05 Jul

Rural India outlook positive on good rabi procurement, cash flow – M&M

Update on the Indian Equity Market:

On Monday, NIFTY closed up at 15,834 (+0.7%). Top gainers in NIFTY50 were Hindalco (+3.8%), ONGC (+2.4%), and SBI (+2.2%). The top losers were Tech M (-1.6%), HDFC Life (-1.4%), and BPCL (-0.6%). The top sectoral gainers were REALTY (+2.7%), METAL (+1.2%) and PVT BANK (1.1%) and sectoral losers were IT (-0.2%) and PHARMA (-0.01%).

Excerpts of an interview with Mr. Hemant Sikka, President of Farm Equipment Sector, M&M (M&M) with CNBC-TV18 dated 2nd July 2021

  • In the month of June 21, the total tractor sales went up 32 per cent, exports jumped over 90 per cent and the market share rose to 42.5 per cent. The company is optimistic about tractor demand in the coming months. The farm sector equipment industry has grown by 19 per cent in June and M&M has outperformed showing 32 per cent growth.
  • The rural outlook looks bright as demand has increased in June. Overall, the rabi procurement has gone around very well. Cash flow in the rural heartland is very positive.
  • With the second wave of COVID subsiding, confidence is coming back. It was a play of two factors, clearly, a little bit of pent-up demand and also some fresh demand coming in that is why June has played out so well for the industry overall.
  • They are getting into a very high base in Q2, Q3, and Q4 FY21 so they will wait for July and August, see how the monsoon pans out, and then maybe at the beginning of September, they will be able to revise the guidance.
  • Overall guidance remains the same and they will try to maintain their usual high & healthy margins.
  • In June, pent-up demand was there due to lockdowns in April & May but there was a little bit of fresh demand as well. The tractor industry has been on the roll and if the monsoon progresses well then the industry will be able to perform much better.
  • None of the players has a very high inventory. M&M also has a very reasonable inventory. In fact, they have reduced inventory in Q1, so production will be running at full capacity.
  • Automakers have raised prices in recent times with most citing increased output costs as a reason. M&M plans to gradually do so.
  • They have taken their latest price increase on July 1. They have taken a 3 per cent price increase. Before that on April 1 and January 1, they had taken the previous 2 price increases. Another increase might be there in 2HFY22.
  • Some of the states have come back as far as supply is concerned like Maharashtra, all the suppliers are running at 100% capacity. In Karnataka, Bangalore, suppliers are running at 50-60% capacity.
  • Overall, they are looking at positive sentiment from the Rural side.

Asset Multiplier comments:

  • Due to positive sentiment building up in rural India, we expect the tractor industry to perform very well.
  • Overall waiting time has increased due to semiconductor shortage but there has been a good demand for their newly launched models (XUV, Thar, bolero).

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

  • The closing price of M&M was ₹ 791/- as of 05-July-2021.  It traded at 20x/ 17x the consensus earnings estimate of ₹ 38.8/ 45.5 for FY22E/23E respectively.
  • The consensus price target is ₹ 947/- which trades at 21x the earnings estimate for FY23E of ₹ 45.5/-

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.”

 

By Auto, Mahindra & Mahindra 0 Comments Read more...
03 Jul

This week in a nutshell (June 28th to July 2nd)

Technical Talks

NIFTY opened the week on 28th June at 15,915 and closed on 2nd July at 15,725. It made a weekly loss of 1%. The 20DMA of 15,752 might as a resistance to the index and the 50DMA of 15,301 might act as a support. This suggests a net downside of 2.5% from hereon.

Weekly highlights

  • On 28th June 21, India’s finance minister Ms. Nirmala Sitharam addressed a press conference announcing economic relief measures. Rs 11.1 lakh mn of loan guarantee scheme was announced for Covid affected sectors. Few measures were also announced with a view to reviewing the tourism sector.
  • The GOI removed import restrictions on refined palm oil till December 21. India is the largest importer of vegetable oils with nearly 15mn tonne annually. The palm oil comprises 9mn tonnes out of the total 15mn tonne. The domestic edible oil prices have doubled in FY21. We believe this move might lead to better availability of the commodity in the domestic market which will further lead to lower prices.
  • The seasonally-adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) declined to 48.1 in June 21 from 50.8 in May. The index fell below the critical 50.0 mark for the first time since July 20. A level above 50 denotes expansion while a score below 50 denotes contraction. The manufacturing sector activities contracted as a rise in coronavirus cases led to strict containment measures which adversely impacted demand.
  •   The Indian Meteorological Department (IMD) forecasted a normal monsoon rainfall over the country as a whole in July 21. However, prevailing conditions suggest that no favorable conditions may develop for further advance of southwest monsoon in Rajasthan, Western UP, Haryana, Chandigarh, Delhi, and Punjab. The availability of good monsoon leads to better agricultural output, which in turn further leads to a boost in the agriculture sector.
  •  The foreign institutional investors (FII) sold Rs 54,168 mn worth of Indian equity shares last week. Domestic institutional investors (DII) undertook Rs 64,174mn of net buying during this week.

Things to watch out for this week

  • The 1QFY22 result season will start next week, with TCS reporting results on July 8, 2021.
  • Auto OEM’s announced June monthly volume data, with a rebound over the previous month’s volume across the board. Further easing of state specific restrictions might drive the share price of auto OEM’s.
By #WeekInANutshell 0 Comments Read more...
01 Jul

Higher Provisions due to increasing Covid-19 Cases to be made – SBI Life

Update on Indian Equity Market:

On Thursday, markets ended lower with Nifty closing 42 points to end at 15,680. DRREDDY (+2.8%), HINDALCO (+2.1%), and BJAT (+1.7%) were the top gainers on the index while BAJAJFINSV (-2.2%), BRITANNIA (-1.4%) and INFY(-1.2%) were the top losers for the day. 

Among the sectoral indices,  PHARMA (+0.9%),  AUTO (+0.8%), and FMCG (+0.4%) were the top gainers, while IT (-0.6%), FINANCIAL SERVICES (-0.4%), and PRIVATE BANK (-0.3%) were the top losers.

 

Excerpts of an interview with Mr. Mahesh Kumar Sharma, MD and CEO of SBI Life on CNBCTV18 dated 30th June 2021:

  • SBI Life Insurance saw a slowdown in their group business in May. The company only registered a growth of 1.35 percent in new business premium, owing to the lockdown.
  • On a YoY basis, the company saw higher claims in H2FY21 over H1FY21. To address the issue of higher claims, the company has taken steps to tackle the negative impact.
  • SBI Life has set aside a higher amount for provisions for any potential spike in Covid-19 claims Rs 1,830 mn vs Rs 400 mn in FY21 and has changed the mortality assumptions for better risk management.
  • If vaccinations continue at this rate, the company expects the full recovery to pre-covid levels by the end of this year. However, the company is confident of a spike in claims during the upcoming quarter.
  • Despite the lockdowns in May, the company expects positive performance due to lifting restrictions and a digital outreach system developed by the company to contact its customers.
  • Individual Non-single premiums are the biggest contributors to the company’s new business premiums due to raising awareness about health insurance and other products due to the pandemic. The company expects to maintain its growth trajectory in the new business premium in the mid-teens over the next few years. 
  • The company hasn’t changed its underwriting policy. The company is confident of the vaccination drive boosting the number of vaccinated insurable population and has no plans to reduce the scope of insurance to the only vaccinated population. 

Asset Multiplier Comments:

  • The insurance sector has been one of the worst-hit sectors due to Covid-19. With the effects of the pandemic tapering and an informed target customer base, there are better days ahead.
  • India’s insurance penetration is very low compared to developed countries. This industry has reached an inflection point from where SBI Life and its peers can achieve steady growth.

 

Consensus Estimates (Source: market screener website): 

  • The closing price of SBI Life was ₹1,007/- as of 1-July-2021.  It traded at 53x/ 46x the EPS estimate of ₹ 19/ ₹ 22  for FY22E/23E respectively.
  • The consensus price target is ₹ 1190/- which trades at 54x the EPS estimate for FY23E of ₹ 22/-
  • In the case of insurance companies, the embedded value per share is the correct multiple for valuing the company. The consensus estimate of this metric is not available on any of the websites.

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.”

By Insurance, SBI Life Insurance , , 0 Comments Read more...
30 Jun

Technological disruption accelerated in the past quarters – LTTS

Update on the Indian Equity Market:

Indian indices ended in the red for the 3rd consecutive day after profit booking by investors. The Nifty 50 ended at 15,722 (-0.2%), dragged by the MEDIA (-0.8%), BANK (-0.7%), and FINANCIAL SERVICES (-0.6%). IT (+0.6%) was the only sector which ended with gains. Among the Nifty 50 stocks, COALINDIA (+1.3%), RELIANCE (+1.2%), and DIVISLAB (+1.1%) ended with gains while SHREECEM (-1.9%), BAJAJFINSV (-1.8%), and POWERGRID (-1.5%) ended with losses.

Excerpts of an interview with Mr. Amit Chadha, CEO & MD, L&T Technology Services (LTTS) published in the Financial Express on 30th June 2021:

  • LTTS’s domestic market comprises plant engineering and product design related business, both for Indian conglomerates and MNCs. On the product design side, LTTS works with various global engineering centres or captive centres in the transportation, industrial products, medical and telecom segments. In the plant engineering segment, they help FMCG and chemical companies with the engineering support domain.
  • Over the past one year, LTTS has pushed the boundaries of virtual development by securing remote access to its labs and developing a Home Lab environment for select clients where engineers have high computer equipment replicated at their homes.
  • Engineering and the R&D (ER&D) services involve a suite of services- from ideation, conceptualisation, design, product development, testing and after-market launch, to support and enhance existing products.
  • In the current scenario, a lot of the work has evolved from physical to the secured virtual space- through simulation, high-end systems, and servers. This work can be done anywhere and can be accessed from anywhere.
  • Unlike other industries, the ER&D segment necessitates a part of the work to be executed and experienced upon in labs and requires the physical presence of the workforce in design centres.
  • A major trend LTTS is observing is the pace at which change is taking place. The acceleration of technological change and disruption that has been affecting processes, products, robotic automation in business functioning in the past few quarters has been different from that in the last 10 years.
  • The second megatrend observed is that companies are partnering with start-ups who have point solutions and are creating a technology ecosystem along with them. Enterprises are relying on bringing all the specialised capabilities and integrating them from start to finish. With the travel disruptions under the new normal, customers are comfortable with this nature of work being done out of offshore delivery centres.
  • The biggest change in technology trends is seen in the areas of electric autonomous connected vehicles, 5G technology, digital healthcare and digital manufacturing.
  • As an ER&D destination, India has gained prominence as a strategic R&D hub focused on innovation and disruptive technology. Clients seeking technology partners or India captive centres are no longer offshoring just for cost benefits, but to achieve flexibility and availability of talent, time to market, and localised products for developing and developed markets. This is where LTTS’ engineering domain expertise will help it stay ahead of its competition.
  • In the plant engineering segment, there has been a push from the Government with its ‘Invest in India’ initiative and promotion on setting up manufacturing facilities in India.

Asset Multiplier Comments

  • LTTS is a key beneficiary of the increasing tech adoption in ER&D. With 50% of its revenues coming from digital, LTTS will likely witness revenue growth from a growth in ER&D spends by Companies.

Consensus Estimate: (Source: market screener website)

  • The closing price of LTTS was ₹ 2,886/- as of 30-June-2021. It traded at 34x/ 29x/ 26x the consensus earnings estimate of ₹ 85.1/ 101/ 110 for FY22E/FY23E/FY24E respectively.
  • The consensus target price of ₹ 2,573/- implies a PE multiple of 23x on FY24E EPS of ₹ 110/-.

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.”

By LTTS , , 0 Comments Read more...
29 Jun

Aspirational middle class buying from Tier 3,4,5 cities will drive growth- Blue Star

Update on the Indian Equity Market:

On Tuesday, NIFTY closed 0.4% down at 15,748. Top gainers in NIFTY50 were POWERGRID (+2.3%), CIPLA (+1.5%), and NESTLEIND (+1.3%). The top losers were IOC (-2.4%), ONGC (-2.2%), and HINDALCO (-2.1%). The only sectoral gainers were PHARMA (+0.6%) and FMCG (+0.5%) while the top sectoral losers were PSU BANK (-1.5%), METAL (-1.2%), and PRIVATE BANK (-1.0%).

Aspirational middle class buying from Tier 3,4,5 cities will drive growth- Blue Star

Excerpts of an interview with Mr. B Thiagarajan, MD, Blue Star (BLUESTARCO), aired on CNBC TV18 dated 29thJune 2021:

  • Markets started reopening in first week of June 2021. Since then, demand has been much better than anticipated. The loss of summer sales will still keep the numbers lower than 1QFY20 by almost 25-30%. However, sales in 1QFY22 will be much better than 1QFY21.
  • In January 2021, BLUESTARCO took a price hike of 5-8% due to cost inflation. Despite that, BLUESTARCO had record sales in 4QFY21with 37% YoY growth.
  • BLUESTARCO took a second price hike in April 2021 to the tune of 3-5%. As the company cannot absorb the exorbitant input cost inflation, it plans to take a third price hike in mid-August 2021.
  • Naturally, consumers have migrated to lower end products and may continue to do that due to the several price hikes.
  • Mr.Thiagarajan maintains the guidance of 8-8.5% margins in the cooling products. BLUESTARCO does not want to sacrifice margins to gain volume.
  • Government’s Production linked incentive (PLI)scheme will have a positive impact in coming months.
  • Embracing the technology of aluminium heat exchangers will reduce the costs and increase energy efficiency for AC industry. Auto industry has shifted to this technology while the AC industry has not done so yet.
  • The next energy level change is scheduled for 1st January 2022 which will push up prices by another 7%. For demand to continue to grow at least at 10% CAGR, these cost rationalizationmeasures will have to be taken.
  • For room ACs, delivering 8% EBITDA margin is possible in 1HFY22. 8.5% is the upper target band which may not be possible in the short term.
  • Demand in Tier 1 cities has been worst affected. For BLUESTARCO, Tier 3,4,5 cities form 65% of revenue. This aspirational middleclass segment in Tiers 3,4,5 cities is what will drive the growth going ahead so BLUESTARCO has repositioned itself in line with this expectation.

 

Asset Multiplier comments:

  • Industries across the board have been facing input cost pressures and are trying to pass on the costs through price hikes.
  • However, passing on the entire cost inflation is proving to be difficult in an already sensitive demand scenario.
  • Consumer discretionary items are sensitive to pricing, so companies will have to calibrate pricing based on competitive scenario. Consumers will shift to a lower priced product if the price difference is large.

 

Consensus Estimate: (Source: market screener website)

 

  • The closing price of BLUESTARCO was ₹ 815/- as of 29-June-2021.  It traded at 44x/ 31x the consensus earnings estimate of ₹ 18.5/ 26.7 for FY22E/23E respectively.
  • The consensus price target is ₹ 819/- which trades at 31x the earnings estimate for FY23E of ₹ 26.7/-

 

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.”

 

By Blue star, Consumer durable, Uncategorized 0 Comments Read more...
28 Jun

India will be a very important market for Electric Vehicle segment – Ashok Leyland

Update on the Indian Equity Market:

Nifty 50 ended 46 points down at 15,815 (-0.3%) amid Finance Minister Nirmala Sitharaman’s announcement of another stimulus package. Among the sectoral indices, PSU BANK (+2.4%), METAL (+1.3%), and PHARMA (+1.3%) were the top gainers while MEDIA (-0.6%), IT (-0.5%), and FINANCIAL SERVICES (-0.3%) were top losers. Among the stocks, DRREDDY (+1.8%), HINDALCO (+1.74%), and DIVISLAB (+1.7%) were the top gainers. HDFCLIFE (-4.1%), TITAN (-1.32), and SHREECEM (-1.2%) were the top losers.

India will be a very important market for Electric Vehicle segment – Ashok Leyland
Edited excerpts of an interview with Mr. Gopal Mahadevan, Chief Financial Officer at Ashok Leyland with CNBC TV18 on 28th June, 2021:
Ashok Leyland reported revenues of Rs 70,005mn and turned profitable after 4 consecutive quarters of losses in 4QFY21.
• FY22 Outlook: Internally company is budgeting for a growth. The growth will depend on how the economy and country open up after the second wave. It will also depend on the third wave and how the delta virus turns out. Overall, the industry and company are expecting a good growth in FY22.
• Jun-21 performance: Sales of the commercial vehicle happens in the last 2 days of the month and it is early to comment on the revenue growth of the month of Jun-21. But a significant growth is not expected as the opening up of the economy has happened recently.
• Ashok Leyland is preparing for the growth in terms of supply, keeping sufficient inventory, being in touch with dealers, network and financials. At the same time the company is keeping track of costs and keeping itself efficient.
• The company expects growth if there is no third wave and economy is open consistently. The forecast for country’s GDP is 9-9.5% which means there is growth from now to Mar-22.
• For Ashok Leyland, the Light Commercial Vehicles (LCV) business seems very promising. The reason being launch of ‘Bada Dost’ which is a completely new segment where the company has seen growth and increase in market share as well. Company is very positive about the LCV segment and doesn’t see demand getting affected significantly as there is a lot of activity witnessed in cities till now. There is intra city transportation, which this segment caters to. E-commerce is also helping this segment to grow.
• Heavy Commercial Vehicles: Growth is seen in three segments. 1) Intermediate commercial vehicles have seen healthy growth where Ashok Leyland is present. 2) Tippers are growing because of the infrastructure impetus provided by the government. This will continue to grow and also there is positive overweight on real estate which will help the demand of Tippers to grow. 3) Multi-axle Vehicles are used for multiple purposes like interstate transportation. So, once these lockdowns or states open up fully, growth of multi-axle vehicles will be visible where Ashok Leyland is very well positioned.
• Plan of action: 1) Heading for LCV growth, 2) Keeping in touch with dealer and customers for both Tippers and Multi-axle vehicles, and 3) Keeping variants of intermediate vehicles ready to capture the market further when it starts growing.
• Scope of Electric Cars and Buses: Mr. Mahadevan thinks that future will be mixed of both green and electric vehicles. He sees capability being built in internal combustion and expects it to stay for few more years and the company will continue to build capabilities in internal combustion and diesel. Ashok Leyland is also future proofing the company by initiative of Switch where all the Electric Vehicles initiatives of the company going forward will be housed under Switch. Switch is 91.5% owned by Ashok Leyland. Switch will have a subsidiary in India which will take care of the global market and will be the manufacturing hub. Switch will also cater to the Indian market and SAARC markets. He believes that India is going to be a very important market as far as EVs are concerned.
• His comments on margin as steel prices are going up: Margins are a factor of three things: 1) Revenue and growth of revenue, 2) Raw Material, 3) Management of the middle line. Ashok Leyland is working on revenue and market share growth. They are also managing the middle line as efficiently as possible. To tackle the high raw material cost problem, company is running a project to improve the performance of the product and take out cost. So, when the steel prices will cool off in the 2HFY22, it is expected that the company will benefit from all these three initiatives.

Asset Multiplier Comments
• Healthy medium-term demand prospects along with market share gain possibilities and structural margin-accretive factors will help Ashok Leyland to achieve robust growth.
• We believe post the Covid second wave, the domestic auto industry is expected to continue on the path of recovery and also expect pent up demand post 1QFY22.
Consensus Estimate (Source: tikr. com and market screener websites)

• The closing price of Ashok Leyland was ₹ 125/- as of 28-Jun-21. It traded at 57x/22x the consensus EPS estimate of ₹ 2.2/5.7 for FY22E/ FY23E respectively.
• The consensus target price of ₹ 140/- implies a PE multiple of 25x on FY23E EPS of ₹ 5.7/-.

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.”

By Ashok Leyland 0 Comments Read more...
26 Jun

This week in a nutshell (June 21st to June 25th)

Technical talks

NIFTY opened the week on 21st June at 15,526 and closed on 25th June at 15,860. The index made a gain of 2% this week. The index has taken support of its 10DMA of 15,768 which might act as a support. RSI (65) and MACD trending upwards suggests an up move from hereon.

Weekly highlights

  • The state of Gujarat has announced a new Electric Vehicle Policy 2021, which will provide a subsidy worth Rs 8,700mn for electric vehicles and for setting up charging infrastructure in the State. EV buyers will get a subsidy up to Rs 20,000 for electric two-wheelers, up to Rs 50,000 for electric three-wheelers and up to Rs 150,000 for 4- wheelers.
  • NBFCs are facing a sudden increase in loan recast, about a tenth of their loan book could be recast due to the pandemic stress. Many NBFCs are seeing recast in the June quarter, which will be implemented in the next few months. The recasts are also to be seen across the June and September quarters. (Source: The Economic Times)
  • On 23 June, banks recovered Rs 58 Bn by selling Vijay Mallya’s shares in United Breweries to Heineken international, which was a 15% stake in the company. So far, banks have recovered Rs 71.8 bn through the share sales, which is a little over 70 percent of the amount that Vijay Mallya owes to the lenders.
  • Reliance Industries Limited (RIL) in its AGM, has announced a Rs 750 Bn capital investment plan towards a clean energy push. RIL’s deal with Aramco is expected to conclude this year, where the latter will buy a 20% stake in RIL’s oil-to-chemical (O2C) unit. The Retail business is expected to create 1 Mn new jobs and add 10 Mn new vendors in next 3 years to the business.
  • FII (Foreign Institutional Investors) selling and DII (Domestic Institutional Investors) buying trend continued this week as well. There was a net outflow of Rs 44571mn from the FII kitty while DII invested Rs 52833 mn.

 

Things to watch out for next week

  • As the country gradually recovers from the 2nd wave of covid 19 supplemented by a strong vaccine drive, the stock market will be driven by these and global factors.
By #WeekInANutshell 0 Comments Read more...
24 Jun

Inquiries and booking coming back as more states are unlocking- Maruti Suzuki

Update on the Indian Equity Market:

On Thursday, NIFTY closed up at 15,790 (+0.6%). Top gainers in NIFTY50 were Infy (+3.5%), TCS (+3.3%), and JSW Steel (+2.2%). The top losers were Reliance (-2.6%), IOC (-1.3%), and Coal India (-1.1%). The top sectoral gainers were IT (+2.8%), PVT BANK (+0.8%) and BANK (0.7%) and sectoral losers were PSU BANK (-1.4%), MEDIA (-1.1%), and REALTY (-0.8%).
Excerpts of an interview with Mr. Shashank Srivastava, ED, Maruti Suzuki (MARUTI) with ET Now dated 22nd June 2021

  • Car is a discretionary product. It is a very large-item product; it is probably the second-largest purchase people make in their lifetime in India. As a result, future demand depends on the economy in general — the per capita income growth and the sentiment.
  • Per capita income growth is expected around 10% as RBI had indicated, lower than the budget figure which was indicated around 14% or so. After the second wave, there has been a lowering down of expectations of economic growth.
  • The rural sentiment is a little more negative at this time of the year compared with last year. The fundamentals of the economy in the rural area are still strong. There can be a good bounce back.
  • OEMs are a little apprehensive of making forward projections at this time because of all this uncertainty. People are talking of a third wave. Unless the sentiment related to Covid becomes negative, there can still be a bounce back.
  • Inquiry levels are getting better. Last week’s levels were almost similar to what they had at the beginning of April. That is pretty good.
  • Closure of outlets, because of weekend lockdowns or whatever, naturally causes a dip. Having said that, inquiries and bookings seem to be coming back as more and more states are unlocking.
  • Cost of running and fuel efficiency are important criteria for the Indian buyer. There are substantial savings if you use CNG. Besides, the availability of CNG now is also much better. They have had good traction on that front.
  • A couple of years back, they were making about 100-1,000 CNG cars a year. In FY21 they did something like 1,58,000-1,60,000. This year they are projecting sales of almost 2,50,000 for CNG.
  • The percentage of electric vehicles being sold in India as well as globally is still very small. The primary reason for it is that the cost of acquisition of electric vehicles is extremely high, largely because the battery costs are very high. There is also the distance-per-charge limitation.
  • Cheaper technology is currently not available, which is one of the basic hindrances to the progress of EVs. The other major factor is the lack of charging infrastructure.
  • In hatchbacks their market share is 65-66%, in sedans almost 50%, in PVs segment, they are more than 60% now, and in vans, they are 90-95%. The one area which seems to be a weak area for them seems to be SUVs.
  • There too, in the entry-level, they are sitting pretty with the Brezza, the number one model there in the entry-level SUV segment.
  • In the mid-SUV segment where competition has the Seltos and the Creta, they have the S Cross. Their numbers are not so great yet. They are quite conscious of this fact and they are watching this SUV segment very closely.
  • After April’s plant shut down owing to the oxygen issue, they restarted production on May 17. They brought forward the maintenance shutdown from June to May. Since the restart, they have been ramping up rapidly. Their utilization is pretty strong at the moment.
  • About semiconductors, there is a global shortage. Maruti has been able to manage production well largely because they have the advantage of a large portfolio — different vehicles using different levels of semiconductors.
  • If semiconductors are not available of a particular type in a particular variant, they then go and produce more of the other. They are just hoping that the situation will normalize in a while.

Asset Multiplier comments:

  • There has been a good bounce back in volumes for auto companies in 4QFY21 and volume data is showing good recovery.
  • In a post-COVID-19 environment, the entry-level hatchback segment, national scrappage policy, and new launches are expected to drive sales.
  • The Indian electric vehicle (EV) market also might see positive movement in 2021-2022.

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

  • The closing price of MARUTI was ₹ 7,531/- as of 24-June-2021.  It traded at 35x/ 27x the consensus earnings estimate of ₹ 214/ 284 for FY22E/23E respectively.
  • The consensus price target is ₹ 6,367/- which trades at 22x the earnings estimate for FY23E of ₹ 284/-

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.”

 

By Auto, Maruti Suzuki 0 Comments Read more...
23 Jun

Naukri is a cash cow for Info Edge – Info Edge

Update on the Indian Equity Market:

On Wednesday, Nifty closed in the red at 15,687 (-0.5%). Among the sectoral indices, Auto (+0.5%) was the only one to close higher. Metal (-1.1%), IT (-0.9%), and Pvt Bank (-0.6%) closed in the red. Maruti (+2.3%), Titan (+1.5%), and Bajaj Fiserv (+1.3%) were the top gainers. Adani Ports (-3.3%), Wipro (-2.9%), and Divis Labs (-1.5%) were among the top losers.

Excerpts of an interview of Mr. Hitesh Oberoi, MD & CEO, Info Edge with CNBC-TV18 dated 22nd June 2021:

  • Speaking about the company, Mr. Oberoi said the digital transformation story is panning out in all categories.
  • The recruiting vertical of Info Edge, Naukri.com has generated Rs 1,950mn of cash in 4QFY21. The Naukri vertical is acting as a cash cow to fund other investments made in the operating business like 99acres.com, Jeevansathi.com, and Shiksha.com.
  • Speaking about EBITDA margins, he said the collection of money is done in advance, and revenue is recognized over a period of time. The billing growth in 4QFY21 was 25% YoY.
  • The 99acers.com business was affected due to the Covid19 2nd wave but now there is some recovery.
  • In Q4FY21, billings for shiksha.com grew by 50% YoY. The education technology is doing well for the company. The schools and colleges are shut for the past 1-1.5 years which has acted as a catalyst to speed up the growth.
  • The company plans to focus on its 4 existing verticals.
  • There is enough cash on books but no immediate acquisition on the cards.

 

 

Asset Multiplier comments:

  • We believe digital transformation led by Covid-19 is acting as a catalyst for verticals like Shiksha.com and Naukri.com
  • We believe the recovery in the 99acers.com vertical will depend upon how 3rd wave pans out. The 3rd wave might hamper the recovery seen in this vertical.

 

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

  • The closing price of Info Edge Ltd was ₹ 4,779 as of 23-June 2021.  It traded at 138x/102x the consensus Earnings per share estimate of ₹ 34.7/46.7 for FY22E/FY23E respectively.
  • The consensus average target price is ₹ 2,873/- which implies a PE multiple of 62x on FY23E EPS of 46.7/-.

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.”

By Info Edge 0 Comments Read more...
22 Jun

45% of sales from consumer segment helped margin expansion – Globus Spirits

Update on the Indian Equity Market:

Following global peers, the Indian indices opened higher on Tuesday. The gains were erased by afternoon and NIFTY closed at 15,773, below the intraday high of 15,896. Within the index, MARUTI (+5.2%), UPL (+3.9%), and SHREECEM (+3.3%) ended higher while ASIANPAINT (-1.8%), BAJFINANCE (-1.6%), and NESTLEIND (-1.2%) ended lower. Among the sectoral indices, AUTO (+1.3%), IT (+0.6%), and METAL (+0.3%) ended with gains while REALTY (-0.7%), BANK (-0.4%), and PRIVATE BANK (-0.4%) were the laggards.

Excerpts of an interview with Mr. Shekhar Swarup, Joint MD, Globus Spirits (GLOBUSSPR) with CNBC-TV 18 on 21st June 2021:

  • They have been undergoing a structural change in the organisation in the last 18 months. There has been a higher demand for alcohol from Oil Marketing Companies (OMCs) in ethanol. That has helped increase margins for GLOBUSSPR.
  • There has been a structural change in the consumer segment. In FY21, 45% of the sales came from this segment, vs 35% in FY20. The increased sales from the consumer segment have also helped increase margins.
  • The lockdowns in April-May 21 have impacted volumes. In Rajasthan and Haryana, there haven’t been widespread lockdowns for alcohol sales. In West Bengal, there were lockdowns for some time. The impact hasn’t been as severe as the same time last year.
  • He believes they are in a position to grow the volumes in 1QFY22E.
  • As the share of consumer business is increasing, margins are growing. The cost escalation has been passed onto the consumers and he expects margin enhancement in the future.
  • They have an expansion project which is expected to be ready for operation in 3QFY22E. This is a 100 percent increase to capacities in West Bengal, which translates to about a third increase in their total capacities. Once these capacities come on stream, ethanol and ENA volumes are expected to grow further.
  • Manufacturing (distillery segment) margins were growing in the last 18months and have stabilised in the last 3months.
  • The premium segment is a new one for them and there be an investment into it for future growth.
  • The majority of the consumer business comes from the value segment. The Indian Made India Liquor (IMIL) and medium liquor segment has done well in FY21. Some new products are expected to be launched in this segment in FY22.

Asset Multiplier Comments

  • The company has a presence in 2 segments: Consumer business, marketing, and selling of IMIL and Indian-made Foreign Liquor (IMFL), and bulk manufacturing business of selling ethanol to OMCs and franchise bottling for brands.
  • GLOBUSSPR is expected to be one of the beneficiaries of the changing ethanol policy, leading to a growth in revenues and margin expansion. The focus on the consumer segment by addition of new products and distribution network expansion is expected to aid margin expansion.

Consensus Estimate: (Source: NSE website)

  • The closing price of GLOBUSSPR was ₹ 595/- as of 22-June-2021. The company reported an EPS of ₹ 48.9/- for FY21.
  • The consensus earnings estimate and price target estimates 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.”

By Globus Spirits, Liquor 0 Comments Read more...