Tag - acquisition

Exports will be the focus area after the acquisition – Motherson sumi

Update on the Indian Equity Market:

On Tuesday , NIFTY ended higher at 17,991 (+0.26%). All the sectoral indices were gainers, led by PSU Banks (+3.1%), Media (+1.5%), and FMCG (+1.2%). IT was the lone loser, down by (-0.9%). Among the stocks, Titan (+6.1%), Bajaj Auto (+3.3%), and Bajaj Finserv (+3.0%) led the gainers while HCL Tech (-3.7%), HDFC Life (-1.9%), and Coal India (-1.7%) led the losers.

Excerpts of an interview with Mr. Vivek Chaand Sehgal, Chairman , of Motherson Sumi (MS) with ET NOW on 11th October 2021:

  • Acquisition of CIM Tools in aerospace segment will be beneficial for MS. CIM Tools have an order book of more than $200 million and the company will do very well in coming time.
  • Exports will be the focus area because MS set up bases in the different countries with CIM Tools and there will be a rise in exports because of the customers are abroad.
  • CIM Tools is a profit-making company and idea would be to improve it and add to the top line. MS has a clear thinking. They get 40% return on capital employed.
  • MS is acquiring existing profit-making joint venture in China. It is very important because MS is more into in passenger vehicles and this one is all about commercial vehicles .
  • MS has a huge presence in China and company have a huge market that they can then generate in China itself.
  • Opportunity wise in two to three years company will be all over in China. Company is learning about commercial vehicles. It is a wonderful area to get into it because MS is very strong with commercial vehicles globally.
  • Comparing global and domestic business is very difficult. The kinds of cars that are produced outside and the cars in India are very different in terms of value. Every car that produced there has a buyer for it. That means customers are at very good situation. Companies have the orders but they have some supply constraints.
  • The chip shortage and all other things combated with customers in a very strong way. The demand is huge and the situation is also getting better.

Asset Multiplier Comments

  • Auto production cuts and raw material price increase due to inflation might affect company’s performance in the near term.
  • Company is expanding its business in different segments. This will be the growth driver.

 Consensus Estimate: (Source: market screener website)

  • The closing price of Motherson Sumi Systems Limited was ₹ 245/- as of 12-Oct-2021. It traded at 35x/23x/20x the consensus earnings per share estimate of ₹6.89/10.8/12.4 for FY22E/FY23E/FY24E respectively.
  • The consensus target price of ₹ 254/- implies a PE multiple of 20x on FY24E EPS of ₹12.4/-.

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.”

 

 

Entry into new categories with Soulfull acquisition – Tata consumer

Update on the Indian Equity Market:

On Thursday Nifty closed 0.7% higher at 14,896. Among the sectoral indices, PSU Banks (+5.9%), FMCG (+2.5%), and Metal (+2.0%) closed higher. IT (-0.4%) was the only sector which closed in the red. SBI (+6.6%), ITC (+6.1%), and Bajaj Finance (+5.0%) closed on a positive note. Asian Paints (-1.9%), UPL (-1.7%), and Cipla (-1.6%) were among the top losers.

Excerpts from an interview of Mr. Sunil D’souza, MD & CEO, Tata Consumer with CNBC-TV18 dated 03rd February 2021:

  • Tea prices have not started to taper off and the company is confident that proper execution will deliver good results in the future.
  • Starbucks and NourishCo Beverages are showing sequential improvement.
  • On ‘Soulfull’ acquisition, he said the Company looked at strategic and financial filters. It will help to get into new categories including snacking, breakfast.
  • This will lead to entry into new consumer occasions. The company was not previously present in these segments.
  • These new products are margin accretive products. EBITDA margins for Soulful are higher as compare to the current basket.
  • Speaking about the tea business, he said the margins are a transient issue. The company has increased its share by 90 bps (Y-0-Y).
  • The company has also integrated its distributor and digitize its system.
  • The account receivables days are down 50% from where the company started.
  • On future acquisitions, he said the company is juggling around different pieces and the announcement will be made when the company gets closer to it.
  • The gross cash of the company is around Rs 2,500 crores, the company makes judicious of the cash. The company around Rs 156 crore cash for the ‘Soulfull’ acquisition.
  • The company expects double-digit growth across financials.

 

Consensus Estimate: (Source: market screener website)

  • The closing price of Tata Consumer was ₹ 589 as of 04-February-2021.  It traded at 58x/47x/40x the consensus Earnings per share estimate of ₹ 10.2/12.5/14.7 for FY21E/FY22E/ FY23E respectively.
  • The consensus average target price is ₹ 605/- which implies a PE multiple of 41x on FY23E EPS of 14.7/-.

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.”

 

Expects ALTBalaji to break even in Q4 – Balaji Telefilms

Update on the Indian Equity Market:

On Thursday, Nifty ended 0.7%, lower than the previous close at 11,519. The top gainers for Nifty 50 were Dr Reddy (+4.2%), HCL Tech (+2.3%), and Zee (+2.3%) while the losing stocks were Hindalco (-4.3%), Tata Motors (-2.5%), and Shree Cement (-2.4%). The sectoral gainers for the day were Pharma (+0.4%), Media (+0.4%), and IT (+0.2%) while the losers were Realty (-1.7%), Metal (-1.4%), and PSU Bank (-1.2%).

Edited excerpts of an interview with Mr Nachiket Pantvaidya, Group Chief Operating Officer at Balaji Telefilms and CEO ALTBalaji; dated 16th September 2020 from CNBC TV18:

• Proactive cost control measures implemented by Balaji Telefilms helped them stem their losses in the lockdown quarter. Their OTT platform, ALTBalaji remains one of the top 5 paid apps in the country.
• Pre COVID, the company was expecting ALTBalaji’s breakeven to happen in October, November and December this year, but as the production schedules were delayed because of the pandemic impact, now it is looking to breakeven in January, February and March in 2021.
• 1Q has been challenging for the Company as all content production activity came to stop.
• In terms of growth, the same quarter last financial year the Company had a direct revenue stream of 6.7 crores that has grown to 12 crores in this quarter so ALTBalaji is doubling its direct subscription.
• The Company is seeing a very good trajectory for ALTBalaji especially because tier II and tier III markets have opened up during the pandemic and that has got them a whole lot of new subscribers without having to spend a lot of marketing money to acquire.
• The acquisition pace will be very high because now the markets have opened up, according to Mr Pantvaidya.
• He added that the real question is that can the Company retain the acquired subscribers, will they churn out and the reason why he is putting that out-front is that if the Company has to produce new shows for these subscribers to be on the platform. Therefore the race is on for the Company to produce more and more shows.
• The Company is confident that it will launch close to 25 shows in the remaining part of the year starting this month itself which is probably 50% more than a usual clip.

Consensus Estimate: (Source: market screener website & investing.com)
• The closing price of Balaji Telefilms Ltd was ₹ 77/- as of 17-September-2020. The company reported a loss of Rs 5.8/- per share for FY20.
• The consensus target price of ₹ 100/-. The consensus earnings estimate are not available.

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.”