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We value Nestle at 55x P/E on CY22E EPS to derive a TP of INR 16,326. With rich valuation, the absolute upside is limited in the medium term, making the risk-reward unattractive. Maintain REDUCE. Nestle India: Nestles 1QCY21 revenue was mostly in line, but the EBITDA margin witnessed a slight miss due to high marketing spends. Domestic revenue growth was broad-based - up by 10% - largely driven by volume and mix. Maggi, Kitkat and Nescafe (in-home consumption) remained strong and posted double-digit growth. OOH consumption further improved but continues to be impacted by COVID. Ecommerce channel grew by 66% (>100% in CY20) and contributed ~4% towards domestic sales. Exports were down by 13% due to lower exports to affiliates. Gross margin continued to see acceleration and clocked >200bps YoY expansion due to benign raw material cost (particularly milk and derivatives). Higher advertising and sales promotion limited the EBITDA margin expansion. EBITDA was up by a healthy 15% YoY (HSIE 20%). With rising lockdown pressure, the near-term demand for packaged food is expected to be strong. New launches, improved distribution, and greater in-house consumption should deliver a healthy earnings show in the medium term. We maintain our EPS estimate for CY21E/CY22E
Given the uncertainties going ahead and punchy valuations; we rate ICICIGI a REDUCE with a revised target price of INR1,250 (DDM derived Mar-23E P/E of 27.4x and a P/ABV of 5.0x). ICICI Lombard: ICICIGI reported an NEP print 6% ahead of our estimates. While FY22E growth in top-line expected to return in FY22E (low base impact), ICICIGI is expected to witness higher CORs as a result of resurgence in Covid cases amidst the second wave, and increased motor traffic vs. 1HFY21. Additionally, new motor regulations are expected to drive down both claims and tariffs, creating supernormal profitability in the short term. We expect a motor TP price hike in FY22E to be a positive catalyst for growth.
Steep run-up prompts downgrade; Earnings surprises unlikely in FY22 Mindtree's (MTCL) 4QFY21 USD revenue was a tad ahead of our estimate while EBIT margin was in line. We think that the earnings surprises that Mindtree has been delivering largely on the back of margin improvement (SGA driven +730bps at the EBIT level in FY21) have likely peaked. We are giving the new management the benefit of the doubt on revenue growth in FY22 on the back of two strong quarters that they have delivered in 3QFY21 and 4QFY21(QoQ), its guidance' on continuation of the momentum and its reasonably strong growth of 18% in its top 20 clients in FY21 (ex-top-client and ex-TTH)....
We are cutting Tata Chemicals (TTCH) from Accumulate to Sell with the stock expected to witness 31.3% downside from CMP based on our new target price (TP) of Rs563 post the 63.9%/252% rally in the last 3 months/12 months. The stock trades at rich PE of 38.9x/22.1x on FY22E/FY23E EPS, which prices in the improving fundamentals over FY21E-23E ~ our FY23E EBITDA is the highest in 15 years. The stock's valuation looks stretched as it implies a 143%/35% premium to the 5-year median/SD+1 readings on 12-month rolling PE of 9.1x/16.4x vs EPS CAGR of 5.4% over FY20-FY23E, which is more relevant than the 43.3% CAGR on the beaten down FY21E as base. This premium is likely due to bullish expectations on EV battery...
Global trends catching on faster in emerging markets: Technology is accelerating global trends in the developing markets. The management believes global trends toward lower/no alcohol products could be at play in India as well....
Additionally, MTCL has filled all the recent gaps in leadership (post major attrition since the management change), largely from Tier 1 IT. This has made the company ready to compete for larger deals in the market. Successfully transitioning from project- to annuity-based approach Mr Chatterjee has changed the company's focus from more of discretionary work to a healthy mix of discretionary and lights on services. This further translates to extended deal tenures and hence offers higher visibility in terms of revenues. MTCL's four key service lines are also structured in a way that targets multiple...
However, the pace of transition is expected to be gradual with ICE engines remaining dominant in the near to medium term, particularly in India. We hosted the HSIE Autos and Mobility Conference, which was attended by five auto OEMs, five parts suppliers, and three startups, amongst others. The key themes that emerged from the conference were electrification and diversification, as the industry is preparing to diversify beyond combustion engines. OEMs are increasingly investing in EV and hybrid technology while auto parts companies are seeking to de-risk their customer mix by foraying into the non-auto space including defence, aerospace, industrial and renewable segments.
However, the pace of transition is expected to be gradual with ICE engines remaining dominant in the near to medium term, particularly in India. We hosted the HSIE Autos and Mobility Conference, which was attended by five auto OEMs, five parts suppliers, and three startups, amongst others. The key themes that emerged from the conference were electrification and diversification, as the industry is preparing to diversify beyond combustion engines. OEMs are increasingly investing in EV and hybrid technology while auto parts companies are seeking to de-risk their customer mix by foraying into the non-auto space including defence, aerospace, industrial and renewable segments.
IPru Life posted a 7% YoY growth on overall APE and 6% on individual APE, a first positive growth in 13 months. On FYTD21 new business de-grew -27% and is likely to end in negative growth for second consecutive year. IPru Life...
IPru Life posted a 7% YoY growth on overall APE and 6% on individual APE, a first positive growth in 13 months. On FYTD21 new business de-grew -27% and is likely to end in negative growth for second consecutive year. IPru Life...
Tata Motors (TTMT) hosted an Investors Day for the JLR business (Link for Change in Estimates | Target | Reco as 1) positive cash-flow from FY23 (v/s FY22 targeted earlier due to one-time...
Automotive OEM production has ramped up significantly across segments over the past six months, with general near to medium term outlook remaining positive - partly on account of pent-up demand. Ensuing improved prospects for the entire channel (aftermarket revival started earlier) are set to benefit ARBL. Industrial demand has also been encouraging in the post Covid months. We expect continued traction there, with overall FY21E-23E sales CAGR at 11.2%. During Q3FY21, other expenses rose sequentially (absolute quantum as well as on percentage of...
Background Greaves Cotton (GCL) is one of the largest manufacturers (primarily) single cylinder (diesel, gasoline engines) and dual cylinder engines, which find application in running 3-W vehicles and 4-W small commercial vehicles (SCVs). The company offers products and solutions across business units- Engines, power, farm equipment, mobility and aftermarket. In FY19 Greaves Cotton augmented its Clean Technology...
Volumes Picking Up Gradually, but We Expect Stress to Remain in FY22E: Recovery is clearly visible from the latest two quarterly numbers, with YoY revenues in Q2FY21 and Q3FY21 coming in at 51% and 74% of the numbers seen in the corresponding quarters in the previous year.
We continue to believe that most near to medium term drivers are priced in. However, on account of expected aggressive store expansion in India, we increase our EPS by 3% for FY22/23. The stock is valued at 81 and 65 P/E on FY22/FY23 EPS. We increase our target multiple to 55x P/E (50x earlier) and derive TP of Rs 2,500. We maintain our REDUCE rating. JFL is a far superior company among QSR peers but we see earnings surprises more for other discretionary companies (driven by pent-up, market share gain, pricing, sourcing advantage, make in India etc). Jubilant FoodWorks (JFL) announced the acquisition of Fides Food Systems Coperatief U.A., Netherlands (Fides) for GBP 24.8mn (INR 2.5bn). Fides is the beneficial owner of 32.81% of equity shares of DP Eurasia N.V. (DP Eurasia). DP Eurasia is the exclusive master franchisee of the Dominos Pizza brand, having 771 stores in Turkey, Russia, Azerbaijan and Georgia. It is listed with London Stock Exchange PLC. DP Eurasia has weak financials (due to operational losses in ex-Turkey, financial leverage and currency impact) resulting in a crack in its stock price over the past 3 years (GBX 250 in 2018 to GBX 70 now). The deal is valued at 8x EV/EBITDA of CY19.
ABB India manufactures heavy engineering & industrial equipment and undertakes engineering and construction projects. The company operates mainly through the Robotics & Motion, Electrification products and...
Near term growth momentum depends on the demand for industrial and protective coatings which further depends on macro environment recovery. Also, competitive pressures and raw material price fluctuation could impact the business prospects in long-term. Hence, considering the extended valuation, we downgrade our rating on the...
Biocon launched Ogivri (biosimilar to Herceptin/Trastuzumab) in Dec2019 and was the second player to launch after Amgen. We observe that the Herceptin market opportunity is gradually getting diluted as innovator life cycle management efforts are gaining traction. Over the last two years, innovator has been able to approximately shift 30-35% of Herceptin prescriptions to alternatives, which include Kadcyla, Hylecta and Phesgo. The transition continues as all three life cycle management products continue to build prescription volumes. The monthly volume market share trends indicate that Phesgo, which was launched recently, has taken 7% market share from...
We value Nestle at 55x P/E on CY22E EPS to derive a TP of Rs 16,326. The stock is trading at 58x P/E on CY22E EPS and limits absolute upside in the medium term, making the risk-reward unattractive. Maintain REDUCE. Nestles 4QCY20 revenue growth was largely in line with beat in gross margin. High employee cost (long-term compensation arrangements to factory employees) impacted the margin (miss in EBITDA). Domestic revenue grew by 10% YoY while exports were down by 8% YoY. Thereby, overall revenue growth of 9% was slightly below estimates (HSIE 11%). Packaged food category continued to perform well, and Nestles performance in CY20 was steady (8% YoY growth). Maggi, Kitkat and Nescafe (in-home consumption) posted double-digit growth during the year, capitalising on the reduced mobility among consumers. However, weak coffee exports impacted overall exports (-8% in 4Q and +1% in CY20). GM expanded by robust 231bps YoY to 59%, the highest in the past eight quarters. EBITDA grew by 10.4% as compared to our expectation of 17% growth; the key difference was due to high employee cost (25% up YoY). We expect Nestle to deliver steady earnings growth, aided by new launches and improved distribution. Moderation in in-home consumption categories will impact key brands but revival in OOH will support growth. We maintain our EPS estimate for CY21E/CY22E
