PINC POWERPICKS - Myiris.com

More documents

Recommendations

Info

PINC POWERPICKS RESEARCH RESEARCH NESTLE INDIA: SELL, TP-Rs3,400 (18% downside) What’s the theme? The rising competitive scenario in most of Nestle's categories along with high capex for capacity addition would force the company to maintain volume market share. Therefore, we expect pressure on pricing power of key brands. Nestle trades at a ~40% premium to the FMCG sector and we argue that this premium would narrow. What will move the stock? 1) Intense competition in the noodle segment (consist ~35% of total EBITDA) would impact the pricing power. We expect decline in EBITDA margin by 31bps and 40bps in CY11 and CY12; 2) Nestle currently trades at ~40% premium over FMCG sector however considering lower pricing power for key products and pressure on return ratios we argue that Nestle should trade at a 25% premium (last two-year average). Where are we stacked versus consensus? Our estimates and target price are among the lowest on the street, led by pressure on EBITDA margin and argument of narrowing down the Nestle's P/E premium. We assign P/E of 30x on next 12-months earnings to derive TP of Rs3,400. What will challenge our target price? 1) We expect Nestle would focus on retaining the volume market share for Maggi noodles therefore assumes volume driven growth going forward. This assumption would result in lower profitability for Nestle and any change in this proposition might change our estimates; 2) We expect ITC, GSK consumer and HUL to be very aggressive in noodle segment, any delay in such efforts would again help Nestle to earn better profitability. 9 (Rs mn) CY09 CY10 CY11E YoY % CY12E YoY % Net Sales 51,395 62,609 76,556 22.3 94,126 23.0 EBITDA 10,448 12,559 15,122 20.4 18,212 20.4 EBITDA Marg. (%) 20.3 20.1 19.8 (31)bps 19.3 (40)bps Adj. Net Profits 6,575 8,188 9,782 19.5 11,745 20.1 Dil. EPS (Rs) 68.2 84.9 101.4 19.5 121.8 20.1 PER (x) 60.8 48.8 40.9 - 34.0 - ROE (%) 113.1 95.7 81.2 (1,449)bps 72.4 (886)bps ROCE (%) 179.7 146.8 102.7 (4,412)bps 96.3 (640)bps Sector: FMCG CMP: Rs4,147; Mcap: Rs400bn Bloomberg: NEST IN; Reuters: NEST.BO Price performance 4,500 4,000 3,500 3,000 Nestle BSE (Rebased) BSE FMCG (Rebased) 2,500 Aug-10 Nov -10 Feb-11 May -11 Aug-11 Key brands’ sales (Rsmn), growth (%) & market share (%) 100 75 50 25 0 Coffee Ev ery day Dairy Baby /Infant Foods Sauces Milkmaid Milk (UHT) Curd Soup Chocolates Noodles 10.0 18.0 26.0 34.0 Source: PINC Research, Industry, Company Note: X Axis –Expected Sales Growth in CY10 (%), Y Axis – Expected Market Share in CY10 (%), Size of bubble – Expected Revenue in CY10 naveent@pinc.co.in +91-22-6618 6384
PINC POWERPICKS RESEARCH RESEARCH PHOENIX MILLS: BUY, TP-Rs240 (11% upside) What’s the theme? PHNX's key project, High Street Phoenix (HSP) is now fully operational and is likely to generate rental income of Rs2-2.2bn in FY12E. Q1FY12 saw the launch of Pune Market City (PHNX stake 58.5%). This will strengthen the rental model of PHNX. Presently PHNX's rental revenue (FY11-Rs1,760mn) comes from HSP and the launch of Pune Market City is likely to further add Rs500mn to top line of PHNX in FY12E. What will move the stock? We see the following near-term triggers for the stock: (i) Commencement of Kurla and Bengaluru Market City projects by Q3FY12 end. (ii) Commencement of the first phase of Shangri- La Hotel in Q3FY12. (iii) HSP-Phase IV (at present 0.25 msf) will provide a strong delta to the company's valuation if it manages to get hospitality FSI (5x). (v) The company may further choose to increase stake in the Bengaluru and Chennai market city projects, which would enhance stock valuation. Where are we stacked versus consensus? Our EPS estimates for FY12 and FY13 are Rs14.3 and Rs15.8 respectively. Our FY12 earnings estimate is 52% is higher than consensus estimate of Rs9.4. We have a 'BUY' recommendation on the stock with a target price of Rs240, which discounts FY12E Gross NAV by 20%. What will challenge our target price? 1) Slowdown in execution in Market City projects and extending free rental periods may hamper the holding company's profitability; economic slowdown may affect revenue from Market City and HSP. (Rs mn) FY10 FY11 FY12E YoY % FY13E YoY % Net Sales 1,230 2,102 5,095 142.4 6,194 21.6 EBITDA 775 1,406 3,106 120.9 3,461 11.4 EBITDA Marg. (%) 63.0 61.5 61.0 (59)bps 55.9 (508)bps Adj. Net Profits 620 818 2,064 152.4 2,288 10.8 Dil. EPS (Rs) 4.3 5.7 14.3 148.7 15.8 10.8 PER (x) 50.7 37.9 15.2 - 13.7 - ROE (%) 4.0 7.2 11.5 430 bps 11.4 (3)bps ROCE (%) 3.2 5.3 8.2 288 bps 8.1 (2)bps 10 Sector: Real Estate CMP: Rs217; Mcap: Rs31bn Bloomberg: PHNX IN; Reuters: PHOE.BO Price performance 300 250 200 150 PHNX Sensex Rebased BSE Realty 100 Aug-10 Nov -10 Feb-11 May -11 Aug-11 PHNX One year forward NAV Project NAV (Rs) High Street Phoenix 141 Market City (Kurla, Bengaluru, Chennai, Pune) 94 Other Residential 18 Investment in Treasure World Developers 18 Investment in Galaxy Entertainment 1 Investment in Phoenix construction 0.1 Other investments 27 Shangrila hotel 21 HSP Phase IV 14 Less: Net Debt 36 G. NAV 298 Less: 20% Discount to NAV 60 Net NAV 238 suman.memani@pinc.co.in +91-22-6618 6479 abhishek.kumar@pinc.co.in +91-22-6618 6398
Page 1 and 2: RESEARCH RESEARCH Ashoka Buildcon B
Page 3 and 4: PINC POWERPICKS RESEARCH RESEARCH A
Page 5 and 6: PINC POWERPICKS RESEARCH RESEARCH G
Page 7 and 8: PINC POWERPICKS RESEARCH RESEARCH J
Page 9: PINC POWERPICKS RESEARCH RESEARCH M
Page 13 and 14: PINC POWERPICKS RESEARCH RESEARCH S
Page 15 and 16: RESEARCH RESEARCH EQUITY DESK T E A

PINC POWERPICKS - Myiris.com

Create successful ePaper yourself

Delete template?

Save as template?