Emami. Institutional Equity Research. FMCG April 18, 2017

Transcription

1 Emami Reco Range Stop Loss Target FMCG April 18, 2017 Background & Business Established in 1974, Emami is the market leader in niche personal care segment with flagship brands such as Navratna, Zandu, Fair & Handsome and Boroplus. The Company has a robust distribution network comprising of 4mn outlets across the country. Investment Rationale Market Leadership across Categories: Emami is the market leader in the cooling hair oil segment with 60% market share with its brand Navratna. In antiseptic cream segment, it enjoys 72% market share with Boroplus. Similarly, with Zandu and Mentho Plus, it commands 60% market share in balm segment. Even in a fiercely competitive men s fairness segment, Emami enjoys leadership with 59% market share with Fair & Handsome. Strong Margin Profile: Being present in personal care segment, Emami enjoys strong margin profile. Its gross margins at ~69% and EBITDA margins at 26% are one of the highest in the industry amongst its peers. The Company ploughs back part of savings in its brands through higher A&P spends, which has supported its growth over the past few years. Exploring Newer Avenues of Growth: Through acquisition of Kesh King and introduction of 7 oils, Emami has entered into the premium value-added hair oil category. Leveraging on the strength of Navratna brand, it has taken eective steps to increase presence in talcum powder space as well. Similarly, it is taking larger strides in the consumer health space by leveraging increasing awareness about Ayurvedic products. Outlook & Valuation Continuing to remain positive on Emami on the back of strong brands, pricing power and market leadership in all flagship brands, We expect Emami to post consolidated revenues of Rs29.4bn and Rs33.8bn and net profit of Rs4.3bn and Rs5.5bn in FY17E and FY18E, respectively. Risks Any sharp seasonal fluctuations could impact demand growth Any substantial increase in the prices of key inputs Heightened competitive intensity 1 Year Stock Price Performance 1,300 1,250 1,200 1,150 1,100 1,050 1, Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 Note: *CMP as on April 17, 2017 Key Figure Market Cap ( Rsbn/US$mn ) 230.8/35.5 Current Price 1023 Target Price 1160 Promoters / Public & Others 72.7/27.3 FY18E P/E (x) 31.2 Revenues CAGR (FY16-18 %) 13.5% PAT CAGR (FY16-18 %) 23.7% Y/E Mar (Rs mn) FY16 FY17E FY18E Revenues 26,238 29,336 33,778 EBITDA 6,838 8,172 9,345 Ebitda Margin % Adj.PAT 3,586 4,345 5,487 ROE (%) Source: Company, RSec Estimates Key Ratios FY16 FY17E FY18E P/E (x) P/BV (x) EV/EBITDA (x) Research Team; Contact: (022) ; rsec.research@rcap.co.in 1

2 Equitas Holdings Reco Range Stop Loss Target Banking April 18, 2017 Background & Business Equitas Holdings (Equitas) is a parent company of Equitas Small Finance Bank, which predominately operates in micro finance lending, preowned vehicles, MSE and aordable housing segments. Conversion of its business into Small Finance Bank (SFB) gives the company access to low-cost funds coupled with wider scope of cross selling opportunities. Investment Rationale Conversion into SFB A Long-term Positive: Equitas is structurally better placed vis-à-vis other MFIs and vehicle finance NBFCs as it has converted into Small Finance Bank (SFB). This gives the company access to low cost funds along with wider scope of cross-selling opportunities. However, in short-term it will face higher conversion expenses along with negative carry cost of SLR and CRR. 1 Year Stock Price Performance Ample Growth Opportunity: AUM analysis suggests that Equitas will sustain robust growth in the foreseeable future led by large market size and low formal financing penetration. The Company has built a niche presence in lending to self-employed individuals, which will aid its strong growth trajectory in coming years. 100 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 Best-in-class Corporate Governance: Over the last 9 years, Equitas has demonstrated strong track-record on corporate governance front. It has received Level-2 rating on Corporate Governance by CRISIL. Further, Equitas has demonstrated very high level of transparency on business front as well, which has resulted in gaining and sustaining customer confidence. We believe that strong corporate governance with enhanced transparency will continue to help Equitas in attracting long-term value investors. Outlook & Valuation Structurally, Equitas Holdings is well-positioned to sustain high growth momentum as its primary focus is on the underserved borrower segment. This also helps it to command relatively higher yield on loans, which leads to stable and healthy NIM. Presence in niche segment having high growth potential, higher margin profile, superior execution skills and strong corporate governance track record augur well for Equitas. Risks Post conversion into an SFB, Equitas will have to comply with the norms relating to CRR, SLR and higher priority sector lending requirements, which may negatively impact its operating performance Note: *CMP as on April 17, 2017 Key Figure Market Cap ( Rsbn/US$mn ) 55.9/8.6 Current Price Target Price 188 Promoters / Public & Others 0/100 FY18E P/BV (x) 2.3 Revenues CAGR (FY16-18 %) 35.8% PAT CAGR (FY16-18 %) 11.8% As target profile of SFB is similar to existing banks, intensity of competition especially for liabilities may cap expected growth. Y/E Mar (Rs mn) FY16 FY17E FY18E Key Ratios FY16 FY17E FY18E Net Revenues 6,842 10,117 12,611 P/E (x) NIM % P/BV (x) Operating Profit 2,655 4,831 5,468 Avg RoA (%) Adj.PAT 1,671 1,880 2,088 ROE (%) Source: Company, Bloomberg Estimates Research Team; Contact: (022) ; rsec.research@rcap.co.in 2

3 Recommendations Summary Total Recommendations Numbers STOCKS 38 CLOSED 34 POSITIVE 24 NEGATIVE 10 We do not keep open positions more than four at any point of time. Assuming Rs1 lakh investment in every stock, the cumulative investment stand at Rs4 lakh. Till date, our closed calls have given profit to the tune of Rs90,293 since inception. Amount Invested (Rs) Cumulative Profit (Rs) % Return % OPEN 4 Strike Rate on closed calls 71% Open Positions Stock Symbol Sector Reco Date Reco Price CMP SL Target Remarks EMAMILTD FMCG 18-Apr BUY EQUITAS Banking 18-Apr BUY PIDILITIND FMCG 5-Apr HOLD AUROPHARMA Pharma 2-Mar HOLD 3

4 Closed Positions Stock Symbol Sector Reco Date Reco Price Exit Price Exit Date Return % Remarks NIITTECH IT 17-Feb Apr % Booked Profit JSWENERGY Power 5-Apr Apr % Booked Profit DABUR FMCG 3-Feb Mar % Booked Profit NCC Construction 2-Mar Mar % Booked Loss ABFRL Retailing 17-Feb Feb % Booked Profit HCLTECH IT 3-Feb Feb % Booked Profit INOXWIND Capital Goods 17-Jan Feb % Booked Loss JUBLFOOD FMCG 17-Jan Jan % Booked Profit ASIANPAINT FMCG 4-Jan Jan % Booked Profit CROMPTON Capital Goods 1-Dec Jan % Booked Profit CADILAHC Pharma 4-Jan Jan % Booked Profit ASHOKLEY Auto 16-Dec Dec % Booked Profit TITAN FMCG 16-Dec Dec % Booked Profit FEDERALBANK Banking 1-Dec Dec % Booked Loss CADILAHC Pharma 16-Nov Nov % Booked Profit TECHM IT 16-Nov Nov % Booked Profit AMBUJACEM Cement 3-Oct Nov % Booked Loss INFY IT 17-Oct Nov % Booked Loss ABFRL Retailing 3-Oct Oct % Booked Profit Continued... 4

5 Closed Positions Stock Symbol Sector Reco Date Reco Price Exit Price Exit Date Return % Remarks ASHOKLEY Auto 17-Oct Oct % Booked Profit BAJAJCORP Consumer 1-Sep Oct % Booked Profit SUNPHARMA Pharma 17-Aug Sep % Booked Loss NAVKARCORP Logistics 16-Sep Sep % Booked Loss AUROPHARMA Pharma 16-Sep Sep % Booked Profit INFY IT 1-Sep Sep % Booked Profit KEC Capital Goods 30-Jul Sep % Booked Loss MGL Oil-Gas 17-Aug Aug % Booked Profit ABFRL Retailing 30-Jul Aug % Booked Profit PFS NBFC 2-Jul Aug % Booked Loss UPL Agrochemicals 15-Jul Jul % Booked Profit CROMPTON Capital Goods 15-Jul Jul % Booked Profit SUNPHARMA Pharma 2-Jul Jul % Booked Profit PERSISTENT IT 21-Jun Jul % Booked Loss NBCC Infrastructure 21-Jun Jul % Booked Profit 5

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