India Consumer & Retail
Off the Shelf
Key developments in Indian consumer space over the past month:
• New product launches. 1) HUL expanded its anti-ageing skin care
portfolio with the launch of two new brands - Ponds Gold Radiance (in
super premium segment) and Fair & Lovely Forever Glow (in mass
end). Prominent brands competing in this space include HUL’s Ponds
Age Miracle and P&G’s Olay Total Effects which are at the premium
end, 2) Dabur forays into modern OTC healthcare market with launch
of a new brand NUTRiGO (multi vitamin capsules), 3) Danone expands
dairy portfolio with yoghurt launch priced competitively with existing
brands (Nestle, Amul), 4) Coca-Cola and Nestle JV company - has
introduced ready-to-drink iced tea brand Nestea recently in bottled form
priced at Rs25/bottle, and 5) Emami expanded its skin care portfolio
with launch of Boroplus Healthy & Fair winter cream (fairness cream)
targeting the mass segment.
• Pricing Actions. Godrej Consumer has hiked prices for soaps (Godrej
No.1 and Cinthol) by 4%. This was being anticipated for quite some time
given significant cost push for palm oil.
• Global highlights. In the recent investor seminar, Unilever stated that it
aims to derive c70% of sales from emerging markets in coming years
from c50% currently. Growth drivers include: 1) Straddling the price
pyramid and focus on personal care; 2) Lead market development:
increasing consumer reach e.g. “starter packs”; 3) Low cost business
models and 4) Move with speed into the white spaces.
• Key commodity trends. There was sharp increase in the palm oil prices
over the past month, up 13% m/m, while crude oil was up 4%. Domestic
Sugar prices and wheat prices were both firm, up 6% m/m and 3% m/m
respectively.
• Performance and Valuation. Over the past month, BSE FMCG Index
was down 1%, outperforming Sensex by 1%. Nestle India and HUL were
the better performers, up 2% and 1% respectively.
Domestic Market – What’s changing?
Hindustan Unilever introduces premium anti-ageing skin care range - Ponds
Gold Radiance and mass anti-ageing skin cream Fair & Lovely Forever Glow
Hindustan Unilever launched the Ponds Gold Radiance range recently in the
premium segment. It will compete with Procter & Gamble, which is a leading player
in premium anti-ageing segment with its Olay Total Effects brand. HUL already has
presence in mid-premium anti-ageing segment with Ponds Age Miracle brand. Ponds
Gold Radiance is priced at Rs799 (for a 50gm pack) which implies a substantial
premium to Ponds Age Miracle priced at Rs300 (for a 50gm pack).
HUL has also introduced a new anti-ageing variant for Fair & Lovely called Forever
Glow to target the mid segment. This is priced at Rs59 for a 25gm pack at c50%
premium to regular FAL SKUs.
Skin care in India is the most sought after personal care category by both local and
global consumer majors given significant head room for growth (23% penetration,
growing at 20% p.a.) with an estimated size of Rs25bn. Rising consumer awareness
and interest, increasing income levels and favorable demographics (growing share of
working women) is driving growth for the category. In terms of key sub-categories of
skin care in India, fairness creams dominate the space with over 45% share followed
by moisturisers at about 22%.
Anti-aging solutions sub-segment is very nascent in India at just 3-5% of overall skin
care category but is fast finding acceptance among consumers. Anti-wrinkle creams
and hair colors started this trend of fighting age and this has now extended into a
wide range of anti aging products. Prominent brands competing in this space include
HUL’s Ponds Age Miracle and P&G’s Olay Total Effects which are at the premium
end. Consumers now prefer to prevent ageing rather than repair the damages at later
stage and high awareness levels coupled with increased availability of these products
is reducing the target age bracket for this segment.
Dabur forays into modern OTC healthcare market with the launch of a new
brand NUTRiGO
Dabur announced its entry into modern OTC healthcare market this week. Their
foray into the Vitamins, Minerals & Supplements category comes with the launch of
Dabur NUTRiGO – Daily Health Supplement with offerings for Men and Women.
This launch is part of Dabur’s aggressive plan to augment its leadership position in
the health care market in India, where the company currently operates with
traditional Ayurvedic products like Dabur Chyawanprash.
There are two variants – Dabur NUTRiGO Total for Men priced at Rs75 (for 10
capsules) and Rs195 (for 30 capsules), and Dabur NUTRiGO Woman priced at Rs85
(for 10 capsules) and Rs225 (for 30 capsules)
Godrej Consumer raises soap prices by 4%
Godrej Consumer has hiked prices for soaps (Godrej No.1 and Cinthol) by 4%. This
was being anticipated for quite some time given significant cost push seen for palm
oil derivatives.
For Godrej No.1 company has reduced the weight (from 120gm earlier to 115gm
now) without changing the price. For Cinthol brand they have taken the prices up by
4% (from Rs23 earlier to Rs24 for 100gm regular SKU).
Danone expands dairy portfolio with yoghurt launch
Danone Group has launched yoghurts recently, expanding its dairy portfolio in an
aggressive fashion both in general and modern trade. Yoghurts are available in plain
and flavored formats. Manufacturing for this product is handled by Schreiber
Dynamix Dairies. The regular plain yoghurt has been priced in line with the market
leaders - Amul and Nestle. However the flavored yoghurt is at a significant discount
to that of Nestle’s flavored yoghurt.
Coca-Cola, Nestle JV launches bottled ice tea Nestea
Coca-Cola and Nestle JV company - Beverage Partners Worldwide has introduced
ready-to-drink iced tea brand Nestea recently in bottled form. The product has been
initially rolled out in Mumbai and would be gradually launched pan-India. It is priced
at Rs25 (for a 400ml PET bottle) broadly in line with regular fruit based drinks.
Nestea is already present in India as an instant mix which is marketed by Nestle
India.
Emami expands its skin care portfolio
With the onset of winter, Emami has introduced Boroplus Healthy & Fair winter
cream (fairness cream). This product targets the mass/mid price segment at Rs27 for
a 25gm pack. As seen in case of Emami's other brands, company has roped in a
leading film personality to endorse the brand and has aggressively started to advertise
this on mass media.
Hindustan Unilever had also introduced a winter specific fairness cream Fair &
Lovely Winter Fairness Cream last year.
Showing posts with label JPMorgan. Show all posts
Showing posts with label JPMorgan. Show all posts
Monday, June 23, 2008
Wednesday, March 5, 2008
JP Morgan: Tata Steel -Rio's bid for Riversdale- Very Positive for TATA
Tata Steel Ltd
Neutral
TISC.BO, TATA IN
Rio's bid for Riversdale- Very Positive for TATA given
~24% stake in Riversdale (Rs38/share on initial bid) -
ALERT
• Rio’s bid for RIV- Takeaways from J.P. Morgan Australia Resources
team: The key thoughts of J.P. Morgan Australia Resource team on Rio’s bid
for RIV (please see note ‘Talks with Riversdale Mining, dated 6th Dec, 2010
for more details) are: ‘a) Speculated price equates to only 6% premium to RIV's
closing price (48% premium to the 3-month average price). Given RIO’s
financial and operational capabilities would de-risk project execution, RIV
shareholders are unlikely to settle for any offer that does not reflect the
entire currently recognized resource base, in our view; b) RIV has three
cornerstone shareholders: steelmakers Tata Steel (24.1% of RIV and 35%
of Benga project) and CSN (13.2%) and financial investor Passport Capital
(13.3%) which could make an attempted takeover slightly more
challenging; c) In our view, the attraction is the resource, rather than the project
as it stands. As we have pointed out in our commentary on Riversdale, the key
hurdle in project development is infrastructure and the current plan of barging
looks challenging, particularly as tonnages rise; d) We believe the likelihood of
a counter-offer emerging from somewhere as high; e) While Riversdale’s
statement confirms that talks are at a very early stage, this news is not surprising
in our view. Investors may have concerns around the execution risks associated
with RIV, but there is little doubt that the resource is world-class in nature and
therefore would sit comfortably within RIO’s portfolio. Having said that, a
number of other companies would no doubt feel the same, implying a high
likelihood of a competitive bid situation emerging in our view particularly
given the current tightness of the coking coal market and the highly
concentrated nature of the supply side’.
• Implications for TATA: We view the bid for RIV as very positive for TATA
and validating the investments that TATA has made in RIV. As of now with
TATA’s ~24% stake in RIV and 35% stake in Benga project combined with an
offtake agreement for 40% of Benga’s coking coal out put, means it is well
positioned to benefit from any increase in value of RIV. TATA’s 24% stake
would be valued at $840mn at the current bid price (Rs38/share), and as the J.P.
Morgan Australian Resource team believes a counter bid is likely which should
be even more positive for TATA. The carrying value in TATA's balance sheet
was $232mn for the 21% stake (it acquired the remaining this year via through
market purchases).
• Dilemma for TATA: Short-term monetization v/s Long-term coking coal
security: We believe the propose bid for RIV creates a dilemma for TATA. Any
potential acquirer for RIV would provide an opportunity for TATA to monetize
investments and given the stretched balance sheet it would allow de-leveraging.
However, given the long term tightness in coking coal and the strong resource
base of RIV, the investment does provide a large degree of coking coal security
for TATA.
• A potential counter bid from TATA for acquiring more stake in RIV?: We
believe TATA’s balance sheet lacks flexibility for a meaningful counter bid .
Neutral
TISC.BO, TATA IN
Rio's bid for Riversdale- Very Positive for TATA given
~24% stake in Riversdale (Rs38/share on initial bid) -
ALERT
• Rio’s bid for RIV- Takeaways from J.P. Morgan Australia Resources
team: The key thoughts of J.P. Morgan Australia Resource team on Rio’s bid
for RIV (please see note ‘Talks with Riversdale Mining, dated 6th Dec, 2010
for more details) are: ‘a) Speculated price equates to only 6% premium to RIV's
closing price (48% premium to the 3-month average price). Given RIO’s
financial and operational capabilities would de-risk project execution, RIV
shareholders are unlikely to settle for any offer that does not reflect the
entire currently recognized resource base, in our view; b) RIV has three
cornerstone shareholders: steelmakers Tata Steel (24.1% of RIV and 35%
of Benga project) and CSN (13.2%) and financial investor Passport Capital
(13.3%) which could make an attempted takeover slightly more
challenging; c) In our view, the attraction is the resource, rather than the project
as it stands. As we have pointed out in our commentary on Riversdale, the key
hurdle in project development is infrastructure and the current plan of barging
looks challenging, particularly as tonnages rise; d) We believe the likelihood of
a counter-offer emerging from somewhere as high; e) While Riversdale’s
statement confirms that talks are at a very early stage, this news is not surprising
in our view. Investors may have concerns around the execution risks associated
with RIV, but there is little doubt that the resource is world-class in nature and
therefore would sit comfortably within RIO’s portfolio. Having said that, a
number of other companies would no doubt feel the same, implying a high
likelihood of a competitive bid situation emerging in our view particularly
given the current tightness of the coking coal market and the highly
concentrated nature of the supply side’.
• Implications for TATA: We view the bid for RIV as very positive for TATA
and validating the investments that TATA has made in RIV. As of now with
TATA’s ~24% stake in RIV and 35% stake in Benga project combined with an
offtake agreement for 40% of Benga’s coking coal out put, means it is well
positioned to benefit from any increase in value of RIV. TATA’s 24% stake
would be valued at $840mn at the current bid price (Rs38/share), and as the J.P.
Morgan Australian Resource team believes a counter bid is likely which should
be even more positive for TATA. The carrying value in TATA's balance sheet
was $232mn for the 21% stake (it acquired the remaining this year via through
market purchases).
• Dilemma for TATA: Short-term monetization v/s Long-term coking coal
security: We believe the propose bid for RIV creates a dilemma for TATA. Any
potential acquirer for RIV would provide an opportunity for TATA to monetize
investments and given the stretched balance sheet it would allow de-leveraging.
However, given the long term tightness in coking coal and the strong resource
base of RIV, the investment does provide a large degree of coking coal security
for TATA.
• A potential counter bid from TATA for acquiring more stake in RIV?: We
believe TATA’s balance sheet lacks flexibility for a meaningful counter bid .
Thursday, October 18, 2007
Bank of Baroda:: concerns on capital constraints recede:: JP Morgan
Bank of Baroda Overweight
BOB.BO, BOB IN
Capital infusion: concerns on capital constraints
recede but infusion EPS and ROE dilutive
• Large capital infusion by the government: According to CNBC
reports, the Indian government has infused ~Rs100bn in PSU banks with
stakes of <57-58%. BOB has received Rs35bn and assuming current
market prices, the infusion would lead to ~10% dilution and would take
the government’s stake in BOB from 54% to 58% and lead to ~175bps
increase in BOB’s Tier 1.
• Positives - No constraints on capital now: The capital infusion
addresses concerns about capital constraints not only in the near term but
also longer term, as the increase in the government’s stake to 58% leaves
leeway for further capital issuance without government help in the
future.
• Negatives: EPS and ROE dilutive, capital marginally higher than
required: Assuming current prices, EPS dilution would be ~6% over
FY11-12E and ROEs would be brought down by ~250bps to ~20-20.5%
for FY12-13. Given strong internal capital generation, we estimate that it
would take more than three years for BOB to leverage up again, leading
to lower ROEs over that period.
• Prefer PNB now vs. BOB: Though we currently have no official
confirmation of the same, we assume the infusion to be 100% equity.
Given very low dilution for PNB, we would prefer PNB vs. BOB as the
capital infusion would widen ROE differentials for BOB vs. PNB from
200bps earlier to 500bps now and valuations would be on par on a post
diluted book basis.
• Maintain Overweight: Though the news is positive for PSU banks in
general as it addresses their capital issues, we believe for BOB the large
dilution is at best neutral, given the large EPS and ROE dilution. We
continue with our Overweight on BOB, given superior asset quality but
would prefer PNB for return ratio differentials post the capital infusion.
BOB.BO, BOB IN
Capital infusion: concerns on capital constraints
recede but infusion EPS and ROE dilutive
• Large capital infusion by the government: According to CNBC
reports, the Indian government has infused ~Rs100bn in PSU banks with
stakes of <57-58%. BOB has received Rs35bn and assuming current
market prices, the infusion would lead to ~10% dilution and would take
the government’s stake in BOB from 54% to 58% and lead to ~175bps
increase in BOB’s Tier 1.
• Positives - No constraints on capital now: The capital infusion
addresses concerns about capital constraints not only in the near term but
also longer term, as the increase in the government’s stake to 58% leaves
leeway for further capital issuance without government help in the
future.
• Negatives: EPS and ROE dilutive, capital marginally higher than
required: Assuming current prices, EPS dilution would be ~6% over
FY11-12E and ROEs would be brought down by ~250bps to ~20-20.5%
for FY12-13. Given strong internal capital generation, we estimate that it
would take more than three years for BOB to leverage up again, leading
to lower ROEs over that period.
confirmation of the same, we assume the infusion to be 100% equity.
Given very low dilution for PNB, we would prefer PNB vs. BOB as the
capital infusion would widen ROE differentials for BOB vs. PNB from
200bps earlier to 500bps now and valuations would be on par on a post
diluted book basis.
• Maintain Overweight: Though the news is positive for PSU banks in
general as it addresses their capital issues, we believe for BOB the large
dilution is at best neutral, given the large EPS and ROE dilution. We
continue with our Overweight on BOB, given superior asset quality but
would prefer PNB for return ratio differentials post the capital infusion.
Sunday, December 24, 2006
JP Morgan:: Indian Power Sector: Measuring coal-related risks
• Our global coal team expects international thermal coal prices to pick
up in CY11 ($101/ton for Newcastle coal vs. $95/ton in CY10), backed
by high China / India demand and supply / export constraints.
• We expect Indian IPPs to remain resilient to rising coal costs in the
medium term. 1) 81% of system-wide thermal coal is sourced from COAL
IN, which has seen a nominal 4.9% CAGR in prices over the last 10 years,
and is at a ~40-50% discount to international prices; 2) 73% (36% exNTPC) of ongoing projects in our coverage universe are insulated due to
regulated returns, and some PPAs have fuel cost pass-through as well-we
estimate a 10% rise in coal costs can raise average genco tariff by 5-6%.
• Long-term risks on both supply and pricing: 1) Firm guarantee by COAL
IN for only 50% of contracted quantity. As per JPM India mining analyst,
India is headed for a thermal coal shortage of 181MT by FY14 and thermal
coal imports could rise 2.8x from current levels. In our view, plants are at
risk of operating at lower capacity utilization or increasing their use of
imports, pushing up costs. Ongoing delays in developing captive coal
mining blocks could further tighten the situation. 2) Indian coal policy
makers are exploring pricing domestic coal at parity with imported coal, and
also a pool pricing mechanism. 3) End of regulated return era for new PPAs:
long-term risk of margin squeeze due to rising coal costs.
• Indian IPPs’ relative position and stock picks: TPWR benefits from
rising coal prices due to its stake in Indonesian coal mines, however past
coal price rises have been neutralized by cost hikes and bottom line flowthru has been limited. JSWE most at risk: 66% of its capacity is on ST
tariffs and all coal is sourced at international market rates. Lanco: Well
hedged fuel strategy, only 1.2GW on imported coal with regulated tariffs.
NTPC: All projects are regulated, coal cost is pass-through. Adani: sweet
coal pricing deal from Adani Enterprises protects it to large extent. RPWR:
captive mines + some pass-through protection in place for 38% of capacity.
• Indian IPPs shopping abroad for resources, with billions of dollars to
spend: we expect long-term benefits and the quest to intensify. Adani
Group spent an upfront US$455M for 7.8Bt Australian Galilee asset and will
pay royalties of A$2 for each ton of production. JSW Energy spent
US$414M for South African coal assets. TPWR was an early bird in
Indonesia, but has stated its appetite for more. GMRI has made smaller buys.
GVK and Lanco have reportedly bid ~US$1B for Australia’s Griffin Coal
which has 250-300MT of reserves. We expect a 5-year cycle for coal mine /
infrastructure development and hence benefits to accrue only post that.
up in CY11 ($101/ton for Newcastle coal vs. $95/ton in CY10), backed
by high China / India demand and supply / export constraints.
• We expect Indian IPPs to remain resilient to rising coal costs in the
medium term. 1) 81% of system-wide thermal coal is sourced from COAL
IN, which has seen a nominal 4.9% CAGR in prices over the last 10 years,
and is at a ~40-50% discount to international prices; 2) 73% (36% exNTPC) of ongoing projects in our coverage universe are insulated due to
regulated returns, and some PPAs have fuel cost pass-through as well-we
estimate a 10% rise in coal costs can raise average genco tariff by 5-6%.
• Long-term risks on both supply and pricing: 1) Firm guarantee by COAL
IN for only 50% of contracted quantity. As per JPM India mining analyst,
India is headed for a thermal coal shortage of 181MT by FY14 and thermal
coal imports could rise 2.8x from current levels. In our view, plants are at
risk of operating at lower capacity utilization or increasing their use of
imports, pushing up costs. Ongoing delays in developing captive coal
mining blocks could further tighten the situation. 2) Indian coal policy
makers are exploring pricing domestic coal at parity with imported coal, and
also a pool pricing mechanism. 3) End of regulated return era for new PPAs:
long-term risk of margin squeeze due to rising coal costs.
• Indian IPPs’ relative position and stock picks: TPWR benefits from
rising coal prices due to its stake in Indonesian coal mines, however past
coal price rises have been neutralized by cost hikes and bottom line flowthru has been limited. JSWE most at risk: 66% of its capacity is on ST
tariffs and all coal is sourced at international market rates. Lanco: Well
hedged fuel strategy, only 1.2GW on imported coal with regulated tariffs.
NTPC: All projects are regulated, coal cost is pass-through. Adani: sweet
coal pricing deal from Adani Enterprises protects it to large extent. RPWR:
captive mines + some pass-through protection in place for 38% of capacity.
• Indian IPPs shopping abroad for resources, with billions of dollars to
spend: we expect long-term benefits and the quest to intensify. Adani
Group spent an upfront US$455M for 7.8Bt Australian Galilee asset and will
pay royalties of A$2 for each ton of production. JSW Energy spent
US$414M for South African coal assets. TPWR was an early bird in
Indonesia, but has stated its appetite for more. GMRI has made smaller buys.
GVK and Lanco have reportedly bid ~US$1B for Australia’s Griffin Coal
which has 250-300MT of reserves. We expect a 5-year cycle for coal mine /
infrastructure development and hence benefits to accrue only post that.
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