashok Leyland is a significant South player but the volume growth there has not been as good as what it was in the rest of the country. South volumes are expected to start catching up in 2HFY22, especially in December and January which will push Ashok Leyland’s market share up.

3) CNG plays an important role in the ICV segment which accounts for a third of the overall MHCV market in terms of trucks. So, with the launch of CNG vehicles in the fourth quarter, market share is expected to go up.

  • At ₹ 3100 crores, its net debt position is comfortable and the D/E ratio is at 0.5. Ashok Leyland will continue to optimize net debt, work on working capital and astutely manage Capex.
  • The chip shortage issue was expected to be solved by September-21 but that hasn’t happened yet. In South-East Asia, capacities are being set up. As per analyst reports, the chip shortage is expected to ease by Q4FY22.
  • Ashok Leyland expects this to ease out and doesn’t see chip shortage as a permanent issue. Once capacities are set up and distribution gets rationalized, the shortage should come off.

Asset Multiplier Comments

  • We expect the raw material inflation to impact the bottom line in the medium term.
  • With the gradual reopening of the economy, bus demand is expected to pick up. The reopening of schools will also provide an impetus to the demand for buses.
  • With the launch of CNG vehicles in the fourth quarter and the anticipated festive demand, we expect an improvement in EBITDA margin levels.

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

  • The closing price of ASHOKLEY was ₹ 147/- as of 16-November-21. It traded at 237x/ 28x/ 19x the consensus EPS estimate of ₹ 0.6/ 5.2/ 7.6 for FY22E/ FY23E/FY24E respectively.
  • The consensus target price of ₹ 152/- implies a PE multiple of 20x on FY24E EPS of ₹ 7.6/-.

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.”

By Ashok Leyland, Auto , , 0 Comments Read more...
15 Sep

Expects volumes to beat industry growth by 10% – JK CEMENT

Update on Indian Equity Market:

On Wednesday, NIFTY ended at 17,519 (+0.8%) as it closed near its high at 17,533. Among the sectoral indices, PSU BANK (+2.8%), CONSUMER DURABLES (+1.0%), and AUTO (+0.9%) ended higher, whereas MEDIA (-1.6%) ended lower. Among the stocks NTPC (+7.5%), BHARTIARTL (+4.8%), and COALINDIA (+4.0%) led the gainers while TATACONSUM (-1.0%), NESTLEIND (-0.6%), and GRASIM (-0.5%) led the losers.

Excerpts of an interview with Mr. Rajneesh Kapoor, Chief Operating Officer, JK Cement (JKCEMENT) with CNBC TV18 on 12th September 2021:

  • JKCEMENT saw an average price decline of 3-4% across all regions in India excluding the East. Traditionally, August is a time where prices drop as a result of peak monsoons. JKCEMENT expects this sentiment to continue in the month of September as well.
  • However, this year’s August was slightly different as the company saw the highest volumes in terms of market demand in FY22 and Kapoor expects this trend to continue hereafter.
  • Volumes in Q3FY22 and Q4FY22 are going to be really good as a result of an increase in capacity utilization hence, there could be an uptick in prices in October and November as the monsoon starts receding. September could see a price uptick of 1.2%.
  • Demand has been healthy across all regions in the country amounting to 40-50% on a year-to-date basis. However, the prices at this point of time are marginally below on a Y-o-Y basis as compared to last year.
  • The real challenge that the industry faces today is in terms of cost. US Petcoke which used to be imported at a rate of 74$ to 78$ per ton is currently trading at 190$ per ton. This problem gets complemented by the scarcity of coal not only in India but also in international markets. China has stopped coal production for safety reasons and Indonesia, also a big supplier has peak monsoons which is why coal supplies have gone down. As a result, fuel cost has increased close to 100%.
  • Going forward, the price increase is going to be a necessity and this could take place post-monsoon.
  • In terms of volumes, JKCEMENT expects good growth because of capacity growth in FY20. Mr. Kapoor expects JKCEMENT to be 10 percent ahead of the market.
  • Capacity addition highlights: Capacity expansion at Panna, Madhya Pradesh is progressing as per the schedule and is expected to be commissioned by Mar-23.

Asset Multiplier Comments

  • The construction business is expected to resume its pace after the monsoon recedes and hence the demand for cement could go up.
  • JKCEMENT has decided to do several capacity expansions and up-gradation of its existing kilns.
  • These could contribute in increasing JKCEMENT’s market share and revenues.

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

  • The closing price of JKCEMENT was ₹ 3395 /- as on 15-Sept-2021. It traded at 28x/25x the consensus EPS estimate of ₹ 123/138 for FY22E/FY23E respectively.
  • The consensus target price of ₹ 3,429/- implies a PE multiple of 25x on FY23E EPS of ₹138/-

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 Cement, JK Cement , , 0 Comments Read more...
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 Nov

OMC’s have asked for an increase in trade margins- Mahanagar Gas

Update on the Indian Equity Market:
On Wednesday Nifty closed 0.5% higher at 12,860. Among the sectoral indices, PSU Banks (+3.6%), Auto (+3.1%), and Realty (+2.1%) closed higher. FMCG (-1.1%), IT (-0.8%), and Pharma (-0.7%) closed lower. BPCL (-2.9%), HUL (-2.0%), and Dr Reddy (-1.7%) closed on a negative note. M&M (+10.4%), Tata Motors (+9.5%), and Bajaj Finserv (+6.5%) were among the top gainers.

Excerpts from an interview of Mr. Deepak Sawant, Deputy MD, Mahanagar Gas with CNBC-TV18 dated 17th November 2020:

● Margins have increased led by a drop in the purchase prices of gas. Domestic gas is around 75-80% of total sales.
● There is an improvement seen in the maintenance cost and other expenditures.
● On volumes and execution, he said the volume was 2.1 mmscmd in Q2FY21.
● In Q3 and Q4 the company will cross 3 mmscmd but on an overall FY21 basis we will be at ~2.5 mmscmd.
● Oil marketing companies have asked for a hike in dealer commission. The OMC’s have asked for double of earlier trade margins. The company has created a contingent liability every year as per the formula.
● The capex plan for FY21E is around Rs 550cr. The company is planning 1.5 times of FY21E capex in FY22 because of future opportunities.
● The volume growth in Q3 & Q4 will be 10% higher YoY.
● The company has reached 100% of the previous year’s volumes and CNG volumes still at 90% as of the date of the interview, so volume growth has come from other sectors.
● In the last 6 months, there were around 40,000 vehicles converted in the city of Mumbai to CNG which amounts to 10% of CNG volumes.

Consensus Estimate: (Source: market screener and Investing.com websites)
● The closing price of Mahanagar Gas was ₹ 906 as of 18-November-2020. It traded at 15x/ 12x/ 11x the consensus Earnings per share estimate of ₹ 59.4/78.6/84.8 for FY21E/ FY22E/ FY23E respectively.
● e consensus average target price for Mahanagar Gas is ₹ 1,119/- which implies a PE multiple of 13x on FY23E EPS of 84.8/-.

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 Uncategorized , 0 Comments Read more...
07 Oct

In-home beverage consumption up 25%; sales at pre-COVID levels- Varun Beverages

Update on the Indian Equity Market:
On Tuesday, Bulls continued to dominate as NIFTY ended up 159 pts (+1.4%) at 11,603.
Among the sectoral indices, METAL (-0.7%), FMCG (-0.19%), and PHARMA (-0.1%) were the losers and FINANCIAL SERVICES (+3.15%), REALTY (+ 2.6%) AND PVT BANK (+2.3 %) were the gainers.
Among the stocks, TATAMOTORS (+7.7%), HDFC (+7.6%), and ADANIPORTS (+3.5%) were the top gainers. BRITANNIA (-1.5%), COALINDIA (-1.3%), and WIPRO (-1.3%) were the top losers.

In-home beverage consumption up 25%; sales at pre-COVID levels- Varun Beverages

Edited excerpts of an interview with Mr. Ravi Kant Jaipuria, Chairman, Varun Beverages with CNBC TV18 dated 5th October 2020:

Varun Beverages (VBL) is the second-largest franchisee (outside US) of carbonated soft drinks and non-carbonated beverages sold under trademarks owned by PepsiCo. It produces and distributes brands such as Pepsi, Diet Pepsi, Seven-Up, Mirinda Orange, Mirinda Lemon, Mountain Dew, Seven-Up Nimbooz Masala Soda, Evervess Soda, Duke’s Soda, Sting, Tropicana, Seven-Up Nimbooz, Gatorade and Quaker Oat Milk as well as packaged drinking water under the brand Aquafina.

• Comments on Hotels, Food courts, Restaurants and Bars to operate in Maharashtra from 5th Oct, 2020 at 50% capacity: Maharashtra is an important state but not the biggest state sales wise for Varun Beverages. He further added that UP is the largest contributing state for Varun Beverages. Unlock in any area or region will be helpful for the company to increase the sales and he is happy to know that restaurants, movie theatres are opening up.
• The overall volume sales have reached pre-COVID levels since August, and the numbers for August and September are very close to the numbers logged during the same periods last year.
• When asked about the prospects for the month of October as the restaurants are opening up he stated that September has been better and he is happy with the performance and things are looking good going forward. Opening up of restaurants will definitely help increase the sales but in-home consumption is quite large and on the go consumption has started and they will be back to normal levels soon.
• The supply started in July-20, so July-20 was reasonably good although weaker than July-19 but since August Varun Beverages is doing well and going forward, he doesn’t see any reason why sales should fall or decline unless any major incidence or lockdown happens.
• Whatever fixed cost they could cut down during the lockdown, they have kept it down since then so fundamentally they will be in a good shape as the cost have gone down and volumes are back to normal. So, going forward things are looking pretty good and in shape.
• Unfortunately, they have lost the peak season i.e. April-May-Jun this year but as the go to market keeps on improving and unlock keeps happening things will be back to normal.
• In home beverage consumption has gone up by 25-30% after COVID and on the go consumption is also seeing recovery. If it reaches the normal level he sees huge growth coming in.
• When asked about the revenue contribution, he informed that restaurants and bars contribute less than 5%, in home consumption and on the go consumption are the main business for Varun Beverages.
• When asked whether they are facing any issues at the supply side he replied that they did not had any issue at the supply side and were able to maintain the supply. Production and Supply side was never a challenge for Varun Beverages.

Consensus Estimate: (Source: market screener website)

• The closing price of VBL was ₹ 689/- as of 06-Oct-2020. It traded at 76x/29x/21x the consensus EPS estimate of ₹ 9.2/24.3/33.1 per share for CY20E/CY21E/ CY22E respectively.
• The consensus target price of ₹ 804/- implies a PE multiple of 24x on CY22E EPS of ₹ 33.1/-

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 Varun Beverages , , , 0 Comments Read more...
22 Jun

Hospital industry will see normalisation by the end of 2QFY21: Fortis Healthcare

Update on the Indian Equity Market:

On Friday, Nifty ended 1.5% higher at 10,244. The top gainers for Nifty 50 were Bajaj Finserv (+9.2%), Bajaj Finance (+6.6%) and Reliance Ind (+6.5%) while the losing stocks for the IndusInd bank (-2.2%), M&M (-1.3%) and Vedanta (-1.3%). Sectoral gainers for the day were Realty (+6.4%), PSU Bank (+2.2%) and Media (2.0%) while the losers were IT (-0.4%) and Metal (-0.1%).

Edited excerpts of an interview with Dr Ashutosh Raghuvanshi, CEO, Fortis Healthcare Ltd; dated 18th June 2020 from Economic Times:

  • The pandemic has affected the routine work of the hospitals and surgeries in a big way. The impact started somewhere in the month of February 20. Thus, the impact can be seen in 4QFY20 as well as 1QFY21E.
  • Volumes got reduced to the emergency work but a gradual resumption of activities on the side of chronic illnesses. Fortis believes that this is a short term blip but there is going to be a sustained and pent up demand of elective work especially for chronic ailments which are going to last for at least 6 months following the normal resumption of activities.
  • Industry sees an upward swing in COVID cases in cities other than Delhi and Mumbai.
  • Fundamentals for the healthcare industry continue to remain strong in the medium term.
  • In April-20 the occupancy levels were 25% which went up to 35% in May-20. In this month the recovery in the average occupancy levels stands at 48%. With this kind of recovery, 60% occupancy expected in July and then normalcy by the end of 2QFY21.
  • Fortis expects FY21 earnings to take a slight hit but expects 3Q and 4Q FY21 to be at normal levels in terms of both revenues and profits.
  • Initiatives in terms of cost and restructuring for Fortis are on-going. Lockdown gave them the opportunity to focus more on these elements. They are in a comfortable position in terms of cash flows even after the fall in revenues in 4QFY20.
  • Fortis is continuously evaluating its portfolio to see which units need to shape up or not performing well to rationalise the portfolio.
  • Staff cost is being relooked at, especially the senior staff members in order to be aligned with the Company’s interest. So conversations are going on. Establishment cost and advertisement cost are been rationalised. Expenses are needed to be prioritised.
  • Some of the CAPEX are been deferred in FY21, for example, land up-gradation of clinical infrastructure.
  • When asked about the price capping that is happening in this industry which will hurt the private players, he said that the margins are expected to be lower as compared to the current ones but the price capping will boost the volumes for the private players. So going forward, volumes are expected to compensate for the lower margins

Consensus Estimate: (Source: market screener website)

  • The closing price of Fortis Healthcare Ltd was ₹ 122/- as of 19-June-2020. It traded at 27.5x the consensus EPS estimate of ₹ 4.4 for FY22E.
  • The consensus target price of ₹ 165/- implies a PE multiple of 37x on FY22E EPS of ₹ 4.4/-.

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.”

By Fortis Healthcare , , , , 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.”

By Dabur, FMCG , , , , , 0 Comments Read more...