Emami Ltd
Emami Limited, is a leading player in the personal and healthcare consumer products industry in India engaged in manufacturing and marketing of health, beauty and personal care products that are based generally on ayurvedic formulation. The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of USD 13.1 billion. The FMCG market is set to treble from USD 11.6 billion in 2003 to USD 33.4 billion in 2015. The outlook for the sector appears bright amid higher income levels and the expansion of the model retail format. Moreover, rise in disposable incomes of rural dwellersmay bolster the sector's performance.
The company’s strong focus on efficient and economic sourcing of raw materials and rationalising resource costs is going to help in improving margins. Apart from domestic markets, Emami has positioned itself strongly in the international market. The Company has created a formidable presence in countries like Russia, Nepal, Bangladesh and in the Middle East Countries among others. Going ahead, the Company has strong growth plans for Bangladesh and the MENAP countries. It has new products in its pipeline for Russia and the CIS countries. For Bangladesh also, it plans to come up with new products. Emami’s international business sales grew by 23% in FY14 and management expects this growth trajectory to sustain.
Emami has entered the deodorant markets with brand “HE” - in line with the company’s strategy to expand into the male grooming segment. In the `21,000 mn market, Emami plans to be a `2,000 mn brand in two years since launch. The Company has a history of Un-interrupted dividend payment for almost two decades. In Q1FY14, the company registered consolidated net sales of Rs.481.73 Cr, up 25.56% YoY. The net profit for the period came in at Rs.70.81 Cr, up 16.71% YoY. We recommend a BUY on the stock with a target of Rs.992.
Motherson Sumi Systems Limited
Motherson Sumi Systems Limited (MSSL) is a joint venture between SamvardhanaMotherson Group and Sumitomo Wiring Systems (Japan) MSSL is a focused, dynamic and progressive company providing customers with innovative and value-added products, services and solutions. The Company is a world-class supplier of high performance components, modules and systems. The company caters primarily to the automotive sector.
The company plans to focus more and more on expanding operations in North America, China and other markets, thereby significantly expanding its overseas operations. MSSL has substantially expanded its customer base globally and further emphasized its affiliation with existing customers. The Company now has presence in 25 countries. In order to spread its reach in North America, the Company has signed an agreement to acquire the Wiring harness business of Stoneridge Inc. through asset purchase at transaction value of USD 65.7 mn. We recommend a “Buy” on the stock with a target of 510.
Pantaloons Fashion & Retail
Fiscal and monetary initiatives taken by the Government and the Reserve Bank of India, a stable government, revival of global growth, moderation of inflation would help in the revival of economy which would in turn help in revival of retail sector. The long term growth potential of Indian retail industry remains intact. The size of the Indian retail market at USD 0.5 trillion in 2012 is expected to grow at a CAGR of 12.7% to reach USD 1.3 trillion by 2020.
Rising income levels and preference towards quality products are likely to drive consumption expenditure in India. One of the biggest beneficiaries of this growth will be the organized retail sector which is projected to grow at a CAGR of 30% from USD 27 billion in 2012 to USD 220 billion by 2020 and substantially increase its share from 8% in 2012 to 20% by 2020.
Introduction of Goods and Service Tax (GST) would be a big booster. It will reduce the tax incidence and complexities associated with the retail business. The new management is focussing on Re-building the organisation, expanding the customer reach, Enhancing productivity of the existing store, Strengthening brand portfolio and Optimising finance costs.
The Company is expanding its stores presence. It has launched 14 new Pantaloons stores and 1 factory outlet during the year taking the total count to 81 Pantaloons stores and 26 Factory Outlets as on 31st March, 2014. In fiscal 2014-15, the Company is targeting to launch 18 to 20 stores to reach 100 stores mark. The Company’s expansion strategy is focused on tier-2 and tier-3 cities, while penetrating deeper into metros.
The company has restructured debt and the average interest cost has come down from 13% to 10.4% for 2013-14. Numbers have been subdued due to the transition issues and organisation building costs. However, the benefit of the new management, lower interest costs, and the expansion in stores will accrue in the future. We recommend a BUY on the stock with a target of Rs.150.
SML Isuzu
SML ISUZU Limited manufactures and sells light commercial vehicles for goods and passenger applications. Products include a range of vehicles such as trucks, buses and ambulances. Sumitomo Corporation, Japan and Isuzu Motors, Japan respectively holds 44% and 15% shareholding in the Company. Stable government at the centre, hopes of revival in the economy, low inflation, lower crude prices and expectations of decisive industrial and fiscal policies, lends hope to an early revival of the commercial vehicles industry.
With expanded capacity the company is in a position to reap the benefits of increased demand arising out of revival in the overall economic scenario, in the first quarter, April-June, 2014 the company sold 2,749 passenger vehicles as against 2,271 in the corresponding quarter of previous year.
The Board has approved a capex plan envisaging an outlay of Rs. 220 crores to be implemented over next three years towards substantial technology and product up-gradation, development of products/ variants and on plant infrastructure to improve manufacturing efficiency. In Q1FY14, the Company reported net sales of Rs.336.46 Cr, up 19.03% YoY. The net profit for the period stood at Rs.23.42 Cr, up 129.38% YoY. We recommend a “Buy” on the stock with a target of 1175.
Snowman Logistics
Snowman Logistics (SLL), an integrated temperature-controlled logistics services provider, operates 23 temperature-controlled warehouses across 14 locations in India (including Kolkata, Mumbai, Delhi, Chennai and Bengaluru). It plans to set up another such 6 and 2 ambient warehouses at 6 cities at the cost of around Rs 140 crore.
The client base of the company is also strong, which include various industry sectors such as dairy products, ice creams, chocolates, pharma, seafood, fruits and vegetables, and poultry and meat. Top 20 customers contributed 44 percent of total revenues in the year ended March 2014. Some of the prominent clients are Hindustan Unilever, Novozymes South Asia, McGain Foods India, Karnataka Co-operative Milk Producers’ Federation, Graviss Foods, Saguna Food, West Coast Fine Foods India etc.
To improve the customer proposition, Snowman’s has introduced various value added services such as knitting, labelling, sorting, packing and re-packing of goods. Such services add significantly to SLL both in term of value to clients as well as bottomline. Further, consignment services such as indenting, order booking, invoicing, etc. for select customers improves SLL’s USP. SLL, being the largest cold chain solutions provider, has huge potential for growth in the organised services sector.
Domestic temperature-controlled logistics industry is estimated at Rs 12,000-15,000 crore and is expected to grow at 15-20 percent year-onyear for the next three to five years. With the strong growth prospects of cold chain industry and company being a leading integrated cold chain player in India with presence across the value chain of the industry, the stock looks good for long term We recommend a BUY on the stock with a target of Rs.135.
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