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Hindustan Unilever and Nestle India Share Q2 Results

Hindustan Unilever and Nestle India Share Q2 Results
by 5paisa Research Team 19/10/2021

Two of India’s most promising FMCG companies declared their quarterly results for Sep-21 quarter. In both the cases, the theme was the same. Higher input costs evaporated some of the top line gains but price hikes could be passed on due to better bargaining power for both these companies. Here is a quick dekko.
 

Hindustan Unilever: Q2 Results Sep-21 quarter


Hindustan Unilever top line revenues were up 11.67% YoY at Rs.13,046 crore. Net profits for the quarter were up 10.49% at Rs.2,181 crore. Hindustan Unilever saw aggressive revenue growth across home care, beauty, personal care and food and refreshments.

 

 

Hindustan Unilever

       

Rs in Crore

Sep-21

Sep-20

YoY

Jun-21

QOQ

Total Income (Rs cr)

₹ 13,046

₹ 11,683

11.67%

₹ 12,194

6.99%

Operating Profit (Rs cr)

₹ 2,945

₹ 2,660

10.71%

₹ 2,661

10.67%

Net Profit (Rs cr)

₹ 2,181

₹ 1,974

10.49%

₹ 2,097

4.01%

           

Diluted EPS (Rs)

₹ 9.28

₹ 8.40

 

₹ 8.92

 

OPM

22.57%

22.77%

 

21.82%

 

Net Margins

16.72%

16.90%

 

17.20%

 


In terms of top line revenues, the home care segment grew 15.7%, beauty & personal care business grew 10.5% and the foods & refreshments vertical grew 7.2% on a YoY basis. In terms of operating profit growth; home care grew 7.4%,  beauty & personal care grew 5.3% and the big boost to growth in profits came from foods & refreshments at 18.8%. 

Check - Hindustan Unilever Quarterly Results

HUL reported healthy EBITDA margins of 25% on the back of calibrated price increases as it managed to pass on some of the cost increases to the end customer. Hindustan Unilever also declared an interim dividend of Rs.15 per share. It reported Net margins at 16.72%.
 

Nestle India: Q3 Results Sep-21 quarter


Nestle India top line revenues grew by 9.62% in the Sep-21 quarter at Rs.3,882.57 crore. Net profits were up 5.16% at Rs.617.37 crore as higher input costs took a toll on operating margins. The growth for Nestle was driven by domestic business as the sales growth of 9.6% was driven by 10.1% growth in domestic sales and 1.3% growth in export sales.

 

 

Nestle India

       

Rs in Crore

Sep-21

Sep-20

YoY

Jun-21

QOQ

Total Income (Rs cr)

₹ 3,882.57

₹ 3,541.70

9.62%

₹ 3,476.70

11.67%

Operating Profit (Rs cr)

₹ 852.46

₹ 792.48

7.57%

₹ 752.71

13.25%

Net Profit (Rs cr)

₹ 617.37

₹ 587.09

5.16%

₹ 538.58

14.63%

           

Diluted EPS (Rs)

₹ 64.04

₹ 60.89

 

₹ 55.86

 

OPM

21.96%

22.38%

 

21.65%

 

Net Margins

15.90%

16.58%

 

15.49%

 


For the third quarter ending Sep-21, Nestle saw growth across all the major categories including food, beverages and confectionary categories. While the ecommerce channel of sales is building market share, the OOH or out of home channel has also got a boost as life returns to normalcy.

Nestle did take a hit on account of input costs spike. That was evident in operating profit growing by just 7.57% and the operating margins tapering from 22.38% in the Sep-20 quarter to 21.96% in the Sep-21 quarter. But a good part of the cost spikes have been passed on to the end customer via price hikes across product categories.

Nestle declared a second interim dividend of Rs.110 per share. The net profit margins at 15.90% were lower than 16.58% in Sep-20 quarter.

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Reliance Retail Buys Stake in Ritu Kumar's Collection

Reliance Retail Buys Stake in Ritu Kumar's Collection
by 5paisa Research Team 20/10/2021

It looks like Reliance Retail has a real eye for fashion labels. Less than a week after Reliance Retail bought a 40% stake in Manish Malhotra’s company, MM Fashions, they have made their next big purchase. Reliance Retail has now bought a 52% stake in the Ritu Kumar Label. While Manish Malhotra has become the first port of call for ravishing Bollywood celebrities, Ritu Kumar has focused on the upper end market with more of ethnic lines.

The price at which the stake has been bought in Ritu Kumar label has not been made public. What is known is that Reliance Retail will buy 35% from the PE fund, Everstone, and the balance 17% from other stakeholders. Ritu Kumar is generally credited with introducing designer wear and upmarket label brands in the Indian scenario. It has been in existence since the late 1960s.

The Ritu Kumar brand broadly covers 4 critical sub-brands. These include Label Ritu Kumar, RI Ritu Kumar, Aarke and Ritu Kumar Home & Living. For Reliance, this acquisition gives them a huge brand image and reach in the ethnic designer wear with an established name in the upper end of the market. For the Ritu Kumar label, this gives them the opportunity to corporatize and grow with a bigger balance sheet.

The trend in fashion brand marketing in India is gradually moving towards the European model where large brands are corporatized. For example, the promoters of Zara and LVMH are among the wealthiest people in the world and have been driven by a corporate culture introduced into the fashion industry. For Reliance Retail, this is an answer to Aditya Birla Fashions buying stakes in big brand lines like Tarun Tahiliani and Sabyasachi.

In a way this is a marriage of boutique stores and corporate scale, which is likely to be the future paradigm. Designer labels are constrained for want of a larger balance sheet. For Reliance Retail, this is one more step towards the larger omnichannel dreams. Under the Omnichannel approach, offline, online, proprietary labels, outsourced labels, ethnic labels and chic labels will coexist under the same roof. It is the balance sheet that really matters.

Also Read:- 

7-Eleven to Open its First Store in India in Partnership with Reliance Retail

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Adani Group Outlines $70 billion Green Energy Plan

Adani Group Outlines $70 billion Green Energy Plan
by 5paisa Research Team 20/10/2021

It is said that Gautam Adani is not used to thinking small. His emergence as one of the most formidable names in the infrastructure space was largely thanks to his aggressive approach to doing business. The latest example is his big bet on green energy. The latest big numbers may sound mindboggling, but that is the kind of plans that Adani has for green energy. The group will invest $50-70 billion over next 10 years in the green energy space.

Check - Adani Pays $3.50 Billion in SB Energy Holdings

Speaking at the Global Investment Summit in UK, Adani outlined his base plan to invest $20 billion over the next 10 years purely in renewable energy generation. In addition, the total organic and inorganic investments in the entire spectrum of green energy would end up in the range of $50 to $70 billion. At the upper end, that is roughly Rs.530,000 crore.

Adani has gone further to underline that out the total investments planned by the Adani group across various businesses, nearly 70% of the investments would only be in the area of sustainable technologies. This will include electrolyzer manufacturing, backward integration into sustainable energy components, supply chain products for renewables etc. In addition, the group will also invest in the confluence of digital and green energy like AI and Cloud.

Here are specific targets outlined by Gautam Adani at the Summit

a) Adani Green Energy will triple its renewable power generation capacity over the next 4 years from 25 GW to 75 GW. Adani Green is already the world’s largest solar power producer as of date in terms of installed capacity.

b) Adani group plans to become one of the largest green hydrogen producers in India and also emerge as the cheapest producer of hydrogen. This is an area where even Reliance Green is very active and aggressive.

c) The Adani group plans to become the world’s largest renewable energy company by 2030; as a dominant player straddling the entire chain from manufacturing equipment, producing supply chain components as well as actual renewable power generation.

In the last Reliance AGM, the group had outlined plans to invest $10 billion in green energy and become net carbon neutral by 2035. It looks like the Adani group is leaving no stone unturned to stamp its impact on green energy.

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Axis AMC and Inversion Collaborate for Turnaround Fund

Axis AMC and Inversion Collaborate for Turnaround Fund
by 5paisa Research Team 20/10/2021

Axis AMC and Inversion Advisory Services will collaborate to launch a Rs.3,500 crore fund to invest in stressed Indian companies that have the potential to turn around their performance and become multi-baggers over time. The structure will be an Alternative Investment Fund (AIF) and will be managed by Axis Asset Management Company.

Inversion Advisory is floated by Akhil Gupta with a functional team to do granular studies on such investment opportunities. Akhil Gupta needs no introduction in corporate circles. He is on the board of Bharti Enterprises and was one of the driving forces behind the launch of Bharti telecom services in India. He is also credited as the force behind the multi billion dollar acquisition of Zain of Africa by Bharti.

The fund raising under the AIF will have a base amount target of raising Rs.3,000 crore with a Greenshoe option to retain another Rs.500 crore based on the discretion of the fund managers. The fund is proposed to be sector agnostic and will not have any specific sectoral preferences. The identification of such opportunities will be done based on a well-refined, fine-tuned and back tested model.

As part of the strategy of the turnaround fund, it will predominantly invest in picking controlling stakes in pre-stressed, stressed, distressed as well as other underperforming assets. The focus will be on companies that have the potential for a turnaround given the right funding support and management bandwidth. Obviously, being a stressed assets fund, the investment perspective will be longer term.

The unique feature of the turnaround fund will be that it will not just be a passive investor. Mutual funds tend to be passive investors in any company. However, this turnaround fund will not only take an equity stake but also mentor the promoters, help them raise finance and also help them recruit the right talent to catalyse the turnaround of the company. The focus will be companies where the stock price is divorced from the turnaround potential.

The fund, if successful, will fill a long standing gap in the market. The turnaround ecosystem for stressed assets in India has been largely debt driven. If this experiment succeeds, it will also create the right equity ecosystem for turnarounds. After all, there is a huge appetite among risk-taking investors for these kind of asset classes.

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Moody’s Upgrades Outlook for Indian Banks from Negative to Stable

Moody’s Upgrades Outlook for Indian Banks from Negative to Stable
by 5paisa Research Team 20/10/2021

Just a couple of weeks after Moody’s upgraded India’s sovereign rating outlook from Negative to Stable, it has repeated the upgrade for Indian banks too. On the strength of improving asset quality and more durable capital buffers,  Moody’s has upgraded the outlook for the Indian banking system from Negative to Stable.

Check - Moody’s Upgrades India’s Rating Outlook to “Stable”

The upgrade is based on a sharp improvement in the health of the Indian banks rated by Moody’s. As per the latest Moody’s presentation, between FY18 and FY21, the stressed loans percentage fell from 10.5% to 7.1%. this is despite the intermittent pressures created by the COVID-19 pandemic and the COVID 2.0 relapse in 2021.

The second key parameter tracked by Moody’s, the Tier-1 capital adequacy ratio, has improved from 9.6% in FY18 to a more robust level of 11.1% in FY21. There has also been substantial recapitalization during this period. At the same time the net interest margin (NIM), the most important banking spread parameter, has improved from 2.7% in FY18 to a more competitive 3.1% in FY21. All these factors combined to justify this outlook upgrade.

One important positive feature pointed out by Moody’s pertaining to Indian banks is the falling cost of credit. The RBI had cut rates aggressively during the pandemic and the abundant liquidity in the system also ensured that transmission rates were very high. This resulted in a sharp fall in credit costs, which is also evident in the fall in interest costs of banks despite the sharp rise in credit during this period.

Moody’s estimates that as the GDP gradually picks up, banking risks should further abate. India’s GDP is expected to pick up by 9.3% in FY22 and by 7.9% in FY23. This is likely to boost credit growth at the rate of 10% and 13% over the next two years. According to Moody’s, most of the legacy problems of the banks are already provisioned and taken care of. In a way, banks are in a position to start off on a clean slate.

Like in the case of sovereign rating, the outlook upgrade adds one more layer of cushion for the stability of banks. It looks like Indian banks have emerged from the COVID crisis, almost unscathed.

Also Read:- 

Moody’s Upgrades the Outlook of 9 Banks from Negative to Stable

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Jubilant Foodworks and Havells India Share Q2 Results

Havells India and Jubilant Foodworks Share Q2 Results
by 5paisa Research Team 20/10/2021

Two major companies Jubilant Foodworks, the master franchisee of the Domino’s Pizza and Dunkin Donuts brands in India, as well as electrical goods player Havells announced their results on 20-Oct. Here is a quick take on the numbers.

Jubilant Foodworks – Q2 Results

Jubilant Foodworks saw sales grow by 36.73% on a yoy basis for the quarter ended Sep-21 at Rs.1,116 crore. Net profits for the quarter were up 58.2% at Rs.120 crore. The revenue growth was driven by smart growth across in-store and home delivery sales. The store operations and capacities were back to normal at most locations.

 

Rs in Crore

Sep-21

Sep-20

YoY

Jun-21

QOQ

Total Income (Rs cr)

₹ 1,116.19

₹ 816.33

36.73%

₹ 893.19

24.97%

Operating Profit (Rs cr)

₹ 194.94

₹ 111.05

75.54%

₹ 121.03

61.07%

Net Profit (Rs cr)

₹ 120.24

₹ 76.01

58.19%

₹ 69.52

72.96%

Diluted EPS (Rs)

₹ 9.11

₹ 5.76

 

₹ 5.27

 

OPM

17.46%

13.60%

 

13.55%

 

Net Margins

10.77%

9.31%

 

7.78%

 

 

For the quarter, operating profits grew by 76% to Rs.195 crore resulting in the operating margins expanding from 13.6% to 17.46% on a yoy basis. There was higher same store sales, better share of home delivery sales and better inventory tweaks. One thaw in the flesh was the spike in the cost of raw materials by 36% due to food inflation.

Net margins for the Sep-21 quarter stood at 10.77%, which is an improvement over the 9.31% in Sep-20 quarter and a leap over the NPM of 7.78% in Jun-21 quarter. The story is all about the QSR recovery post-pandemic.

 

Havells India – Q2 Results

Havells India sales revenues grew 31.65% for Sep-21 quarter to Rs.3,238 crore. However, the net profits were lower by -7.3% to Rs.302cr. There was growth across all the major verticals of the company including switchgears, cables, lightings, electrical consumer durables and the Lloyds consumer segment.
 

Rs in Crore

Sep-21

Sep-20

YOY

Jun-21

QOQ

Total Income (Rs cr)

₹ 3,238.04

₹ 2,459.49

31.65%

₹ 2,609.97

24.06%

Operating Profit (Rs cr)

₹ 382.61

₹ 362.84

5.45%

₹ 293.72

30.26%

Net Profit (Rs cr)

₹ 302.39

₹ 326.36

-7.34%

₹ 235.78

28.25%

Diluted EPS (Rs)

₹ 4.83

₹ 5.21

 

₹ 3.77

 

OPM

11.82%

14.75%

 

11.25%

 

Net Margins

9.34%

13.27%

 

9.03%

 

 

For example, the revenues of the switchgears business grew by 13% and the electrical cables business was up 18.3%. Lightings and fixtures grew 32% while electrical consumer goods business grew 26%. Even the Lloyds consumer  business saw top line grow 23.5%. However, all these segments saw flat to tepid growth in EBIT profits while the Lloyds consumer business slipped into negative EBIT. 

The big challenge that Havells faced in the quarter was the sharp spike in raw material costs. This has been a feature of most of the Indian companies across sectors and the supply chain constraints have only worsened over the last few months.  This challenge got heightened by higher interest costs. Despite efforts by Havells to tweak its inventory more effectively to reduce the operating costs, the damage on the profit growth was done.

Net margins at 9.34% were lower than 13.27% in Sep-20 quarter but marginally better than 9.03% NPM in the sequential Jun-21 quarter. 

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