Will benefit from larger home cooking trend – BorosilPrashant Vaishampayan
Update on the Indian Equity Market:
The market ended flat for the second straight day on Wednesday. The last hour buying helped reduce the losses made through the day. At close, the Nifty was up 1.30 points, or 0.01%, at 15,576.
Among the sectoral indices, PSU BANK (+3.0%), METAL (+2.2%), and AUTO (+1.8%) were top gainers while IT (-0.8%), FMCG (-0.5%), and FINANCIAL SERVICEs (-0.2%) were losers. Among the stocks, UPL (+2.8%), TATASTEEL (+2.6%), and HINDALCO (+1.9%) were the top gainers. ITC (-2.9%), TECHM (-1.2%), and AXISBANK (-1.0%) were the top losers.
Will benefit from larger home cooking trend – Borosil
Edited excerpts of an interview with Mr. Shreevar Kheruka, Managing Director & Chief Executive Officer, Borosil with CNBC TV18 dated 31st May, 2021:
• Borosil saw a 30% YoY revenue growth in 4QFY21. There was a good bounce back in 4QFY21 after dull 1HFY21 and ended the year much stronger than anticipated.
• First 10-15 days of April-21 were following the same trajectory as 4QFY21 did, but due to second wave coming in, business got impacted as shops and outlets were shut.
• As the cases wane in the second (COVID-19) wave, a stronger bounce back is expected again. In short term some pain is expected on the consumer side of the business but demand seems to be strong in the long run.
• On the scientific side, Borosil makes vials and ampoules and that has seen strong demand because of COVID as well as non-COVID related injectable demand. This business has headed up even in 1QFY22 and strong demand is expected to continue for the rest of the year.
• It’s a wait and watch situation on the consumer side, but the company is bullish on the opportunity in the next year as well as for the future.
• Consumer business contributed ~60-65% of total revenue in FY21 and rest is scientific segment.
• The consumer business has been stagnant and things are rapidly growing on the scientific side. Mid-teens growth is anticipated for scientific segment in FY22E, vials are expected to grow ~25-30% for FY22E.
• E-Commerce has been the fastest and strongly growing channel for Borosil.
• Capex is planned for vials and ampoules as well as for new products in the segment. Not large Capex allocated for scientific laboratory equipment.
• Borosil is looking for inorganic expansions going forward in scientific segment and has a net cash of ~250 crores in company’s books.
Asset Multiplier Comments
• Looking at the performance and growth in 2HFY21 we believe that Borosil has good potential going forward. Diversified product portfolio, gain in appliances and E-Commerce channel and sale of COVID-related products such as Remdesivir and vaccine vials gives us confidence on growth of the company.
Consensus Estimate (Source: investing. com and market screener websites)
• The closing price of Borosil was ₹ 220/- as of 02-Jun-21. It traded at 70x/60x the consensus EPS estimate of ₹ 3.1/3.7 for FY22E/ FY23E respectively.
• The consensus target price for Borosil is 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.”