Diversified

Footfalls improving every month– Phoenix Mills

Update on the Indian Equity Market:

On Thursday, Nifty closed 1.3% lower at 12,772. Within NIFTY50, POWERGRID (+2.6%), ITC (+2.2%), and NTPC (+1.7%) were the top gainers, while SBIN (-5.0%), ICICIBANK (-4.2%), and AXISBANK (-4.1%) were the top losing stocks. Among the sectoral indices, FMCG (+0.4%), and MEDIA (+0.3%) were the only gainerswhilePSU BANK (-3.1%), BANK (-2.9%), and PRIVATE BANK (-2.6%) were the toplosing sectors.

Footfalls improving every month– Phoenix Mills

Excerpts of an interview with Mr. Shishir Shrivastava, MD, Phoenix Mills, aired on CNBC-TV19 on 18thNovember 2020
● Average footfalls for October and November have reached 55%. Footfalls were higher in the first 2 weeks of November. Consumption, especially in the first 2 weeks of November has been 104% of last year. This means that conversion rates have gone up, i.e more people entering the mall are actually buying/consuming.
● 2QFY21 revenue was down 48% YoY as retail stores and hotels were not operational. But Phoenix Mills is seeing very good pick up now. Management expects FY21 to end at 58% of FY20’s rental income.
● Phoenix Mills has concluded negotiations with bank partners and have absolute visibility on how cash flows will pan out.
● Any discounts and waivers given by Phoenix Mills for the period of shutdown and the period after unlocking will end by the close of FY21. FY22 rentals will be close to what was recorded in FY20.
● When malls opened in August, footfalls were 25% which has increased to 55% now. So the trend is encouraging. People are being careful leading to still subdued footfalls. Phoenix Mills are also regulating the people density in their properties.
● Every month footfalls are improving 25-30%. Management hopes that they should be close to 75-80% of footfalls by 4QFY21. That being said, the important metric of consumption is tracking very well.
● All of Phoenix Mills’ expansion projects are well underway. They opened a new 1 mn sq ft. mall in Lucknow in July 2020 which is performing well. There are some delays on account of shortage of manpower but they are largely on track with expansion projects.
● Under construction projects of Phoenix Mills were funded by equity and there was no draw down of debt- which continues.
● Phoenix Mills have lease rental discounted debt on the operational assets. The moratorium has helped and now as cash flows are improving, management has visibility that they will be able to service all debt obligations by 3QFY21. This also includes amounts to be paid for deferment of moratorium.
● Phoenix Mills has around Rs 45,000 mn gross debt, and aroundRs 18,500mn cash on book. As free cash flow keeps improving, net debt levels can come down further.

Consensus Estimate (Source: market screener website)
● The closing price of PHOENIXLTD was ₹ 645/- as of 19-November-2020. It traded at 215x/ 33 x/ 25x the consensus EPS estimate of ₹ 3.0/19.8/26.2 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 732/- implies a PE multiple of 28x on FY23E EPS of ₹26.2/-.

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.”

India’s intrinsic growth story intact–Siemens India

Update on the Indian Equity Market:

On Monday, Nifty closed higher (+2.6%) at 9,826. Within NIFTY50, BAJFINANCE (+10.5%), BAJAJFINSV(+7.8%), and TITAN (+7.7%) were the top gainers, while DRREDDY (-2.9%), INFRATEL (-2.5%) and ULTRACEMCO (-2.2%) were the top losers. All the sectoral indices gained in the session led byPSU BANK (+7.6%), METAL (+3.9%) and FIN SERVICE (+3.6%).

Excerpts of an interview with Mr.Sunil Mathur, MD & CEO –Siemens India published in Business Standard dated 1st June 2020:

  • The process of resuming operations has been complicated. Social distancing has to be carried out without upsetting the machinery process in a factory.
  • There are various concerns related to supply chains, capacity utilization, logistics, and labor-related concerns.
  • There are different conversations happening with customers. Some customers want to wait for normalcy to return before taking delivery of materials as projects have halted. Some customers who had already ordered materials now have a different view of the business and might have to rethink or defer their capex plans.
  • Siemens is still receiving orders as their business is varied and they are heavy on digitization. But the ordering in general has become sluggish as companies are not in offices to provide physical signatures to book an order.
  • Some customers are talking about delaying payments. Siemens on its part has not yet delayed payments to their suppliers. But it’s a fine balance as if customers are not paying, Siemens will have to rethink about payments to their suppliers.
  • Currently, no customer will agree to an increase in prices and no supplier will agree to a reduction in cost. Siemens will have to manage both and still be profitable. The strategy of the last seven years, of focusing on profitable growth, continues for Siemens.
  • The Covid crisis is a hiccup, but India’s intrinsic growth story has not changed. India needs to ramp up green energy, power transmission and distribution, Metro rail, and railways. Siemens expects orders across segments.
  • Of the Rs 20 tn stimulus package, Rs 900bn package for distribution companies is a step in the right direction. Support for agriculture is also a good measure. But Mr. Mathur believes the government needs to step up infra spends to fuel the economy. It was mentioned in the package, but the conversion to actual tendering on ground remains to be seen.

Consensus Estimate: (Source: market screenerand investing.com websites)

  • The closing price ofSIEMENS was ₹ 1,125/- as of 1-June-2020. It traded at 51.1x/ 34.8x/ 30.7x the consensus EPS estimate of ₹ 22.0/ 32.3/ 36.7 for FY20E/ FY21E/ FY22E respectively. (Siemens’s fiscal year is on a September ending basis)
  • Consensus target price of ₹ 1,173/- implies a PE multiple of 32.0x on FY22E EPS of ₹ 36.7.

 

 

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.”

 

Quess Corp: Expect EBITDA growth of 30% in FY20E.

Update on the Indian Equity Market:

On Tuesday, NIFTY50 closed 0.3% lower. The decline was led by Zee (-7.3%), Bharti Infratel (-6.5%) and Grasim (-4.4%). NIFTY50 gainers included ICICI bank (+3.1%), GAIL (+2.5%) and Dr. Reddy (+1.9%). MEDIA (-3.6%), IT (-1.2%) and REALTY (-0.9%) were the top losing sectors while PVT BANK (+0.6%), BANK (+0.5%) and FIN SERV (+0.4%) were the only sectors that gained.

Quess Corp: Expect EBITDA growth of 30% in FY20E.

Excerpts from an interview with Mr Ajit Isaac, Chairman and MD, Quess Corp. The interview was published in Mint dated 26th November 2019.

  • In 1HFY20, Quess Corp has hired about 59,000 people to their workforce against 56,000 people hired in the whole of FY19. The size of the workforce as of November 2019 is 380,000.
  • Second half is usually a period of lesser headcount addition as large part of addition is for the festive season that ends towards October-November. December-January is a slow period and then February onwards there is a pick-up again.
  • Fourth quarter tends to have a better EBITDA growth as certain activities peak in that period such as collections in banks, academics, consumption of food, etc.
  • Quess Corp will likely end FY20E with close to 400,000 headcount. Addition in the 2HFY20 will be about 20,000-25,000 people.
  • Quess Corp is benefiting from a few sources. Firstly it is gaining market share from competition. Second is the benefit from movement of employment from the informal sector to the formal sector. Quess Corp is able to benefit from this transition due to its nationwide presence.  Thirdly, companies are preferring players that are more compliant and have no regulatory issues. As a result, Quess Corp workforce size is expanding.
  • Quess Corp will see 30% growth in EBITDA in FY20E.
  • Employment trend is better in non-IT than in the IT sector.
  • IT sector can be broken down in parts. It includes the Indian IT services companies, product companies, captives such as JP Morgan, Goldman Sachs which set up large campuses here to service their international requirements, and lastly, e-commerce and related ventures. Out of the above four segments, IT services has seen least growth in employment. Largest growth is in captives followed by e-commerce.
  • In the non-IT sectors, Quess Corp has added a lot of people in Banking and financial services sector and consumer sector. Consumer sector is doing well as companies want to shift to variable costs in the economic slowdown.

Consensus Estimate (Source: market screener website)

  • The closing price of Quess Corp was ₹ 532/- as of 26-November-19. It traded at 26x/ 19x/ 15x the consensus EPS estimate for FY20E/ FY21E/ FY22E of ₹ 20.3/ 27.6/ 35.8 respectively.
  • Consensus target price of ₹ 714/- implies a PE multiple of 20x on FY22E EPS of ₹ 35.8/-.