We met with the management of Voltas and following were the key takeaways from the meeting: a) primary sales towards festive season (Diwali/Dussehra) was weaker than expectations, b) GST implementation led to 2% increase in effective tax rate, but company has not rolled out any price increase as 2Q/3Q are lean seasons, c) Voltas-Arcelik JV products to be launched by 4QFY18 (pushed from 3Q) and the plant is expected to be commissioned in 18 months after location is finalised, d) Voltas is No.4 player in inverter AC market (6% market share) as its focuses on the fixed speed AC segment given management's view that demand in that segment is still intact and e) projects division may see some near term...
We met Yes Bank's senior management recently and continue to remain positive about the bank's execution abilities. Key takeaways from the meeting: a) Asset quality: The space to look out for any incremental stress will be the power sector (especially thermal) and some telecom sector companies. Management believes most of the NCLT cases will go for restructuring rather than liquidation and IRPs have already begun receiving restructuring proposals. b)International Financial Reporting Standards (IFRS): While the timelines on implementation are still not clear, Yes Bank will need additional provisioning to the extent of INR 6bn-INR 7bn and will potentially have an impact on fee income recognition (15%-20%...
Merging all India businesses into listed entity: A first by an MNC Schaeffler Group announced merger of its unlisted subsidiaries i.e. INA Bearings (INA) and Luk India (LuK) into the listed subsidiary Schaeffler India (SCHFL), to form a single India wide entity. The consideration will be paid through share swap, resulting in an increase in parent company's holding to 74.1% (vs 51.3%).The transaction value is pegged at INR 62bn, valuing the combined entity at PE of 48x CY16 (32% premium to SCHFL) and EVE of 23x CY16 (8% premium to SCHFL). We believe its first time an MNC is consolidating all its business under the listed entity and the premium paid over Schaeffer India is justified as a)...
Somany Ceramics (Somany) saw a significant drop in volumes (-16% YoY) on account of disruptions led by a) SAP roll-out (upgraded to S4 HANA; impact in April) and b) de-stocking by channel prior to the GST rollout (impact in June). The consequent negative operating leverage led to a 61% decline in adj. net income (60% below JMFe). While ERP has stabilised fully, GST destocking has not yet reversed. Management remains confident about mediumterm double-digit volume growth and operating margin expansion on the back of investments into brand equity, product portfolio upgrades and an improvement in the retail...
Titan reported another spectacular quarter with jewellery business posting a 56% growth in revenue. Retail growth stood at 55% with SSSG of 51%. There were a few non-comparable elements that contributed to this performance (details below) but those do not take away from the fact that the quarter was exceptionally strong a combination of the 2017 Akshaya Tritiya season turning out to be one of the best so far and a very successful gold exchange program ran during the period. Watches remain a question mark and investors' concern on the Favre Leuba strategy (ran up losses of INR155mn over the past 6M) is legitimate, in our view. We tinkered with our estimates just a tad, and our forecasts now have an in-built askrate of 25%/34% EBITDA and net profit growth for the balance 9M of the year. Our new TP...
Broadly inline; Some stability seen in toothpaste market-share Colgate's operating performance was expectedly muted in 1QFY18 with volumes down 5% YoY (vs expectation of -4%). Net sales realisation growth, though, was much lower than what we expected (details below) which resulted in a c.3% revenue decline (vs forecast of 3% growth). The company surprisingly effected a 7.9% cut in A&P; spends which helped drive a 5% operating profit growth. The key positive highlight, though, was the stability in toothpaste market share (on sequential comparison) at 54.3% after witnessing continuous decline since mid-2015. On the negative side, toothbrush seems to have lost share after...
In-line results; announces 3.1MTPA expansion in East India Ramco reported in-line results with revenue growth at 7% YoY, aided by volume/realisation growth of 3.6%/1.4% YoY, respectively. EBITDA/t declined by 5.4% YoY as power/fuel and freight cost escalations more than offset the realisation growth. Other operating income for the quarter was higher YoY on an increase in wind farm income (Rs259mn in 1QFY18 vs Rs200mn in 1QFY17) and receipt of Rs90mn on account of industrial promotion assistance. The Company is expanding its grinding capacity from 16.5MTPA to 19.6MTPA via expansion in its West Bengal/ Vizag grinding units (1.1MTPA each) and entering the Odisha market with...
