Latest Event Updates
Hindustan Foods
Proxy play for entire FMCG sector
Biz: Contract manufacture of FMCG goods.
- Reckitt acquisition is complete
- IceCream plant in UP is ready to produce – 2023 summer would be peak season
- Beverages plant is picking up steam
- Bars and Soaps project seems to have started working
- Capex at coimbatore beverage plant indicates strong momentum
Whats next?
- Co is seeking approval to raise 300Crs through QIPs during AGM on 22nd sep, 2022
- Need to watch the participant and success rate + management commentary about utilisation of proceeds from fund raising
- target of 4000cr revenue in FY25 could make its market cap reach 15000Cr (from current 5300cr) and might lead to re-rating of the ticker.
Risks:
- Big Cos stepping out from contract manufacturing (very rare but can’t rule out)
- Management changes.
- Inorganic expansion might lead to too much diversification. Should closely watch the revenue contribution from such M&A.
Premier Explosives
Mcap < 500 Crs (as on Q1 FY 23)
biz: Making high energy materials for defense, space, infrastructure & mining Cos.
Track the defence budget declaration during every FY budget announcements and measure how much company is able to take its share from the budget.
Order book: 646 Cr as on FY23 Q1
Closest Peer: Solar Industries
Defence – high margin
Commercial explosives segment – like commodity – volatile & margin pressure in FY 22
Explosives manufacturer:
4-Mar-22- secured 4.5Cr order from DRDO
29-Apr-22- secured 100Cr order for rocket motor from overseas entity
2-Sep-22-first private Co to build a PSLV launcher motor – a big plus
Ammonia Nitrate is the major raw material (:thinking: DeepakFert) but requires only industrial grade and not explosive. Next is Ammonia pychrolate. Co has already set up a plant to manufacture pychrolate in-house to reduce the dependency of raw material, supply chain and freight costs as well as efficiency grades.
Works with BDL for a few projects.
- almost 3x of FY22 revenue as order book and management is expecting to do good in FY 23 onwards
- FY 22 had a higher depreciation claimed, plant closure, VRS for employees cost in jagdalpur operations contract etc.,
Red Flags:
- For a 200Cr revenue in FY 22, auditor fee is almost 24.5 lakhs (track it over a period)
- Apart from Salary, Management has a % commissions in the sales
- Though experienced management, new team should need to deliver
Uflex
| Q3 FY 22 – Bumper quarter with PAT 313Cr refer to uflex website for presentation/transcripts film types: BOPP, BOPET, flexible packaging prods Biz – flexible packaging, chemical biz, packaging, engineering, holography biz Biscuit packs to hot chai packs printing on cement bags to bhujia covers kids toys material to gift wrappers -> Co working on Recycleable plastic (post consumption recycling) to reduce production of virgin plastic. plant in mexico and MLP plant at poland -> plants across the globe. (PCR plants at nigeria) -> Capex has come alive this quarter and processed over 15.4K MT PCR. -> Strong sticky partnerships with other biz Biz has good long term loans to be paid EV/EBITA – 3X (MCap – 6.5K Cr) Peer: Polyplex,cosmo,garware,srf,jindal,naharpoly,huhtamaki Customers: P&G, PepsiCo, Mondelez, Nestle, Britannia, Haldiram’s, Amul, GSK, Coca-Cola, Mars Wrigley, Amcor, ITC Fanastic Q1 FY23 – Rev & PAT up by 45% yoy & 10%+ QOQ. Aseptic liquid volumes jumps 123% yoy *Dharwad facility soon to be commissioned |
- While the co has performed well over the years, long term Debt levels are increasing resulting in good % outflow under finance cost section in P&L. No discussion about debt reduction
- We should check for Sales volume, Net revenue from operations, Net profit, Finance cost YOY to take a decision.
- Packaging industry as a whole has a very good potential.
- Peers include:
- Polyplex – multi national, fully integrated, D-PAC
- SRF – along with chemicals, Packaging films is the second biggest revenue stream (new plant Indore commissioned in Aug 2022)
- Cosmo Films/First
- Garware films
POLYPLEX Q1 Fy23
Overview:
| biz – BOPET (Biaxally-polyethylene teraphthalate)#1 supplier (1950 customers), BOPP – Biaxally oriented polypylene – Made from crude oil refining & natural gas plants – thailand, india, USA – widely distributed 1-Dec-21 – Polyplex Thailand JV + Capex + EV PET fully integrated manufacturing facilities across the globe – Manufacturing of PET Resin (Virgin + post consumer PET blake) + base films + value added products Each facility is self reliant with scope for recycling mechanism D-PAC is the USP of the Co. Differentiated Product Application & Customer – high entry barrier, customer stickiness, pricing stability,IP from standard Cos. Products applications- *Flexi packaging Food – FMCG – maggie, delmante ketchup, chocolate wrapper,knorr soup,oreo,parle-g,curd cup Flexi packaging – Non food – pharmaceuticals , kitchen & home care,pet food,tapes, soap covers, pampers etc., *CPP (compressable poly propylene – food wrap, sealant films) & blown PP , blown PE (metallized PE, air bag *Labels,cartons,holography & paper *Downstream: saracote,lam,print *Customer base: US(30%),Asia (46-27+19%),Europe(20%),ROW(4%) – Q1FY23 – 2650 customers in 75 countries EPS for FY 2022 is > FY 2021 EPS but almost flatish in % terms – I believe,Stock is consolidating because of low EPS generated in FY22. |
Co did not publish any previous concall transcripts to read through
Varun Beverages Ltd Q1 FY23
Biz: Pepsi Co Bottler, Snacks,Tropicana, Gatorade, Sting etc.,
Divided in to CSD (Carbonated Soft Drinks) and Non-CSD
Royalty to Pepsi Co per annum – (Formulation, product & packaging, trademark, brand development)
Licensed to bottle until 2039
- Reports metrics/profitability based on number of Cases sold (24 bottles = 1 case) currently at 165/-
- Seasonal/Strongest in Summer Quarter. Weakest is December Quarter
- Reports earnings based on the calendar year
- H1 FY23 volumes almost close to crossing full year FY 22
- Volume led and price hike led realisations reported in Q2 FY22 (June 2022)
Strong Backward integration + expert regional specific sales Team + own logistics + cost efficient measures (reduction in incentives/commissions) = levers for higher realisations.
- Transition from glass bottles (Returnables Glass bottles RGB) to PET bottles led to asset unutilisation of RGB manufacturing lines -> 46.4Crs of assets are written off in Q2 CY23.
- Inventories increased to 1795 crores (an addition of 350Cr). is it common? (Not sure*)
- Trade receivables: 322Cr (addition of 140Cr)
Revenue contribution mixture: (Q2 CY2022.)
- CSD constituted 73%,
- JBD 9% and
- Packaged Drinking Water 18%
- Debt reduction measures have been taken (3005 Cr to 2055Cr in last 6 months)
- Capex of 670Crs for Bihar & Jammu plans (greenfield expansion)
- 90% capacity utilization
- Working capital days reduced to 17 days from 24 days (last year).
- Packaging efficiency is improved by reducing the size/weight of the PET bottle
backward integration:
- PepsiCo just provides the concentrate + monetary support (brand build etc) – VBL is responsible for Sales, GTM, Capital efficient utilisation, supply chain etc.,
- VBL has set up a plant to manufacture PET bottles at Kuthwa to reduce dependency on third party vendors for rapid supply chain
Key Risks:
Concall Insights:
Outlook:
Supreme Ind
people who knows plastic better since 1942
Mcap: 24236Cr Vs Nilkamal 2112Cr MCap (As on 19 Aug 2022)
Promoter: 48% FII: 16 DII: 19 Public: 15%
- Biz: furniture, packaging, piping, toys, storage material, composite lpg cylinders – polymers & resins in to finished plastic products
- Institutions increasing stake gradually
- proxy 30.7% holding in supreme petrochem – makes polystyrene, expanded polystyrene,extruded foam, speciality polymer compounds
- Crude is first procured by supreme petrochem and bi-product is sent to parent co to make furniture with it.
- Debt free company
**
Supreme PetroChem – largest single site polystyrene producer in the world
Q1 FY 23 performance:
| YOY | QOQ | |
| Revenue | GOOD | DOWN |
| PAT | GOOD | DOWN |
Observation:
There seems to be a drop every June Quarter when compared to March Quarter.
Source: screener.in
Sapphire Foods Q1 FY23
- YUM brand franchisor – India, Srilanka, Bangladesh & Nepal
- 10 + 10 years franchise contract
- Royalty fee is 6-6.3% of net sales and 6% marketing spend
- Allowed to open other non-competing stores with prior approval from YUM – scope for diversification in future
- Great quarter to begin with FY 23
- surpassed pre-covid store count, per restaurant sales per day, EBIT margins, Total revenues,
- Cost optimisation is done by evaluating and closing the unviable restaurants
- Total store count stands at 616 (KFC, Pizza hut and Taco bell) – India, Srilanka, Bangladesh & Nepal
- Total Ebit Margin crossed 20% for the first time and should look to sustain these
- FY 23 total revenues to be north of 1350Cr and PAT be 150Cr (vs 46 crs in FY 22)
- 37 stores opened in Q1 FY23
- contribution from delivery has gone up from 21 % to 39%
- % revenue contribution from drive-through, dine-in and delivery -> Dine-in seems to be a clear winner and hints us that people are stepping out – Indicator for retail proxy play
- Opened Stores in Srilanka even in these political situations – Indicates strength
- 49% of revenue in FY 22 were from delivery orders
insights from presentation:
Monthly updates to follow
- Monthly Auto sales Data
- Monthly brokerage numbers from major brokerages
- Monthly GST collections Data
- Monthly Telecom customers additions data
- Monthly WPI, CPI, IIP, MMI inflation numbers
- RBI policy meet up and meeting minutes
- Monthly business updates from retails
- Monthly production details update from Manufacturing Cos.
Follow monthly business update to get an insight and edge about the business progress so that you can take a position well in time to capitalise on the opportunity Monthly Business updates
AFFLE Q1 FY23 highlights
AFFLE – a CPCU ROI driven advertisement company
Concentrates currently only in Emerging markets – latin america, India, Indonesia etc.,
Revenue contribution from Europe is very less and US is insignificant
No issues with respect to geo-political macro factors
founders are bullish about whole digital advertising landscape as only 25% of over all world advertisement is done in digital and Affle currently handles only a small portion of it but ranks in the top 10 companies. There is a lot of room to grow.
Q1 FY23 performance:
- Top notch Revenue & PAT YOY – over 100%
- Good number of clients on boarded
- Jampp started to contribute to the bottomline (10% EBITDA)
- India numbers sounded weak but not really
- Investment in inventory & Datasets is expensed in P&L but it is a balance sheet item as they would let the company generate revenue in the long-term
- Over all management is bullish about the digital advertisement segment in the emerging markets.
Questions about Apple IDAF
- Affle did agree that apple’s IDAF change in the appstore did affect but Affle successfully fought this game by acquiring the company which had presence in the US and swept the sweet top 10 companies in the apple advertisement eco system
- Revenue contribution from IOS eco system is pretty negligible as most of the users in the emerging markets are using Android
Questions about Android Cookie
- Cookies are in existence for over 20-30 years. No big change so far
- Affle model is not affected as affle’s business is majorly from handheld/mobile/connected TV devices.
- Affle is ready for short video format ads too
- Affle built its stack both verticular as well as vernacular to able to cater to any company in any industry.
Questions about bobbl keyboard divestment
- Affle wants this to look like an investment at this point in time instead of a subsidiary or an associate
- Worked with bobbl keyboard should not make other companies feel threatened
- bobbl divestment to bring in new investor and may add some money to the shareholders kitty.
Questions about Google making certain changes for advertisements in-app while gaming
- Agreed that google is planning to make changes soon but pushed back recently until 2024-25
- Google being an advertising major – at any cost, it would make sure to set up a system suitable for advertisers and we are sure about it
- Even if we feel that we are threatened now, some system would come in to existence by the time Google makes these changes.
Questions about revenue and bottomline contribution from Jampp acquisition last year:
- 0% while acquisition but within a year it is standing at 10% margins. Founders are acquiring companies after having a long term working relationship to evaluate the potential company for an acquisition. They acquire the company when the said Co is about to break even and then add affle backbone structure which acts as a growth lever for further upsell and cross sell to the new and existing customers to deliver more value by charging a little extra.
VMART Annual Report FY2022 glimpse
- Observe cost efficient measures taken by closing down unviable stores in the FY
- SSSG has increased massively
- Contribution from private labels has gone up to 45% (increased margins and realisations)
- Unlimited (Arvind fashions) stores in south India helped expand footprint and reach – No debt involved
SWOT
Key risks:
FY22 performance consolidated – PAT 12cr INR.
- Co raised funds during the year QIP – equity dilution + esops
- Inventories increased heavily – 239 cr – could also be from unlimited stores acquisition
Redflag for provisions on ILFS amount recovery:
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