Tag - new launches

‘Experience of the Future’ stores next big thing – Westlife Development

Update on the Indian Equity Market:

On Thursday, NIFTY50 ended in the green for the 3rd straight session at 16,595 (+1.5%). The trends for five state assembly elections may have aided the sentiment as the ruling BJP led in the majority of the seats in India’s largest state of Uttar Pradesh.

Among the sectoral indices, FMCG (+3.0%), PSU BANK (+2.3%), and METAL (+2.3%) led the gainers while IT (-0.1%) was the only sectoral index that closed in the red. Among the NIFTY50 stocks, HINDUNILVR (+5.2%), TATASTEEL (+4.3%), and GRASIM (+4.1%) led the gainers while COALINDIA (-3.8%), TECHM (-1.5%), and DRREDDY (-1.2%) led the losers.

Excerpts of an interview with Mr. Amit Jatia, Vice Chairman, Westlife Development published in Financial Express on 10th March 2022:

  • India has an inflationary tendency, so cutting costs is a part of the Company’s DNA. Vice-Chairman believes sales growth should be accompanied by a 100-250bps cost reduction YoY to survive.
  • If a certain cost increased, the company finds a reduction in some other avenue to maintain the balance. He doesn’t believe this policy will change in the next three to five years.
  • He believes inflation is here to stay. The company takes a 3-5% price hike every year and CY22 will not be any different.
  • Currently, there are a total of 316 McDonald’s outlets out of which 248 have McCafe inside them, which are proper coffee shops.
  • The company is working on accelerating the expansion of its network and plans to have over 500 stores in the next 3-5 years. This will require an investment of over Rs 8bn.
  • The expansion strategy will also be aligned to the company’s omnichannel strategy with a robust portfolio of ‘experience of the future’ (EOTF) stores, drive-throughs, and stores with separate take-out windows. The company will be doubling its drive-throughs within India. Menu innovation, omnichannel presence, and network expansion will continue to be the key levers for Westlife.
  • The EOTF stores are a big thing now, as the company is trying to change the way the QSR industry will operate in the future.
  • There are no favorites when one talks about the McDonald’s brand. Offerings like McAloo Tikki, McChicken, McSpicy, McVeggie are all consumer favourites, and the company is not dependent on one product.
  • The eating behaviour of customers has changed tremendously. Earlier, consumers were focused on snacking when eating out at a QSR, now they are looking at a complete meal. As a result, the Company’s focus has shifted towards larger opportunities which are meals.
  • In the last 2 years, the company has pivoted to become an omnichannel brand wherein the digital channels are accelerated at a phenomenal rate for McDonald’s. Its drive-through, contact-less take-away, on-the-go service ensured continuity of operations. Also, as stores were reopened delivery continued to grow. So, both in-store dining and delivery have provided an impetus to revenue and profitability growth. In 3QFY22, as most of the dine-in restrictions were eased, revenue from convenience channels grew 55% YoY with McDelivery reporting its highest ever revenue so far.
  • The new range of burgers along with the Fried Chicken platform and McCafe helped accelerate the average unit volume growth by 30% without any significant capex investment.

Asset Multiplier Comments

  • With increased focus on hygiene due to the pandemic, customers’ preference has shifted towards branded products. We believe McDonald’s (Westlife Development) is well-placed to benefit from this opportunity due to its brand recall, strong network, and variety of products.
  • With the new launches such as Fried chicken, the company is evolving from being just a burger company and providing tough competition to its peers.
  • With the entry into adjacent spaces such as Gourmet burgers and Fried chicken without incremental capex, the company will be able to improve its margins and provide better returns to shareholders.

Consensus Estimate: (Source: Marketscreener website)

  • The closing price of Westlife Development was ₹ 478 /- as of 10-March-2022. It traded at 76x/ 52x the consensus earnings estimate of ₹ 6.3/9.2 for FY23E/FY24E respectively.
  • The consensus target price of ₹ 629/- implies a P/E multiple of 68x on FY24E EPS estimate of ₹ 9.2/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

New launches to offset US pricing pressure- Cipla

Update on the Indian Equity Market:

On Monday, NIFTY closed in the green at 17,339 (+1.4%) ahead of the Budget. Among the sectoral indices, REALTY (+3%), PSU BANK (+3%), and IT (+2.8%) were the top gainers and there were no sectoral losers. TECHM (+5.2%), TATAMOTORS (+4.0%), and WIPRO (+3.8%) were the top gainers. INDUSINBK (-3.5%), KOTAKBANK (-2.0%), and COALINDIA (-1.4%) were among the top losers.

Excerpts from an interview of Mr. Umang Vohra, MD & Global CEO, Cipla (CIPLA) with Economic Times dated 31st January 2022:

  • On the India growth numbers, CIPLA saw strong momentum in the base portfolio and has pre-allocated resources to the bigger brands. As healthcare begins to expand, it saw a large contribution from Tier 1 to 4 towns to the volume growth. It has re-positioned resources on its key branded franchises in India on the back of consumer business playing out strongly.
  • In the US, CIPLA’s respiratory portfolio gained market share resulting in revenues worth US$150 mn. Mr.Vohra said the December quarter always has bunched up sales because that is the buying pattern in the US as there are holidays in the first 7-8 days of January.
  • Launch momentum is going to be significant in FY23 because the US is responsive to it.
  • In South Africa, the market is divided into private and tender. The tender is linked to government buying. The private market has always shown robust growth and CIPLA has been beating the market over the past five years QoQ.
  • There were congestions in the tender market as there are patterns of government buying in response to the Budget of the country. These patterns respond to the aid that the country receives in terms of a portfolio of medicines, in terms of the buying agencies supporting the various governments.
  • The South African tender market is going through a new cycle similar to the one 3 years ago. Despite some shifts due to this cycle, it is expected to go back to the way it was originally.
  • In India, CIPLA sees doctor practice to come back strongly on the back of volume demand.
  • Pricing pressure in the US is expected to continue. It is the nature of the US market. It is a free market and prices fall as more players enter it. CIPLA has responded to these pressures quite significantly and these are expected to continue going forward.
  • The issue of pricing will be there in the US markets but new launches are expected to offset that.

Asset Multiplier comments:

  • The US business is expected to ramp up on the back of new launches and a complex generics portfolio.
  • The revenues were not impacted significantly by US price erosion due to new complex launches and increasing market share. Should the new launches get delayed, CIPLA will be impacted by the pricing pressures in the US.
  • With the decline in COVID-19 products’ contribution, the base portfolio has started growing. We expect this base portfolio to perform well in the coming quarters as the cases start declining.
  • We expect margins to sustain the upward trajectory for the next few quarters as the complex pipeline is strong.

Consensus Estimate: (Source: Market screener and Tikr websites)

  • The closing price of Cipla was ₹ 945/- as of 31-January-2022.  It traded at 27x/23x/20x the consensus earnings per share estimate of ₹ 35/42/50/- for FY22E/FY23E/FY24E respectively.
  • The consensus average target price is ₹ 1,088/- which implies a PE multiple of 22x on FY24E EPS of ₹ 50/-.

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.”

‘Biocon optimistic about hitting $1 billion in revenue by FY22 on back of new launches’ – Kiran Mazumdar Shaw, Chairperson and Managing Director, Biocon

Update on the Indian Equity Market:

On Wednesday, NIFTY closed at 12,025 (-0.2%). Among the stocks, Bharti Airtel (+3.1%), Yes Bank (+2.2%) and TCS (+2.15%) were the gainers. Eicher Motors (-4.3%), Coal India (-2.5%), and LT (-2.2%) were the top losing stocks. IT (+0.4%) and FMCG (+0.1%) were the sectoral gainers. All the sectors ended in the red.

‘Biocon optimistic about hitting $1 billion in revenue by FY22 on back of new launches’ – Kiran Mazumdar Shaw, Chairperson and Managing Director, Biocon

Excerpts from an interview with Kiran Mazumdar Shaw, Chairperson and Managing Director- Biocon published in Livemint on 08th January 2020:

  • They would get a benchmark valuation through some private equity investment before they take it to the market for an initial public offering (IPO) and according to her this is the first step where True North has invested in Biocon’s Biologics and they set a base level benchmark valuation.
  • They might raise little more private equity prior to the IPO. This gives them an idea of where they believe they can unlock the value in terms of Biocon Biologics in the next few years.
  • They have been in discussion with several private equity forums and of course True North has been first of the block and they will be socializing and entertaining other investment opportunities from other private equity firms.
  • In 2020, hopefully they will see private equity funding complete before they go for an IPO. The plan is obviously to invite private equity and use it for many of their current funding needs.
  • They have set up a very expensive biologics facility. So private equity funding will actually come in very handy instead of raising extra loans, debt finance.
  • They plan to extend the private equity funding to $200-300 million or more levels and True North is expected to take up additional stake along with others.
  • The opportunities are very well marked out, and she feels optimistic about hitting the target of $1 billion of revenue in biologics by FY22.
  • They are now in the US market with both Trastuzumab and Pegfilgrastim. Both have had pretty strong entries.
  • They have also got Glargine and Bevacizumab that will make an entry into the market by FY22 and we also expect insulin Aspart to be in the US market by that time.
  • There are many launches that are planned by FY22 and she believes that they have worked out a fairly conservative kind of metrics to get them to that FY22 billion dollar target. So that is why they remain quite confident that they will be able to hit that target.
  • She believes that they have a very robust pipeline; they have 28 molecules, either in the market or under development. They have just commissioned first expansion of their very large biologics facility in Bengaluru.
  • Biocon has to be viewed as a balanced portfolio with small molecules, biologics and research services and those who want a pure play investment opportunity in either biologics or research services can opt for either Syngene or Biocon Biologics. She thinks they have made it into an interesting investment opportunity by structuring it this way.
  • Biocon will continue to be a very strong performer considering the fact that it intends to have majority stake in both Syngene and Biologics.
  • As capex needs of biologics business are very high both in terms of manufacturing capacity as well as R&D investment, they will use the funding across the board.

Consensus Estimate: (Source: market screener website)

  • The closing price of Biocon Ltd was ₹ 282/- as on 08th January-20. It traded at 37x/ 28x/ 21x the consensus earnings estimate of ₹ 7.5/ 10.1/ 13.2 for FY20E/ FY21E/ FY22E respectively.
  • Consensus target price is ₹ 294/- which implies a PE multiple of 22x on FY22E EPS of ₹ 13.2/-