Update on the Indian Equity Market:
On Friday Nifty closed 0.24% lower at 11,642. Among the sectoral indices Metal (+1.6%), Media (+1.5%), and IT (+0.2%) closed higher. Auto (-1.1%), Private Bank (-0.9%), and FMCG (-0.8%) closed lower. Bharti Airtel (-4.0%), Hero Motocorp (-3.1%), Maruti (-2.5%), closed on a negative note. Adani Ports (+4.5%), BPCL (+3.5%), and Coal India (+3.4%) were among the top gainers.
Excerpts from an interview of Mr. Vir Advani, VC & MD, Bluestar with CNBC-TV18 dated 29th October 2020:
● On cost-cutting, Mr. Advani said the revenue recovered 72% as compared to the same quarter last year and EBITDA recovered 75 percent. The Company was able to sustain the margins. It was supported by overheads and changes in the cost structure.
● The company has made some structural changes to the cost structure which will help to save costs in the current year as well as next year.
● On business, he said in projects the recovery is still slow which ~ 60-65% of last year is. The project sites have not fully opened and there is a tight cash position in some customers.
● On the retail side, he said there are some green shoots visible. For September month the recovery is high at 90%. The company is looking to reach a 90% level of last year’s demand in Q3. The company expects a normal Q4.
● The company has held on to the Market share of ~12.8% as they had strong sales in Tier II & III.
● E-commerce sales are doing well for the company.
● In 1HFY20 the online sales were 3% of the company’s sales, in 1HFY21 it crossed 13%. Water purifiers are doing better and ~75% of Water purifier sales happening online.
● The company has made progress on the working capital front. The company generated Rs100 cr of positive cash flow on a standalone basis.
● On Exports, he said the company has reached 90% of last year on an H1 basis and expects growth in FY21E on exports.
Consensus Estimate: (Source: market screener and Investing.com websites)
● The closing price of Blue star was ₹ 629 as of 30-October-2020. It traded at 59x/ 34x/ 25x the consensus Earnings per share estimate of ₹ 10.7/18.7/25.0 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for Blue star is ₹ 566/- which implies a PE multiple of 23x on FY23E EPS of ₹25/-.
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