Dalelorenzo's GDI Blog

ITC@ Rs 275? St divided over stock’s prospects

NEW DELHI: ITC's March quarter crowds announced on Tuesday did fulfill Street estimates, but the scrip transactions about 2 per cent lower in Wednesday's trade.Post-earnings analyst targets on the cigarette capital now vary, based largely on how ITC's non-cigarette customs would act going ahead.Those who are ready to believe that the hotel business designed to improve after the easy of the lockdown, as ensure globally, and learn good potentials for the non-cigarette FMCG and other transactions, are ready to assign the stock a target as high as Rs 275. Others, who expect the non-cigarette businesses to do appreciable time to have a material say at operating elevations are unwilling to set targets beyond the persisting price.At Tuesday’s close of Rs 215 apiece, the stocks actually stands where it was in 2013. Muted targetsCiti has a price target of Rs 215 on the stocks. JPMorgan reads it at Rs 225. Motilal Oswal Securities said it continues to value ITC at a 20 per cent premium to its global peers. Yet, its target at Rs 220 per share, based on 15 hours June FY2 3 EPS, proposes no upside.“The cigarette business is likely to contribute over 82 per cent to ITC's overall Ebit in FY23 from 85 per cent of cases in FY20. There is no material reduction in dependence on this segment, which is beset by concerns straying from strong Ebit raise for several years to the overhang of possible GST increases. The related matter over tobacco have also led to a reduction in valuation numerous, ” Motilal Oswal Securities said.ITC reported a 1.3 per cent year-on-year decline in March quarter net profit at Rs 3,748.4 crore on a 24 per cent rise in net auctions at Rs 14,157 crore.Cigarette business incomes rose 14.2 per cent of cases on a year-on-year basis to Rs 5,859.60 crore. Volumes for the segment rose eight per cent YoY, with the progressive easy of restrictions and improved mobility. The non-cigarette FMCG business incomes rose 15.8 per cent YoY to Rs 3,687.50 crore. Hotel business loss moderated sequentially while agribusiness benefitted from a one-off export opportunity, JP Morgan said. “While the cigarette opportunity in India remains attractive committed per capita consumption, endowing modalities have changed with ESG acquiring a significant role, " Edelweiss said. A rerating demands something more, it said. This brokerage has a target of Rs 241. Among non-cigarette firms, ITC's inns business clocked sequential retrieval assisted by higher tenancy and food and beverages business. After breaking even in Q3FY21, the segment’s Ebitda improved further to Rs 25 crore in the March quarter.On a YoY basis, revenues were down 38.2 per cent to Rs 288 crore from Rs 466 crore YoY. The agribusiness receipts rose 78.5 per cent to Rs 3,369 crore as wheat, rice, oil grains and exports of value-added menus drove growth.“The paper business watched 13.5 per cent of cases YoY growing at Rs 1,656 crore on sustained strong sequential recovery with improved offtake across end-user manufactures, ” the company said.On Wednesday, the scrip transactions 1.8 per cent of cases lower at Rs 211.35. Optimistic targetsSome brokerages are quite positive on ITC. For JM Financial, what was most heartening in the March quarter was the fact that cigarette volumes were nearly back at pre-pandemic ranks, which has indicated that the much-feared structural damage to smoking attires has not really showed so far."There were other click ratings including a hike in dividend per share in FY2 1 to Rs 10.75 from Rs 10.15 in FY20 despite the fall in EPS. There was a quantum-leap in disclosure positions. Besides, ITC has sustained its AA rating by MSCI-ESG- this is the highest amongst world tobacco majors, " it said.Sharekhan said the stock is currently trading at alluring valuation of 15.4 ages its FY2023 EPS and has a target of Rs 265. JM Financial attains the stock a Rs 275 -worthy. Morgan Stanley has a target of Rs 251 on the stock.To Kotak, ITC offers a combination of inexpensive valuations, healthy bonu crop, and the promise of robust long-term raise in FMCG segment. This brokerage has factored in significance of the second largest gesticulate of the pandemic, decorated FY2022-23 EPS thinks by 2-5 per cent and still advocated a fair value of Rs 257 per share on the stock. “Valuations at 15 hours can offer upsides with improvement in growth. We retain' buy’ with a target of Rs 265, ” said Emkay Global.YES Securities has initiated coverage on the stock with a target of Rs 266, based on 20 times FY23 earnings, a significant discount of 50 -6 0 per cent to the FMCG sector peers and a 15 per cent discount to its long-term average multiple.“We accept concerns on ESG and FMCG business growth/ boundary trajectory look overdone. While valuation remains inexpensive for the stock, the stock can continue to remain range-bound for now given shortfall of positive provokes either on rise or corporate act, ” it said.

Read more: economictimes.indiatimes.com


FMCG firms step up sales staff incentives

Shopper goods corporations have increased incentives of distributor salesmen by 50 -7 0% since the outbreak of pandemic last year, in an effort to keep their auctions activities flowing and ensure the frontline laborers remain on field amid surging overturn migration.Until last year, the monthly motivations were Rs3, 000 -3, 500 per month, which is now Rs 4,500 -6, 000 on an average, according to a report by Love In Store Technologies, which handles direct fund transmit of more than a dozen FMCG conglomerates including Britannia, Tata Consumer Make, Reckitt Benkiser, Dabur and Colgate Palmolive. "Incentivising auctions parties is crucial to keep them motivated as they remain on field despite tiding illnes dangers, " said Krishnarao Buddha, elderly category honcho at India’s largest biscuit creator, Parle Make. "For them, it's likewise like a button of acceptance which works to push sales even further."Most fellowships expanded their delivery reach since last year and now have an even bigger store network than pre-pandemic. In fact, FMCG firms computed about 10 distributors on average every day since January last year in an effort to reach shoppers directly through their own dealers instead of using wholesalers, according to Bizom.Salesmen are not FMCG employees, but are appointed by distributors, and a usual mid-sized consumer goods company has 3,000 -5, 000 marketings the staff members of the field."These distributor sales representative inspect supermarkets to take orders, and hence are the true frontline in terms of FMCG sales. Many of them had left for their hamlets during the firstly beckon and companies genuinely needed them on the field to ensure business, " said Aditya Goel, cofounder of Love In Store that organizes place report fees for salesmen and retailers on behalf of the FMCG firms.Companies said higher payout for sales staff was just one of the many stimulus they had initiated."In addition to securing our frontline auctions staff with adequate insurance and mediclaim policy to cover for any medical emergencies, we have brought in appropriate changes to the compensation package with a mix of increased cash and non-monetary motivations to keep them caused, " said Adarsh Sharma, executive director - auctions at Dabur India.Amway said it also launched initiatives to upskill about 5.5 lakh distributors to go the digital gesticulate. “Consequently, "were having" said approximately 20% increase in the income of our distributors vis-a-vis last year, " said Anshu Budhraja, chief operating officer, Amway India.This heightened push on expanding reach resulted in the FMCG market developing 4.6% in the year ended March 2021, twice the rate in 2020 despite manufacturing and deployment impediments in late March and April last year, as per Kantar.Marico, nonetheless, said here today had tweaked the reward system even as its overall incentives remain unchanged."It has been done, firstly through simplification of key business metrics and aligned payoff programmes which are driven by the frontend functions. The targets and metrics were recalibrated and shared on a monthly and quarterly basis to drive sharper focus on the most critical agenda basis the changing fiscal scenario, " said Sanjay Mishra, chief operating officer, India sales at Marico.

Read more: economictimes.indiatimes.com


Timt to bet on FMCG mid & smallcaps: Anshul Saigal

If one can find the freedom appoints in that space, with a one-two year occasion range, there is definitely money to be made in FMCG space, says Anshul Saigal, Portfolio Manager& Head-PMS, Kotak Mahindra AMC.On privates versus PSU banksThe trend vis-a-vis the large cap private banks and the PSU banks has been laid out over many years and conditions have not changed for this trend to change. It looks like the trend of some market share gains by private sector companies banks is going to continue in the future -- foreseeable as well as distant. The veer came strengthened by the fact that some of the banks were able to access the capital sells and conjure uppercase and strengthen their balance sheets which allows them to gain market share even faster going forward. Clearly those banks were more on the private area than the PSU side. Also one cannot overlook the fact that the consumers want to go to more credible actors for their bank requirements, in this case the private banks. All the conditions seem to suggest that the trend of market share amplifications is going to continue and there are 4-5 sizable private sector companies banks and there is a lot of market share to be taken. If the banking pie is worth Rs 100, then Rs 70 goes to PSUs, about Rs 10 -1 2 to NBFCs and the rest goes to private sector banks. Even though the private sector banks have outperformed in recent times, but clearly their share is very small in the context of the overall bank tart in its own country. So nothing would seem to indicate that private sector banks will see a hasten protrusion. On FMCG theme and midcap playersWe have seen that over the last 2 to three years, the FMCG space and the consumption cavity in general has been less correlated to financial act. We have visualized outperformance in this space compared to the rest of the markets. The outperformance has now become so austere that many of these FMCG fellowships were transactions at unsustainable valuation differentials and that required either FMCG valuations would need to correct or the rest of the market would need to see an expansion in valuations to catch up. In the past six odd months, FMCG companionships has already been underperformed the broader markets. The valuation spread is tightening and the rest of the market is outperforming the FMCG space though there is always scope to make money if you are a stock picker. In the mid and smallcap space, even in the FMCG segment there are opportunities to make money. There are tailwinds and to a certain extent animal forces have come out as beings are going out and spending and the sentimentality is improving. All these things are leading to volume growth in the mid and smallcap seat. If one can find the freedom specifies in that space, with a one-two year age scope, there is definitely money to be made in FMCG space. On whether BPCL and BEML are worthy of long-term investment or transactions pots on disinvestment newsAnshul Saigal: Both these companies are corporations with different ventures embedded in one company. For instance, BEML has a metro business, a excuse business and certain other industries. BPCL has an oil marketing business, a refining the enterprises and it has oil and gas wells for extraction. These are very different jobs, all embedded into a company. Someone coming to buy these companies will have to keep in mind that they are buying a conglomerate rather than a standalone business with a single cable of business. These corporations would have been of greater value had they been split and sold differently because people would have had the opportunity to get into the different indications of enterprises and have that risk profile added to their portfolios. But these are still very valuable and enormous assets. After disinvestment, numerous PSU companionships become much more efficient and much more client oriented. Their industries have grown manifold over the years, BSNL being a case in point. There may be value for strategic investors in these companies and the nature of these professions may be very different formerly this divestment plays out. So tactical investors may find value in both the stocks in the short term as also in the long term.On how to play the real estate and residence expect resurgence -- via plaster and real estate majors or via ancillaries In the US and Canada, where there is a recovery in real estate properties, while real estate rates had moved up marginally, the log costs have double-faced because unlike in India where we use concrete to build constructs, in the US and Canada they use wood and log and those prices have virtually double-dealing. So clearly in the US, construct information are a great behavior to play the real estate recovery. Similarly, in India, residence improvement and building substances are a very interesting method to play the real estate recovery. We are coming off virtually 6-7 years of consolidation in real estate and conditions are such that fringe players or weaker musicians are out of the market and the stronger actors are becoming stronger. The busines is consolidating in their spare. In 2017, the listed players had about 6-7% of market share in the Indian real estate space. That market share in three to four years, has gone up to 22%. This tells us that these companies are becoming stronger and too that organised actors "whos doing" gratifying to organised real estate firms are going to see market share incomes and this trend will strengthen going forward. Home improvement frisks -- be it tiles, sanitaryware, faucets, plywood etc or improving fabrics; plaster, steel -- all stand to benefit from a real estate recovery. And so I would say that that could be a nice way to play a recovery if one believes there is going to be a recovery then those would be a neat space to play the real estate improvement. On crude prices and power& oil marketing companiesAll commodity expenditures, including exertion rates are appreciating an uptick and the outlook for these expenditures is that they can remain strong and picture an upward path move forward. However, the free movement of persons in stock tolls as too exertion prices is only a fraction of the flower that we learnt in 2007 -0 8 and 12 -1 3 years have transferred after that peak. We are still a fraction of those tolls in terms of where commodity expenditures are today. If merchandise tolls continue this trend upwards, then we could continue to see an expansion in gross refining perimeters. We have realise deepened interest in energy and petroleum extraction companionships. Another interesting way to play this trend would be to bet on sugar now as with ethanol mixing, carbohydrate has become a play on energy. It becomes an interesting play as vigor prices become stronger going forward.

Read more: economictimes.indiatimes.com