Tag - FMCG

Confident of double-digit growth in FY22 on pent-up demand – Emami

Update on the Indian Equity Market:

Domestic markets started cautiously positive and witnessed a strong rebound as it gained momentum from expectations of another set of relief measures. The new stimulus package is expected to focus on boosting the worst-hit sectors like tourism, aviation and hospitality along with MSMEs. Nifty ended above 15,300 as value buying was seen in the IT sector while Metals stocks remained in the correction phase due to muted international commodity prices.
Among the sectoral indices, REALTY (+2.8%), MEDIA (+1.9%), and IT (+1.8%) were top gainers while METAL (-1.9%), and PSU BANK(-0.3%) were among the top losers. Among the stocks, BAJAJFINSV (+4.6%), BAJFINANCE (+2.7%), and INFY (+2.5%) were the top gainers. POWERGRID (-3.0%), HINDALCO (-2.5%), and JSWSTEEL (-2.4%) were the top losers.

Edited excerpts of an interview with Mr. Mohan Goenka, Director, Emami with CNBC TV18 dated 26th May, 2021:

• Emami reported good Q4 earnings on a favourable base with 39% volume growth in domestic business. Director, Mohan Goenka says he’s confident of double-digit growth in FY22 on pent-up demand. He added their promoter pledge is at 30% & they will reduce it to 15% in the next 1 year.
• Revenue was over Rs 9000 mn in 3QFY21 v/s ~Rs 7300 mn in 4QFY21. But these numbers are not comparable on QoQ basis due seasonality in business. Emami has shown a decent growth in 2 years horizon and when compared to 4QFY19 the growth is robust.
• All categories like Zandu Balm, Kesh King, Men’s grooming products and Menthoplus has grown much better in 4QFY21 over 3QFY21.
• 40-45% of the sales comes from the winter portfolio.
• Emami started with a good note and first two weeks of April saw a very good demand. Emami has seasonal products and has healthy summer products like Navratna Tel and cool talc, however the demand tapered this season. But it is also seen that the demand really bounces back as soon as cases comes down and this time when market opens up, the company is confident of delivering a double-digit volume growth as the pent-up demand comes through.
• Seeing the input price inflation, Emami has taken 4% price hike which will take care of the input cost pressure leading to a stable Gross Margin.
• Rural demand has been impacted across geographies in second wave. The Company expects demand to pick up quickly as soon as lockdowns are lifted.
• Having the healthcare range in the portfolio, Emami was able to sell products even in the month of April and May. The demand for these products was seen to be robust.
• In the last 2 years contribution of E-commerce has reached ~4% of domestic business from 0.5%. It is expected to reach at least 6% in next 2-3 years.
• Cost reduction was seen in employee cost, other expenses and advertisement, EBITDA margin was at all time high at 30% level and target is to sustain margins going ahead.
• No need to add capacity as of now as the capacity utilization is ~60%.

Asset Multiplier Comments
• We believe that competition in Emami’s key product categories such as skin, and hair oil, will continue to remain high. Nevertheless, we remain optimistic about the favourable base, and robust demand and growth in health and hygiene market, especially in rural markets.

Consensus Estimate (Source: investing. com and market screener websites)
The closing price of Emami was ₹ 504/- as of 26-May-20. It traded at 42.5x/32.1x the consensus EPS estimate of ₹ 11.8/15.6 for FY22E/ FY23E respectively.
• The consensus target price of ₹ 564/- implies a PE multiple of 36x on FY23E EPS of ₹ 15.6/-.

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.”

Health and hygiene segments seeing good growth– Emami

Update on the Indian Equity Market:

On Thursday, Nifty closed 1.1% higher at 13,749. Within NIFTY50, TATAMOTORS (+3.9%), SUNPHARMA(+3.2%), and AXISBANK (+2.8%) were the top gainers, while INFY (-1.3%), WIPRO(-1.0%), and NSETLEIND (-0.8%) were the top losing stocks. Among the sectoral indices, FINANCIAL SERVICES (+1.8%),BANK (+1.7%) and PRIVATE BANK (+1.6%) were the top gainerswhileMEDIA (-0.8%), IT (-0.7%), and REALTY (-0.4%) were the only losing sectors.

Health and hygiene segments seeing good growth– Emami

Excerpts of an interview with Mr. Mohan Goenka, Director, Emami, aired on CNBC-TV18 on 23rdDecember 2020:
● The Covid-19 worries are now over for Emami. Emami delivered double digit YoY growth in 2QFY21 and the management expects similar YoY growth in 3QFY21E. The resumption of growth is to do with Emami’s product range which includes health, immunity, and hygiene products.
● Winter is the key season for Emami and it has set in well in most parts of India. Some healthcare products that have done well because of covid-19, continue to do so. These 2 factors are leading to sustainability of last quarter’s growth.
● Emami is a rural play which is also helping with the growth.
● Emami is not seeing any input cost pressure. Margins are in an expanding trajectory and that continues.
● Due to Covid-19, health has been in focus. Zandu is an established brand that plays in that area. Emami also focused on Chyawanprash, honey and some other product portfolios which have grown well- almost 40% in 2QFY21E.
● The promoters are committed to bringing the pledging down to zero in the next few quarters.
● Emami has launched multiple products particularly in the hygiene segment. Emami is spending good amount of money on advertising for these products. Because margins are at all time high would be investing more into the business.
● Advertising as % of sales will remain in range of 17%-18%.
Consensus Estimate (Source: market screener website)
● The closing price of Emamiwas ₹ 426as of 24-December-2020. It traded at 44x/ 36 x/ 31x the consensus EPS estimate of ₹9.8/11.8/13.8 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 435/- implies a PE multiple of 32x on FY23E EPS of ₹13.8/-.

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.”

Strong 2QFY21 performance, expect 2HFY21 to better – Emami

Update on the Indian Equity Market:

On Tuesday, Nifty closed 1.4% higher at 12,631. Within NIFTY50, BAJFINANCE (+8.9%), INDUSINDBK (+7.3%), and LT (+6.9%) were the top gainers, while TECHM (-5.7%), CIPLA (-5.4%), and HCLTECH (-5.0%) were the top losing stocks. Among the sectoral indices, FINANCIAL SERVICES (+4.1%), BANK (+3.9%), and PRIVATE BANK (+3.7%) were the top gainerswhilePHARMA (-4.3%), and IT (-3.9%) were the only losing sectors.

Strong 2QFY21 performance, expect 2HFY21 to better – Emami

Excerpts of an interview with Mr. N H Bhansali, CEO-Finance& CEO, Emami, aired on CNBC-TV19 on 9thNovember 2020
● In 2QFY21, Emami delivered 10% YoY volume growth, 11% YoY revenue growth and 33% YoY EBITDA growth.
● In 2QFY21, excluding the winter portfolio which had a weak quarter, the revenue growth was 28% YoY.
● The growth was seen across all brands, channels and geographies. Kesh King had highest ever quarterly growth, healthcare sector delivered 50%+ YoY growth in 2QFY21.
● Now winter is setting in and management expects 2HFY21 to be better. Trajectory in October 2020 was good and all brands are performing well.
● Healthcare segment, which includes chyawanprash and other immunity boosters, growth was 40% in 1QFY21 and 53% in 2QFY21.
● There is no extra inventory with the dealers now and the supply chain has settled well from the interim covid-19 disruption. So growth would continue.
● In line with the FMCG industry, Emami’s advertising expenses have now returned to pre-covid levels.
● Management expects EBITDA margin to expand from 26% in FY20 to ~30% for FY21E.

Consensus Estimate (Source: market screener website)
● The closing price of EMAMILTD was ₹ 380/- as of 10-November-2020. It traded at 38x/ 31x/ 26x the consensus EPS estimate of ₹ 10.1/12.1/14.5 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 391/- implies a PE multiple of 27x on FY23E EPS of ₹14.5/-.

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.”

In-home beverage consumption up 25%; sales at pre-COVID levels- Varun Beverages

Update on the Indian Equity Market:
On Tuesday, Bulls continued to dominate as NIFTY ended up 159 pts (+1.4%) at 11,603.
Among the sectoral indices, METAL (-0.7%), FMCG (-0.19%), and PHARMA (-0.1%) were the losers and FINANCIAL SERVICES (+3.15%), REALTY (+ 2.6%) AND PVT BANK (+2.3 %) were the gainers.
Among the stocks, TATAMOTORS (+7.7%), HDFC (+7.6%), and ADANIPORTS (+3.5%) were the top gainers. BRITANNIA (-1.5%), COALINDIA (-1.3%), and WIPRO (-1.3%) were the top losers.

In-home beverage consumption up 25%; sales at pre-COVID levels- Varun Beverages

Edited excerpts of an interview with Mr. Ravi Kant Jaipuria, Chairman, Varun Beverages with CNBC TV18 dated 5th October 2020:

Varun Beverages (VBL) is the second-largest franchisee (outside US) of carbonated soft drinks and non-carbonated beverages sold under trademarks owned by PepsiCo. It produces and distributes brands such as Pepsi, Diet Pepsi, Seven-Up, Mirinda Orange, Mirinda Lemon, Mountain Dew, Seven-Up Nimbooz Masala Soda, Evervess Soda, Duke’s Soda, Sting, Tropicana, Seven-Up Nimbooz, Gatorade and Quaker Oat Milk as well as packaged drinking water under the brand Aquafina.

• Comments on Hotels, Food courts, Restaurants and Bars to operate in Maharashtra from 5th Oct, 2020 at 50% capacity: Maharashtra is an important state but not the biggest state sales wise for Varun Beverages. He further added that UP is the largest contributing state for Varun Beverages. Unlock in any area or region will be helpful for the company to increase the sales and he is happy to know that restaurants, movie theatres are opening up.
• The overall volume sales have reached pre-COVID levels since August, and the numbers for August and September are very close to the numbers logged during the same periods last year.
• When asked about the prospects for the month of October as the restaurants are opening up he stated that September has been better and he is happy with the performance and things are looking good going forward. Opening up of restaurants will definitely help increase the sales but in-home consumption is quite large and on the go consumption has started and they will be back to normal levels soon.
• The supply started in July-20, so July-20 was reasonably good although weaker than July-19 but since August Varun Beverages is doing well and going forward, he doesn’t see any reason why sales should fall or decline unless any major incidence or lockdown happens.
• Whatever fixed cost they could cut down during the lockdown, they have kept it down since then so fundamentally they will be in a good shape as the cost have gone down and volumes are back to normal. So, going forward things are looking pretty good and in shape.
• Unfortunately, they have lost the peak season i.e. April-May-Jun this year but as the go to market keeps on improving and unlock keeps happening things will be back to normal.
• In home beverage consumption has gone up by 25-30% after COVID and on the go consumption is also seeing recovery. If it reaches the normal level he sees huge growth coming in.
• When asked about the revenue contribution, he informed that restaurants and bars contribute less than 5%, in home consumption and on the go consumption are the main business for Varun Beverages.
• When asked whether they are facing any issues at the supply side he replied that they did not had any issue at the supply side and were able to maintain the supply. Production and Supply side was never a challenge for Varun Beverages.

Consensus Estimate: (Source: market screener website)

• The closing price of VBL was ₹ 689/- as of 06-Oct-2020. It traded at 76x/29x/21x the consensus EPS estimate of ₹ 9.2/24.3/33.1 per share for CY20E/CY21E/ CY22E respectively.
• The consensus target price of ₹ 804/- implies a PE multiple of 24x on CY22E EPS of ₹ 33.1/-

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.”

Rural India has felt more of a squeeze from the slowdown, says Adi Godrej, chairman, Godrej Group

Update on the Indian Equity Market:

On Friday, NIFTY ended up 433 pts up (+4.5%) at above 10,023 level. It was an eventful and highly volatile session with significant gains after posting a record intra-day recovery. The Nifty50 index was locked in 10 per cent lower circuit early morning, prompting a halt in trading for 45 minutes. However, once the markets re-opened, the headline indices Sensex and Nifty shot up as much as 5,381 points and 1,604 points, respectively, from their early morning lows. The volatility index surged over 24 per cent during the session.

PSU Bank (+11.7%), Financial Services (+6.2%), and Metal (+6.5%) were the top performing sectors. Media (-0.6%) was the only loser for the day.

Among stocks, SBI (+14.9%), TATA Steel (+14.5%), and HDFC (+10.5%), were the top gainers. UPL (-7.2%) ZEEL (-4.2%) and NESTLE IND (-3.7%) were the top losers.

Rural India has felt more of a squeeze from the slowdown, says Adi Godrej, chairman, Godrej Group

While the discretionary spend in rural areas has not risen as per expectations, FY21 is likely to deliver better numbers than the ongoing fiscal, says Adi Godrej, Chairman of the Godrej Group.

Edited excerpts of an interview with Mr Adi Godrej, Chairman of the Godrej Group; dated 13th March 2020:

When asked about his views on GST implementation he said that the implementation of GST has been good for the economy and it would not be correct to attribute the decline in GDP growth to the new tax regime. There are other factors like the China and US trade war or the killing of an Iranian general by the Americans that might have impacted the economy; we can’t be sure. So, it’s a combination of geopolitical and other factors that have affected GDP growth. He also added that there is no doubt that the economy has slowed down, but it will recover, if only slowly and expects FY21 to be better than FY20.
He commented that for FMCG products, the slowdown has been more pronounced in the rural areas, though rural growth was ahead earlier. The rural economy has been impacted by the slowdown in production and an irregular monsoon. Also, the discretionary spend of the rural population has not grown as per expectations. He expects to fare better in FY21, though a lot would depend on government policy going forward.
When asked about his suggestion on steps that should be taken by government to boost overall consumption, he suggested that there might be no tax on agriculture, but animal husbandry is taxed fully, bringing under the net income from poultry, dairy, fisheries, etc. which affects rural growth.
He informed that Godrej Agrovet was affected but it managed to recover from the lows and the business is expected to grow provided the government accepts the suggestion of treating animal husbandry on a par with agriculture.
He stated that Godrej Consumer Products Ltd (GCPL) performed better in 3QFY20. The international businesses have been performing well as the economies there have done well, especially Indonesia, which is a large market for GCPL. The hair care business is rated number one in Africa; new products are being introduced in the haircare and repellant segments, besides those to prevent dengue and malaria.
When asked about the real estate business performance and company’s focus on residential or the commercial segment given the slowdown, he said that real estate business over the last two years we have had record sales and that the company will continue to grow both businesses though commercial segment as it is doing better. The factor contributing to such kind of growth even in a phase where construction projects are facing liquidity and demand-related obstacles is the reputation of the group and trust of the people on the brand.
When asked about his vision on India and Godrej group in next five to ten years he stated that he believes India has a great future. On purchasing power parity, India will be the largest economy in the world by 2050. At present, India is ranked third after China and the US and will overtake both. India will also overtake China on population. As far as the Godrej Group is concerned, it will keep growing faster than the economy.
Consensus Estimate: (Source: market screener, investing.com website)

The closing price of Godrej Consumer Products Ltd was ₹ 525/- as of 13rd March 2020. It traded at 36x/ 31x/ 28x the consensus EPS for FY20E/ FY21E/ FY22E of ₹ 15.6/18.1/20 respectively.
Consensus target price of ₹ 750/- implies a PE multiple of 37.5x on FY22E EPS of ₹ 20/-.

Coronavirus impact likely from 1QFY21: Dilip Piramal Chairman, VIP Industries

Update on the Indian Equity Market:
On Thursday, Sensex ended up 152 pts lower and Nifty settled 45 pts lower at 12,080 level led by weekly expiry. Metal (+0.8%) and PSU Bank (+1%) were the top-performing sectors. NIFTY FMCG (-0.6%), NIFTY IT (-0.7%) and NIFTY Media (-0.6%) led the declining sectors. Among stocks, Cipla, Asian Paints, HUL and TCS were the top laggards, while gainers were INDUSIND Bank, Zee, SBI and Tata Steel.

Coronavirus impact likely from 1QFY21: Dilip Piramal Chairman, VIP Industries

Edited excerpts of an interview with Mr. Dilip Piramal, Chairman, VIP Industries; dated 19th February 2020:

Mr. Piramal said the Chinese companies’ accounts for 50% of its supplies.
Speaking about Coronavirus he said that this is an unprecedented situation and will have to see how this pans out. This will definitely have an impact on travel and on the general economy as China is a large supplier for most of the products in the world. But India is not so much part of the international economy as yet, so it could have some advantage.
The international travel is going to be affected on the whole as there will be some negative reaction.
China is a large part of VIP’s supply chain as VIP imports from China. The dependence on China is reducing gradually over the last few years.
Coronavirus is going to affect the whole luggage industry as it is dependent on China for finished goods, including the unorganised sector.
The factories in China have started after the Chinese New Year holidays with local workers last Monday, but that is still a small part of the overall employment.
Talking about the Supplies requirement from China, Mr. Piramal informed that 60% of the supplies for the Jun quarter are stocked up and there might be some delay, shortfall and may have to see some decline in revenues.
VIP’s supplies are now about 50% from China and the rest is sourced in India and Bangladesh.
When asked about the pricing scenario, Mr. Piramal commented that he doesn’t expect any price surge in the luggage industry but there will be some amount of firmness and decline in discounts and offers.
Mr. Piramal said that it is too early to comment on the sales growth to be expected in Jun quarter but they have stocked up and hopes that the stock levels go low and they don’t lose any sales.
Because of the downturn and loss of market share, the sales growth for 9MFY20 was less than 5%. The market share as of now stands at ~50%.
Consensus Estimate: (Source: market screener, investing.com website)

The closing price of VIP Industries was ₹ 450/- as of 20th February 2020. It traded at 34x/ 32x/ 26x the consensus EPS for FY20E/ FY21E/ FY22E of ₹ 13.4/14.4/17.7 respectively.
Consensus target price of ₹ 520/- implies a PE multiple of 29x on FY22E EPS of ₹ 17.7/-.

VIP Industries: Revenue growth target of 5-10% for next quarter as well as for the whole year

Update on the Indian Equity Market:

Markets started the week marginally higher as Nifty closed the day 5 points higher to 11,912. 6 out of 11 sectoral indices closed the day on a positive note with MEDIA (2.8%), PVT BANKS (1.4%) and BANK (1.3%) led the gains while IT (-0.5%), FMCG (-0.5%) and AUTO (-0.2) were the laggards. Among the stocks, ZEEL (6.2%), YESBANK (5.7%) and BPCL (2.8%) led the index higher whereas NESTLEIND (-2.4%), HEROMOTO (-2.1%) and HINDALCO (-2.1%) were the worst-performing stocks.

VIP Industries:  Revenue growth target of 5-10% for next quarter as well as for the whole year

Key takeaways from the interview of Mr Dilip Piramal, Chairman, VIP Industries dated 11th November 2019 published in LiveMint:

  • Mr Piramal started the interview with his remarks on the 2QFY20 performance of VIP Industries. He mentioned that though revenues were lower, EBITDA was higher due to two reasons. First, due to the implementation of IND-AS 116, the EBITDA went up by 6 basis points. Second, the company also witnessed improvement in gross margins which contributed to the EBITDA growth.
  • The company reported YoY growth of 3% in revenues. He said that he was not surprised by the lower growth in revenues as it aligns with the general trend in the economy.
  • About the revenue growth in the future, he said that things are slightly better than before. The company is looking to achieve between 5-10% growth in this quarter and for the whole year. This is lower as compared to the historical growth rate of around 25%.
  • On being asked about whether the customers are up-trading, he said that there is not much of a change. In fact, the lower end is increasing faster for about nearly one year.
  • He mentioned that there is no increase in competition for the company. The industry is very small with two bigger players and one quite small player who is very competitive in the lower end. It is more like a segment-wise competition. The competitive pressure is the same.
  • After the implementation of Goods and Service Tax (GST), the market share has moved from unorganised players to the organized players. The company achieved a growth of 25% in FY18 largely on the back of implementation of GST.

Consensus Estimate (Source: market screener website)

  • The closing price of VIP Industries was ₹ 437/- as of 11-November-19. It traded at 37x/ 30x the consensus EPS for FY 20E/ FY 21E of ₹ 11.8/ 14.6 respectively.
  • Consensus target price of ₹ 509/- implies a PE multiple of 35x on FY22E EPS of ₹ 14.6/-.