Dabur India: pick of the week: ICICI Securities

Dabur India Ltd has acquired 100% equity in Namaste Laboratories and its three subsidiary companies - Hair Rejuvenation & Revitalization Nigeria Limited, Healing Hair Laboratories International, LLC, and Urban Laboratories International, LLC along with its South African arm – for $100 million, in an all-cash deal, thus, stepping into the hair care products market in the US, Europe and Africa. The Namaste Group controls a 12% market share in the US and enjoys significant market positions in other countries of Africa, the Middle East, Europe and North America. The company’s net sales stand at $83 million with margins ranging at ~13%.Therefore, this acquisition would help the company to strengthen its presence in the African market while the existing distribution network of the Namaste Group in the US would help Dabur to introduce its products there. Thus, we believe the contribution to sales from the international business would increase to around 25% from around 20% currently.  

Financials:

At the current market price of | 96, the stock is trading at 29.2x its FY11E EPS of | 3.3 and 25x its FY12E EPS of | 3.8. With Dabur’s foray into new categories via acquisitions (Hobi Kozmetik and Namaste Labs) and strong earnings visibility with the ability to sustain margins, we have valued the stock at 28x its FY12E EPS of | 3.8, therefore, arriving at a target price of | 106. Technical Outlook A look at the long-term price chart shows that the stock is in a clear uptrend, consistently forming higher highs and higher lows on the weekly charts. The stock hit an all-time high of | 112.40 levels in mid-September 2010. Thereafter, it has witnessed a steady corrective decline The most important observation to be made on the price chart is that the corrective price decline appears to have halted at the 50% retracement of the recent rally from March 2010 lows of 78 levels to the all-time highs Also noteworthy is the fact that after a momentary dip below the 200 day exponential moving average (EMA) the share price has witnessed a strong bounce back accompanied by a sharp jump in volumes, thereby re-affirming buying support at the long-term moving average support Among oscillators, the 14 period daily RSI has turned northwards from the oversold region and supports the current upmove whereas the MACD has also given a positive crossover below the trigger line indicating build-up of momentum on the upsides

Fortnightly round up of key banking and economic indicators:: Emkay

Emkaynomics

Fortnightly round up of key banking and economic indicators

n     The growth in non food credit has moved up to 22.8% for the week ended Nov. 19, 2010 and deposit mobilisation inched up to 16.4%

n     The CD ratio has remained relatively unchanged and stood at 73.4% for the week ended Nov. 19, 2010

n     Money supply growth has moved up to 16.9% and the money multiplier inched upwards to 4.93

n     Call money rates as on Dec. 06, 2010 have shed 60bps from last fortnight to 6.3%

n     The spread between call money and reverse repo rates has narrowed as on Dec. 06, 2010 and stands at 109 bps

n     Excess liquidity is absent in the system and stood at `-549.2 bn.  The repo balances stood at ~ `933.8 bn. and reverse repo at ~ `19.1 bn. for the week ended Nov. 19, 2010

n     The spread between the long and short end OIS has increased and stand at 32bps as opposed to 20 bps last fortnight

India – Strategy (Where is the money?): IIFL

India – Strategy (Where is the money?): 

Year to date in FY11, FII inflows, at US$25bn, have already crossed last year’s record US$23bn. Not surprisingly, FII shareholding of India’s market has increased 250bps to ~16% (for BSE200) since the lows of March last year. FIIs now own US$227bn worth of stocks in BSE 500. FIIs are currently underweight large domestic growth sectors—Consumer Discretionary, Staples, and Industrials. They are overweight only Financials (+930bps compared to index), and 36.1% of FII holding is concentrated in Financials. We recommend an Overweight on both IT and Metals. Both these sectors (especially IT) are currently under-owned in institutional portfolios. Fundamentally, the IT sector currently has business momentum, and with the rupee unlikely to appreciate materially, earnings could surprise on the upside. The Metals sector offers a strong hedge to our overweight domestic consumer-focussed portfolio against a sharp rise in global commodities on the back of a deluge of QE2 liquidity.

JP Morgan:: India FMCG: Consumer & Retail Off the Shelf

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.

RBS: News headlines Round Up: 7 December 201

News headlines
Oil & Gas 
ONGC to ink Kazakh deal in Feb (Economic Times)
Vedanta expects to seal US$9.6bn deal for Cairn India soon (Economic Times)
ONGC set to get 10% return on Cairn fields (Economic Times)



Banks
State Bank hikes deposit rates by up to 150bp (Economic Times)
BOI raises fixed deposit rates by up to 1%  (Economic Times)
RBI asks banks to open resource centres for financial inclusion (Business Standard)     
               
Pharma
Glenmark gets US FDA nod to sell painkiller drug in US (Economic Times)

Commodity
Congress demands ED probe into Vedanta "deal" (Economic Times)
Tata Steel says Riversdale Mining stake strategic for it (Economic Times)
Tata Steel to raise UK structural steel prices (Economic Times)
SC issues notice to Centre, Orissa government and Posco (Economic Times)

IT & Telecom
BSNL seeks Rs50bn more to build defence network (Economic Times)
Bharti, Idea attack CDMA players for inflating customer numbers (Economic Times)
BSNL slashes inter-state call rates in Meghalaya, Tripura, Mizoram (Economic Times)
Aircel too opposes hike in spectrum usage charge; moves SC (Economic Times)
AOL mulls breakup, then merger with Yahoo (Economic Times)

Power, engineering & infrastructure
Suzlon Energy to merge tower biz, infra verticals with itself (Economic Times)
Bharat Forge to invest Rs19bn in NTPC JV (Economic Times)
Areva likely to sign agreement with NPCIL for 2 nuke plants (Economic Times)
Gujarat setting up Rs80bn solar power park (Economic Times)
Hindujas in pact with French companies (Economic Times)

Automobiles 
Carmakers to raise prices from next year on rising input costs (Economic Times)
Toyota set to hike prices of vehicles across models in India (Economic Times)
No talks with Nissan for small car with Ashok Leyland: Hinduja (Economic Times)
Volvo Buses India targets US$1bn revenue in 5 years (Economic Times)
Hyundai to hike prices by up to 2% from January (Economic Times)

UBS: Welspun Corp -SEBI order impacts investor sentiment

UBS Investment Research
Welspun Corp 
SEBI order impacts investor sentiment 
 
„ SEBI bars promoter entities to trade in Welspun stock, till further notice
SEBI has directed promoter/promoter group entities not to buy, sell or deal in
Welspun Corp (WCL) shares till further notice. This is on preliminary SEBI
enquiry on alleged trading by the Dangi/promoter entities to possibly influence
WCL price. Entities can file their objection within 21 days and request a hearing.
„ Welspun clarifies that the order has no bearing on its business/financials
WCL clarifies that the SEBI order has no bearing on any of its business/financials.
Further, promoter entities have also indicated that they are taking professional
advice and believe they are in full compliance with all applicable laws.



„ Cost of capital higher; capital raising may be difficult on weak sentiment
In our view, SEBI ex parte order may not have a significant impact on the existing
business (reasonable balance-sheet and can deliver on quality projects). However,
required cost of capital (equity risk premium, beta) is likely to increase and any
potential capital raising (WCL has no requirement in c2 years) would be difficult.
„ Valuation: Downgrade PT to Rs 250, maintain Buy only on fundamentals
We have marginally revised our estimates lower to incorporate MSK Projects. We
downgrade our price target to Rs 250 from Rs 400, on higher WACC (from 12.1%
to 15.4%) and slightly lower long term growth. We are positive on pipes sector and
WCL’s business and maintain Buy on fundamentals. Yet, SEBI ex parte order may
keep investor sentiment muted over medium term. We await more clarity on the
SEBI enquiry; any negative surprises would significantly impact investor
sentiment and perception on the stock

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 .

You might also like:

UBS: Tata Steel- Riversdale developments +ve for Tata Steel

RBS::Tata Steel – Riversdale valuations soar

Tata Steel:Upgrading FY11 EPS by 14% -Motilal Oswal

Tata Steel:: Standalone numbers in line -- IDFC Sec

Tata Steel — Capital Raising On The Cards: Ambit