Tag - hand sanitisers

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06 May

Entry into service industry for sanitization for the long haul: Amit Syngle, Asian Paints

Update on the Indian Equity Market:

For the second consecutive day, the Nifty closed lower at 9,206 on Tuesday amid reports of stress among lenders when millions of borrowers are facing pandemic induced income loss. As a result, there were no sectoral gainers. PSU Bank (-3.3%), Realty (-2.9%), and Bank (-2.4%) were the top losing sectors. Among the stocks, the biggest gainers were Infratel (+3.6%), M&M (3.2%), and Powergrid (+2.9%). SBIN (-4.2%), Bajaj Finance (-3.8%), and Britannia (-3.6%) led the losers.

Entry into service industry for sanitization for the long haul: Amit Syngle, Asian Paints

Excerpts of an interview with Mr. Amit Syngle, MD & CEO, Asian Paints which aired on CNBC TV18 on 4th May 2020:

  • For the last 3-4 weeks, Asian Paints were under a complete lockdown. The lockdown 3.0 has offered some relaxation.
  • Some of the plants and warehouses have opened as shops for non-essential goods have been allowed to open. Most of their plants have opened but work at slightly reduced capacity.
  • Asian Paints has given buyers 45 days of credit and asked vendors for an extension as well. Talking about the liquidity position, he said stringent cost-cutting measures are being undertaken to preserve cash. There is comfortable liquidity going ahead and they do not foresee any problems in the coming period.
  • Asian Paints had announced their foray into the hand and surface sanitizer with the Viroprotek range of products. Talking about the development of this range, he said they have worked on the range in the last 10-15 days at the behest of the government and the Ministry of Health, and Ministry of Chemicals.
  • As a responsible and caring brand, they wanted to help the government and community and the shortage in the market was the motivation for entering this segment. They already have the Royal Health Shield, a range of antibacterial paint that ensures hygiene and bacteria control. So entry into the sanitizer range aligned with their objective.
  • They have been in the Health and Hygiene space for some time and have products in that range. In the near future, Viroprotek will be a part of the overall range.
  • To ensure reach to the right outlets and ensure adequate supply, their distribution segments will be activated.
  • Though initially entire production will be directed to the Government and NGO initiatives, sanitizers & surface cleaners will be part of Asian Paint’s portfolio in the future. They are looking to enter the service industry for sanitization in a very big way.
  • On the business plans going forward, he said they are watching and devising scenarios as to what will happen in these exceptional circumstances. There is no clarity in terms of how the situation envelops, and what is going to happen. Thus, depending on how the situation clears up and the market opens, plans will be made accordingly. It is difficult to give concrete plans as the entire environment is uncertain.
  • Talking about the top line, no action will be seen in 1QFY21. As per indications coming in, it will be a wipe off quarter. It is difficult to say how revenues will come in for the entire year.

Consensus Estimate: (Source: market screener website)

  • The closing price of Asian Paints Ltd was ₹ 1,618/- as of 05-May-2020.  It traded at 49.5x/ 41.6x the consensus EPS estimate of ₹ 32.7/ 38.9 for FY21E/ FY22E respectively.
  • The consensus average target price of ₹ 1,822/- implies a PE multiple of 46.8x on FY22E EPS of ₹ 38.9/-

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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09 Mar

Godrej Consumer confident of ramping up production when required says CEO Gambhir

Update on the Indian Equity Market:

On Friday, NIFTY closed 2.6% lower at 10980 because of the coronavirus scare and the Yes Bank crisis. RBI’s action of seizing control of Yes Bank and the possible consequences on the financial system weakened the market sentiments. The top losers for the day were Yes Bank (-54.9%), Tata Motors (-9.5%) and Zee (-7.3%). The few gaining stocks included Bajaj Auto (1.5%), GAIL (0.8%) and Maruti (0.4%).  All the sectors were in the red. The top losing sectors were Nifty PSU bank (-5.3%), Nifty Media (-4.8%) and Nifty Metal (-4.4%).

Excerpts from an interview of Mr. Vivek Gambhir, Managing Director and CEO, Godrej Consumer Products Ltd published in Live Mint dated 06th March 2020:

  • The surge in demand for hand sanitizers and soaps in the wake of fears of the COVID-19 epidemic will not have any significant impact on earnings for GCPL since it constitutes a small business segment.
  • The rabi harvest has been good and the demand from the rural market is expected to start picking up in the next one or two quarters.
  • The market is seeing a temporary demand in hand soaps, hand sanitizers, small soaps, and handwashes as well. GCPL has enough production capacity and will be ramping up the same to fulfill the demand.
  • According to Mr. Gambhir, the Company will definitely see some temporary spikes in demand mainly in April- May timeframe.
  • GCPL is rolling out some new digital campaigns to educate consumers about the coronavirus and what they can do to protect themselves.
  • The hand sanitizers and Rs 10 soaps are around 30% of the entire soap segment for the company. The company will see an uptick in demand but will not be material enough at this stage.
  • In regard to ramping up the production capacity, Mr. Gambhir said that they have enough production capacity to meet the increased demand and don’t see any challenges in meeting those demands. GCPL is also seeing some request for export orders from other parts of the world but these are relatively small numbers and won’t be material.
  • For the soap business in India, GCPL has seen strong volume growth in Q3 and has continued to gain market share in both their brands Godrej No 1 and Cinthol. There has been some value degrowth in this particular segment but the imbalance between volumes and value is expected to be corrected over the next couple of quarters. GCPL has taken a 5% hike in soap prices given some of the increases in palm oil derivatives. The Company will evaluate if there is a need for further increase in prices. With some price increases, the Company will be able to drive a better balance between volume growth and value growth. At the same time GCPL is intensifying some of its cost reduction programs and is hoping to maintain the margins. However, if it is required to take a dip in the margins for a quarter or two to drive the volumes, they are prepared for it.  Next year, the Company is expecting a better performance from both India and international business and on the margin front, they hope to sustain the levels if not improving.
  • FMCG sector has been experiencing challenges over the last few quarters with regards to a weakening consumer sentiment, sagging rural demand and liquidity pressures in the channel still continue.
  • GCPL expectation is that over the next one-two quarters, the industry will start seeing a recovery in demand particularly led by the rural sector which has been a big cause of concern.
  • The rural sector has been growing at 0.5x the growth rate which was 1.2x or 1.3x a few quarters ago. The deterioration in growth has been significantly fair. Recently there has been some gradual recovery because the rabi crops have been good. The rural inflation also augurs well for rural consumers. It is putting more money in the hands of farmers.

Consensus Estimate: (Source: market screener website)

  • The closing price of Godrej Consumer Product Ltd was ₹ 640/- as of 06-March-2020.  It traded at 41x/ 35x/ 32x the consensus earnings estimate of ₹ 15.6/18.1/20.0 for FY20E/FY21E/FY22E respectively.
  • The consensus target price is ₹ 754/- which implies a PE multiple of 38x on FY22E EPS of ₹ 20.0/-.
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