Miscellaneous

Confident of delivering 16-18% CC revenue growth in FY22 – Vaibhav Global

Update on the Indian Equity Market:

On Tuesday, NIFTY closed up at 15,805 (+0.7%). Top gainers in NIFTY50 were ICICI Bank (+2.7%), HDFC (+2.6%), and Grasim (+2.6%). The top losers were Adani Ports (-2.0%), Dr Reddy (-1.1%), and HCLT (-0.9%). The top sectoral gainers were FIN SERVICES (+1.4%), PVT BANK (+1.3%) and BANK (+1.2%) and sectoral losers were MEDIA (-0.6%), IT (-0.3%) and FMCG (-0.2%).

Excerpts of an interview with Mr Vineet Ganeriwala, Group CFO, Vaibhav Global (VAIBHAVGBL) with ET Now dated 12th July 2021

  • In FY21, they grew their unique customer base by about 39% and reached the half-million mark. A part of it was induced by the pandemic. A lot of people were at home and there was high TV viewership and heightened web traffic throughout last year.
  • Their business model is such that it works in all kinds of economic cycles. They have been working on it, expanding their product portfolios, and are getting good traction by retaining old customers and getting new customers on board.
  • When the economies open up, some softening might be seen in certain periods but they are pretty confident of delivering their guidance to the market which is 16% to 18% constant currency revenue growth for FY22.
  • They are an omnichannel player. They sell via TV as well as the web. They are present in marketplaces like Amazon, eBay, etc. They use all kinds of social platforms — Facebook, Instagram, etc. This unique positioning gives a fantastic shopping experience to their customers, a high recall value, and the value positioning which they command.
  • Talking about the TV viewership, he said pay-TV may see a decline in the next few years. The decline in TV viewership of their customer demographics (above 45-50 years) is very low.
  • While the pay-TV decline is seen in the US, at the same time, over the air (OTA) moves are growing. From 13 million homes, maybe seven years back now the OTA which is free-to-air homes in the US has already crossed 20 million. They are constantly increasing their presence there.
  • In the new age stream of OTT, they are consciously investing and are increasing their presence there as well. They recently revamped their Roku app and tied it up with YouTube. They are present in almost all prominent digital, OTT, and streaming devices.
  • While they gave guidance of 16-18% constant currency growth in FY22, they gave guidance of 15-17% for the medium and long term as well.
  • While they will keep working on increasing their market share in the US and the UK, the B2C revenue has been growing at a CAGR of 16% for the last six years. Still, they have a market share of about 2.5-3%. Even in these two geographies, they are pretty confident of increasing the market share there.
  • They announced their German company in January this year. Their team is physically there in Germany already. Their website is already launched in Germany. TV is already live in their partner studio. Their studio which is under construction will be live in a few days. They are pretty excited about the German venture.
  • Part of the growth will come from the US and the UK; part of the growth will come from newer geographies like Germany. Once they stabilize and operationalize the German operation, they would look into other geographies like Japan.
  • They will keep the cash on the balance sheet. They want to build a kitty for the future, both organic and inorganic opportunities. They plan to invest about US$2 million of capex in rolling out the German business this year and similar other organic opportunities for plans as well. Otherwise, they will look at any inorganic opportunities which come their way.
  • Their inventory in terms of holding number days has been going down in the last 2-3 years. in March-20, they had about $60 million of inventory. In terms of the number of days of sales gone down by about 20% year-on-year. While the absolute number might have increased slightly, the sales growth has been much faster.
  • Being a regional supply chain player, in case of any transit delays, they are able to procure material from other countries and even procure locally from the US and the UK. To that extent, their operations are very smooth and they do not see any challenge on that front.
  • As a result of a delay some transient inventory would shoot up in the 2QFY22 but that would be a timing difference. As soon as the shipment situation improves, they will bring that down like they did last year.

Asset Multiplier comments:

  • We believe that the company has good growth prospects due to its presence in different geographies. Also, presence in both B2B and B2C will drive the growth faster.
  • consumer attention is constantly shifting. So, their omnichannel presence strengthens their positioning in the industry.

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

  • The closing price of VAIBHAVGBL was ₹ 813/- as of 13-July-2021. It is trading at 54x FY21 EPS of Rs 15.
  • Consensus estimates are not available for VAIBHAVGBL.

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.”

Normalized revenue growth could have been around 15% in 4QFY21- JK Paper

Update on the Indian Equity Market:

On Wednesday, NIFTY closed at 15,767 (-0.6%). Top gainers in NIFTY50 were Tata Consumer (+2.1%), Nestle (+1.5%), and ONGC (+1.1%). The top losers were Adani ports (-7.9%), Tata Steel (-2.9%), and Hindalco (-2.8%). The top sectoral gainers were FMCG (+0.5%) and IT (+0.2%) and sectoral losers were METAL (-2.8%), REALTY (-1.2%), and MEDIA (-1.1%).

Excerpts of an interview with Mr. AS Mehta, President & Director, JK Paper (JKPAPER) with CNBC TV18 dated 14th June 2021

  • Sales were impacted for 10 days in 4QFY21. Normalized revenue growth in 4QFY21 could have been around 15 percent.
  • In 4QFY21, the Sirpur plant volume was close to 70 percent of its capacity, which was not there in the 4QFY20.
  • Going forward the full impact of this new high-efficiency boiler for the company is likely to be in the range of Rs 300-350 mn on an annualized basis.
  • The pulp prices at some point of time crossed US$ 800 per tonne, but that is not a sustainable pulp price level. The pulp prices are currently in the same band of US$ 780-800 per tonne and it may continue for some more time.
  • There is no way that the pulp prices can remain in the current band. It can only sustain for a short period. Sustainable prices could be close to US$ 600 plus-minus US$ 20-30.
  • There is no direct connection between global pulp prices and local paper prices. Local paper prices are impacted due to the demand and supply scenario.
  • Post the first covid wave, paper prices dropped by ~18-20% but it revived after demand recovery.
  • Gujarat project is close to Rs 20 bn expansion project. In this project, they are putting up a new board machine & pulp mill. The projected date for completion was April or May but it was delayed due to covid. They are likely to start the trial and the final commission may happen in July. Both the additions will be on stream by the end of 2QFY21.
  • If the situation remains normal, there could be an increase in revenue. There might be some impact but overall performance should be good.

Asset Multiplier comments:

  • The Paper industry was one of the worst-hit due to lockdowns in CY20 and 1HCY21. Now that the lockdowns have been eased, offices have started operating at capacity.
  • Though in-person classes are shut, with online schools and colleges restarting, there will be demand for paper products from students. Hence, there could be a revival in the paper industry.

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

  •  The closing price of JKPAPER was ₹ 175/- as of 16-June-2021. It traded at 5x/ 4x the consensus earnings estimate of ₹ 32.0/ 45.8 for FY22E/23E respectively.
  • The consensus price target is ₹ 225/- which trades at 5x the earnings estimate for FY23E of ₹ 45.8/-

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.”

Expect the margins to expand in FY22E – Solar Industries

Update on the Indian Equity Market:

On Monday, Nifty closed in the green at 15,583 (+1.0%). Among the sectoral indices, Metal (+2.1%), Realty (+1.4%), and Bank (+1.1%) closed higher. Media (-1.4%), PSU Bank (-0.7%), and Auto (-0.2%) closed in the red. JSW steel (+3.3%), ICICI Bank (+3.0%), and Reliance (+2.8%) were the top gainers. M&M (-4.3%), Adani port (-0.9%), and HDFC Life (-0.6%) were among the top losers.

Excerpts of an interview of Mr. Manish Nuwal, CEO, Solar Industries with CNBC-TV18 dated 28th May 2021:

  • Speaking about Q4FY21 performance, Mr. Nuwal said, the numbers had grown on a low base of Q4FY20. Compared on a normal base, the volume has grown ~24%.
  • In Q4FY21, sales had a growth of ~45% YoY, this was led by volume growth of ~13% and a price increase of 25%. On the international side, the business is performing as per expectations.
  • The company expects a 30% revenue growth in FY22E.
  • Speaking about defence business, he said the business was impacted due to the Covid crisis. Currently, the order book is Rs 6,800mn, and the company recently received an order of multimode hand grenades. The production has already started for multimode hand grenades. The numbers will reflect in FY22E.
  • The target is to receive Rs 3,000mn revenue from defense in FY22E.
  • In terms of incremental defence order, he said the company will participate in the coming RFPs (request for proposal) to grow the order book.
  • Speaking about EBITDA margins, he said going forward the company expects the margins to expand in FY22E. EBITDA margins stood at 21% in Q4FY21.
  • In FY22E, the company plans to spend Rs 3,150mn on Capex.
  • The working capital cycle days have also improved from 113 days to 108 days in FY21. The target is to bring it down to 100days.
  • The debt levels are comfortable and the company is planning for aggressive Capex in the next 2 years. The company announced the setting up of 2 new plants. 1 in south India and the other in North India.
  • The plants are expected to get commissioned within 2 years.

 

Asset Multiplier comments:

  • We believe order book in the defense segment will aid revenue growth in FY22E which in turn might lead to EBITDA margin expansion.
  • The target to lower working capital days will improve the cash conversion cycle and lead to effective utilization of cash.

 

Consensus Estimate: (Source: market screener website)

  • The closing price of Solar Ltd was ₹ 1,550 as of 31-May 2021.  It traded at 38x/32x the consensus Earnings per share estimate of ₹ 40.9/49 for FY22E/FY23E respectively.
  • The consensus average target price is ₹ 1,463/- which implies a PE multiple of 30x on FY23E EPS of 49/-.

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.”

Volume boost expected from commissioning of Western Dedicated Freight Corridor– CONCOR

Update on the Indian Equity Market:

 

On Wednesday, Nifty closed 0.9% higher at 14,819. Within NIFTY50, JSWSTEEL (+5.3%), WIPRO (+2.4%), and SBIN (+2.2%) were top gainers, while ADANIPORTS (-2.8%), TATACONSUM (-1.4%), and UPL (-1.3%) were the top losing stocks. Among the sectoral indices, PSU BANK (+1.9%), AUTO (+1.6%), and PRIVATE BANK (+1.5%) were the highest gainers, while no sector ended with losses.

 

Volume boost expected from commissioning of Western Dedicated Freight Corridor– CONCOR

 

Excerpts of an interview with Mr. V Kalyana Rama, MD& Chairman, Container Corporation of India (CONCOR), aired on CNBC-TV18 dated on 6th April 2021:

  • CONCOR had good volumes in 4QFY21. Overall for FY21, handling volumes for CONCOR were 2.8% less YoY, while originating volumes were higher on a YoY basis.
  • Rama hopes FY22E will be a good year as demand has picked up and is expected to continue. Export demand has also increased in the last 6 months.
  • CONCOR has paid Rs 5,900 mn to Indian Railways in relation to a dispute, and the issue is now resolved.
  • According to a comment by DIPAM (Department of Investment and Public Asset Management) secretary, divestment of CONCOR may not happen in 1QFY22E. CONCOR divestment can take place only after Indian Railways finalizes land lease policy, which has to be approved by the Cabinet.
  • Commissioning of Western Dedicated Freight Corridor (DFC) is expected to be completed by June 2022. Connection up to Palanpur is expected to start any day now. This will help in connecting to 2 ports- Mundra and Pipavav. This will be a big volume boost in the northern India container movement business. The connection upto Mumbai port will take another year.
  • The DFC will lead to higher revenues. There is also a possibility to increase EBITDA margins due to double stacking and high capacity wagons. CONCOR is planning to have a 100% double stacking movement for all containers meant for northern India.
  • In the short term, Mr. Rama expects more growth in EXIM business as exports are picking up. In the domestic market, he is seeing more people coming toward containerization which will also aid growth. In addition, CONCOR is focusing on bulk transportation of commodities.

Asset Multiplier Comments

  • In the Union Budget for FY22E, Government of India (GoI) has budgeted inflow of Rs 17.5 lakh mn from divestment in PSUs.
  • To kick start the privatization of PSUs, GoI will float the Expression of Interest (EoI) for divestment in CONCOR. GoI plans to divest 30.8% stake and cede management control in the Rs 355 bn market cap (as on 6th April 2021) company.
  • Several Indian as well as global companies seem to be interested in getting a stake in India’s largest container and terminal operator.
  • There has been scepticism on whether GoI will be able to successfully execute their PSU divestment strategy.  Success of this privatization will pave way for further divestments in other PSUs.

 

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

  • The closing price of CONCOR was ₹ 583as of 6-April-2021. It traded at 35x/ 27x the consensus EPS estimate of ₹16.7/21.4 for FY22E/ FY23E respectively.
  • The consensus target price of ₹ 520/- implies a PE multiple of 24x on FY23E EPS of ₹21.4/-.

 

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.”

 

Optimistic on Sun NXT – Sun TV

Update on the Indian Equity Market:

On Wednesday, Nifty closed in the red at 15,107. Among the sectoral indices, Realty (+1.6%), Pharma (+0.7%), and IT (+0.4%) closed higher. PVT Bank (-0.7%), Fin Services (-0.2%) and FMCG (-0.1%) closed in the red. Cipla (+2.8%), Bajaj Finserv (+2.8%), and SBI Life (+2.7%) closed on a positive note. Eicher Motors (-2.2%), Bharti Airtel (-1.6%), and HDFC Bank (-1.2%) were among the top losers.

Excerpts from an interview of Mr. SL Narayan, CFO, Sun Group with CNBC-TV18 dated 09th February 2021:

  • The company expects double-digit growth across financials.
  • Narayan said things are looking good since January-21.
  • The advertising revenues are still lagging but the company is in a better position as compared to Q1FY21.
  • The company was impacted more as compared to large peers because of its dependence on local revenues.
  • He said the entire ecosystem is affected and hence there is some impact on the company as well.
  • On Sun NXT, he said the company had a large contract that came up for renewal. However, the negotiations couldn’t be concluded on time and its revenues were not recognized in Q3FY21.
  • Speaking about subscribers for Sun NXT, he said the company is not spending on customer acquisition because they don’t want to build an OTT at a significant upfront investment.
  • Movie releases will bring back the growth in subscription revenues.
  • A lot of new movies will be hitting the screen in coming times.

 

Consensus Estimate: (Source: market screener website)

  • The closing price of Sun TV was ₹ 528 as of 10-February-2021.  It traded at 15x/13x/12x the consensus Earnings per share estimate of ₹ 35.8/39.3/42.3 for FY21E/FY22E/ FY23E respectively.
  • The consensus average target price is ₹ 566/- which implies a PE multiple of 13x on FY23E EPS of 42.3/-.

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.”

 

Demand recovering despite product prices at historic highs – Indian Oil Corp.

Update on the Indian Equity Market:

On Friday, Nifty50 ended 1.5% lower at 14,372 dragged by the metal and banking stocks. AUTO (+1.4%), and IT (+0.2%) were the only sectoral indices to end the day with gains. METAL (-3.9%), BANK (-3.2%), and PRIVATE BANK (-3.2%) led the sectoral losers. Auto stocks led the gainers with BAJAJ AUTO (+11.2%), HEROMOTOCO (+4.0%), and EICHERMOT (+1.8%) leading the pack. AXISBANK (-4.5%), ASIANPAINT (-4.3%), and JSWSTEEL (-4.0%) were the top losers.

Excerpts of an interview with Mr. Shrikant Vaidya, Chairman, Indian Oil Corporation (IOC) published in Business Standard on 21st January 2021:

  • Crude oil prices are rising does not impact IOC’s margins as refining margins are influenced by product cracks. Product cracks are yet to recover fully. The increase in crude oil prices is likely to boost margins through inventory gains, provided prices stabilise at these levels.
  • India is set to drive global oil demand over the long term. Vaccine rollout suggests a more certain recovery in the oil market in 2021, but demand uncertainty still looms. Saudi Arabia’s decision to reduce crude oil production by 1 mn barrels a day in February and March has provided support to the market but demand concerns remain.
  • We may have to wait for fiscal conditions to improve before a significant reduction in excise duty rates are announced.
  • With the upcoming Budget, he reiterated the petroleum industry’s demand to move petrol, diesel, aviation turbine fuel, natural gas, and crude oil under GST. Exclusion of these products which account for ~60 percent of refined product volumes, with crude oil and natural gas has resulted in stranded taxes in the hands of oil & gas companies.
  • Oil consumption posted a month-on-month increase for the fourth straight month in December 2020. The easing of restrictions has revived demand from transportation.
  • IOC is sticking to the investment plans as those are based on long term demand potential in the country. Though they have faced temporary issues due to pandemic restrictions, IOC is on track to achieve its capex target of Rs 260 bn in FY21.
  • Since the easing of lockdown, IOC has commenced work on 2800 projects at an anticipated cost totaling Rs 2 trillion.

Consensus Estimate: (Source: market screener website)

  • The closing price of IOC was ₹ 96/- as of 22-January-2021. It traded at 8x/ 7x/ 6x the consensus earnings estimate of ₹ 12.8/ 14.2/ 17.3 per share for FY21E/FY22E/FY23E respectively.
  • The consensus target price of ₹ 115 implies a PE multiple of 7x on FY23E EPS of ₹ 17.3/-.

 

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.”

Dramatic recovery in advertising revenues – Sun TV

Update on the Indian Equity Market:
On Monday Nifty closed 0.1% higher at 13,568. Among the sectoral indices, Media (+1.8%), Auto (+0.6%), and Metal (+0.8%) closed higher. Nifty PSU Bank (-1.5%), FMCG (-1.3%), and Pharma (-0.2%) closed lower. Bajaj Finance (+5.1%), Bajaj Finserv (+4.2%), and Eicher Motors (+3.1%) closed on a positive note. HUL (-2.1%), Nestle (-2.1%), and BPCL (-1.8%) were among the top losers.

Excerpts from an interview of Mr. SL Narayanan CFO, Sun Group with CNBC-TV18 dated 14th December 2020:

● Mr. Narayanan said the company has dramatic recovery in advertising revenues.
● The recovery on QoQ basis is better but the kind of set back company witnessed in the 1st half of the year the recovery is not that sharp to recover all the deficits.
● He said the subscription will become the mainstay of media companies like Sun Tv.
● 9 years back, the subscription revenues were averaging around Rs 85 crore a quarter which was Rs 340 crore run rate annually. That number has now touched Rs 2,000cr.
● Speaking on infrastructure, he said the company has prepared in the last 3-4 years for streaming.
● The company is investing in more forms of content.
● He said the telecom companies are sourcing content from media companies.
● The company is looking to spend Rs 400 cr on original content and in addition to this, the company will be producing movies.
● The company will also Rs 200 cr for exclusive content on Sun Next.

Consensus Estimate: (Source: market screener and Investing.com websites)
● The closing price of Sun TV was ₹ 500 as of 14-December-2020. It traded at 14x/ 13x/ 12x the consensus Earnings per share estimate of ₹ 35.5/39.1/41.9 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for Sun TV is ₹ 523/- which implies a PE multiple of 12x on FY23E EPS of 41.9/-.
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.”

An uptick in demand during Diwali – VST Tillers Tractors

Update on the Indian Equity Market:
On Thursday Nifty closed 1.0% higher at 12,906. Among the sectoral indices, PSU Banks (+1.9%), Metal (+3.9%), and Fin Services (+1.7%) closed higher. None of the sectors closed lower. Eicher Motors (-1.6%), Maruti (-0.7%), and BPCL (-0.7%) closed on a negative note. JSW Steel (+7.0%), Tata Steel (+5.2%), and Grasim (+4.4%) were among the top gainers.

Excerpts from an interview of Mr. Antony Cherukara, MD, VST Tillers with CNBC-TV18 dated 23rd November 2020:

● Better agriculture and the festive season have led to rising demand for tractors and farm equipment.
● Speaking on the outlook, Mr. Cherukara says, the outlook is positive as an uptick in demand is seen.
● There was an uptick in demand during the Diwali festival.
● On tillers, he says, the import slowdown is coming into place, and going forward there will be an effect on demand based on that.
● 15-20% of imports of tillers were from China earlier. The Chinese tillers are cheaper as compared to Indian manufacturers. The quality of Indian tillers is good.
● On tractor sales, he says, the expected growth for tractors in FY21E is expected to be in the range of 12-15%, and a 20%+ growth is expected in tillers.
● There is not much visibility on Q4FY21 as of now.
● Speaking on cash on the books, he says, the cash flow is healthy and the company has generated 70cr + of additional cash flow in H1FY21.
● The relocation of the Benagluru facility to Hosur is on track and it is expected to be done by Q4FY21E. There will savings after this relocation.

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

● The closing price of VST Tillers Tractors was ₹ 1930 as of 26-November-2020. It traded at 22x/ 20x/ 14x the consensus Earnings per share estimate of ₹ 87.3/98.8/136 for FY21E/ FY22E/ FY23E respectively.
● Consensus average target price for VST Tillers Tractors is ₹ 1,977/- which implies a PE multiple of 15x on FY23E EPS of 136/-.

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.”

FY22 to be a game changer – Dixon Technologies

Update on the Indian Equity Market:
On Thursday, Indian equity markets snapped a two-day losing streak with the Nifty50 closing 1.5% higher at 11,449. RELIANCE (+7.3%) was the top gainer after reports of potential investments in its retail arm, Reliance Retail. BPCL (+6.0%), and ASIANPAINT (4.2%) were the other lead gainers in the index. INFRATEL (-4.8%), HINDALCO (-2.9%), and TATASTEEL (-2.3%) led the losers. Among the sectoral indices, PSU BANK (+2.5%), MEDIA (+1.3%), and FINANCIAL SERVICES 25/50 (+1.01%) were the top gainers. METAL (-1.1%), and PHARMA (-0.01%) were the only sectoral indices to end in the red.
*Nifty Financial Services 25/50 is a new capped version of the Nifty Financial Services index.

Edited excerpts of an interview with Mr. Atul Lall, MD, Dixon Technologies (India) with CNBC-TV18 on 8th September 2020:
• A government panel has recently cleared $100 bn of mobile export proposals from global manufacturers.
• Dixon has submitted 2 applications under the production-linked incentive scheme (PLI) but has not received an official nod yet. It might take a week to ten days to receive official communication from the government.
• They have large contracts for exports and domestic markets lined up with big global brands. The focus is to accelerate project implementation and production is planned to start by Q4FY21.
• The government is giving a 4-6 percent incentive for manufacturing under the PLI scheme for the next 5 years, which Mr. Lall calls the government handholding in the infancy stage of any industry. There is some disability in manufacturing mobile in India when compared to China, and the scheme is helping reduce that.
• They are seeing significant traction from large global players looking to shift base from China and other countries to India.
• Year 1 is a very short period and they get barely 3 months to generate revenues in this fiscal (FY21). In year 2, in one application, there is a ceiling of about Rs 3000-4000 crore. If they get both the applications, they will be able to generate revenues of Rs 8000 crore through mobile manufacturing, which is a big leap for a company like theirs.
• There will be a small margin expansion with a large volume expansion next year, which is going to be a game-changer.
• In the LED TV segment, the order book is very strong and they are operating at 110% capacity and with the government shifting imports of a certain kind of televisions from OGL (Open General License) to a restricted category, their order book is increasing. They have already expanded their capacity from 3.6 mn to 4.4 mn units, there is a further expansion planned to take it to 5.5 mn units. This increased capacity is almost 33% of the Indian TV requirement. This second round of capacity expansion will be completed by March 2021.
• The capacity expansion is happening across verticals, including mobiles and washing machines.
• There will be significant growth in Q2 on a YoY basis. Plants for LED TV, mobiles, and washing machines are running at almost 110% capacity. Lighting being an extensive manpower-oriented segment, they had to re-engineer the lines because of social distancing is working at 80% capacity. The one vertical that is not performing as well, which is the security surveillance systems, working at 50% capacity. Overall, the business has been good.
• FY21 will be better than FY20 both on the top line as well as the bottom line.

Consensus Estimate: (Source: market screener website)
• The closing price of Dixon Technologies (India) was ₹ 9400/- as of 10-September-2020. It traded at 91.3x/ 50x/ 36.7x the consensus earnings estimate of ₹ 103/ 188 / 256 per share for FY21E/FY22E/FY23E respectively.
• The consensus target price of ₹ 7936/- implies a PE multiple of 31x on FY23E EPS of ₹ 256/-.

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.”

Execution back on track with return of labour and availability of raw materials: Dilip Buildcon

Update on the Indian Equity Market:
On Thursday, NIFTY closed in red at 11,312 (-0.8%). Top gainers in NIFTY50 were NTPC (+6.9%), ONGC (+3.3%), and Power grid (+2.6%). The top losers were Tata Motors (-2.6%), HDFC (-2.3%), and Axis bank (-2.2%). The top sectoral gainers were MEDIA (+3.1%), METAL (+1.0%) and REALTY (+0.4%) and sectoral losers were FIN SERVICES (-1.3%), PVT BANKS (-1.3%), and BANK (-1.3%).

Excerpts of an interview with Mr Rohan Suryavanshi, Head -Strategy & Planning, Dilip Buildcon with ET now dated 18th August 2020:
● 1QFY21 was impacted by Covid but the good news is that they have had a very strong order book. The Rs 8,900 crore worth of orders that they have won are spread across different verticals.
● They have dam irrigation orders, tunnel orders, special bridge orders and also road orders. All these have different lead times of two to four years and these orders will start sort of giving revenues in the later part of this year which would be about the end of Q3FY21 to the start of Q4FY21.
● Execution has definitely picked up from when the lockdown was imposed. They have started seeing reverse migration of now labourers coming back to sites. They have also started seeing normalisation in all the raw material supply chains which has been disrupted.
● 90% plus of their labourers have come back to the sites and all the raw material disruptions are behind barring some sites where there might be local disruptions.
● The only thing that is impacting right now are the monsoons. Since they have had good monsoons across the country that is impacting work for the industry as a whole.
● For the past couple of years, they have been focussing on debt reduction and working capital cycle improvement which had also seen their debt equity ratio falling to 0.81 last year from 1.06 a year before.
● In FY21, because of Covid and because of the impact that it has had, they will avail of a moratorium, and also avail of whatever facilities the RBI has given them.
● Current debt numbers and the current working capital cycle numbers will not go up from here and will actually reduce and this is all obviously dependent on how the rest of the year looks and hopefully they would not have any more large disruptions or shutdowns because all those things will impact revenue and profitability.
● In 1QFY21, their revenues were only reduced by about 17% as a YoY basis from same quarter last year, which is exceptionally good as opposed to the industry average of about 40% plus reduction in revenues.
● The business model of having their own people, having their own equipment, doing everything on their own without any subcontracting has definitely helped them in getting this revenue and being ahead of the curve when the recovery came.

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

● The closing price of Dilip Buildcon was ₹ 404/- as of 20-August-2020. It traded at 18x/ 11x the consensus earnings estimate of ₹ 22.0/ 37.7 for FY21E/22E respectively.
● The consensus price target is ₹ 406/- which trades at 11x the earnings estimate for FY22E of ₹ 37.7/-
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