|SALES (₹ Crs)||450.50||339.20||337.90||351.60|
|NET PROFIT (₹ Cr)||101.80||40.90||37.30||45.80|
Tuesday, December 3, 2013
CMP: Rs. 40.55; Buy at current levels.
Short Term Target - Rs. 45; Medium to Long Term Target – Rs. 55; STOP LOSS – Rs. 48.00; Market Cap: Rs. 175.53 Cr; 52 Week High/Low: Rs. 102.25 / Rs. 35.50.
Total Shares: 4,32,88,000 shares; Promoters : 2,01,32,444 shares – 46.51 %; Total Public holding : 2,31,55,556 shares – 53.49 %; Book Value: Rs. 153.26; Face Value: Rs. 2.00; EPS: Rs. 0.62; Dividend: 50.00 % ; P/E: 65.40 times; Ind. P/E: 6.32; EV/EBITDA: 3.16
Total Debt: Rs. 353.48 Cr; Enterprise Value: Rs. 540.32 Cr.
SANGHVI MOVERS LTD: The Company was founded in 1989 and is based in Pune, India. Sanghvi Movers Limited operates as a crane rental services company. It’s a major player in Equipment rental & leasing sector in India and other parts of Asia. It provides heavy lift, plant erection and maintenance services for various large scale projects. The company also offers over dimensional, heavy, and bulk cargo transportation services. It operates a fleet of 400 medium to large size hydraulic truck mounted telescopic and lattice boom cranes and crawler cranes with lifting capacity ranging from 20 MT to 800 MT; and 132 hydraulic multi axle modular trailers. In addition, the company also engages in the generation of power from windmills. It primarily serves power, cement, steel, refinery, metros, windmill, and metal sectors. The Company operates in two business segments: Operations of Cranes and Power Generation. It earns regular revenue from the business of power generation from windmills commissioned in Jaisalmer, Rajasthan and Chitradurga, Karnataka. The Company's clients include ACC Ltd, BGR Energy Systems Ltd, Birla Corporation Ltd, Electrosteels Ltd, Furnace Fabrica (India) Ltd, Jindal Steel & Power Ltd, Leitner Shriram Mfg Ltd, Neelachal ISPAT Nigam Ltd, Suzlon, Aditya Birla Group, TOYO, BHEL, Reliance, Vedanta Group, Siemens, Tata Steel, Enron power, Samsung and Gujarat Ambuja. Sanghvi Movers ltd is globally compared with Nippon Pallet Pool Company Ltd of Japan, Han Kook Capital Company Ltd of South Korea and with Nippan Rental Company Ltd of Japan.
Sanghvi Movers is the 3rd largest crane services company in Asia and ranked seventh largest in the world. The company has a robust fleet of over 400 cranes, majority of which are above the 100 tonne category. Sanghvi Movers has an overall market share of about 45% and more than 80% market share in the 100 tonnes and above category. The company undertakes the implementation of turnkey projects and caters to 75% of the traditional power sector and 65% of the windmill sector’s crane requirement. The company has Crawler and truck mounted cranes and also has Hydraulic Multi Axle Modular Trailer. The company claims to have 98 % guaranteed machine availability with a timely deployment. The company has its owned state of the art Sanghvi Training Academy which provides high skills crane training programmes and produces highly skilled crane operators. Sanghvi Movers has 12 depots across the country to ensure timely deployment of cranes. The Indian logistics industry accounts for a mere 2 % ($100 billion) of the $5000 billion global logistics industry despite having the second largest network of roads at 3.83 million km, the fourth largest rail network of 63000 km, 128 airports, 12 major ports, 1 trans-shipment port and 187 non major ports. Indian Logistics sector grew by 8 to 10 percent annually over the last decade. There are several factors which have favorably impacted the growth of the logistics industry, like the country’s tax regime, growth across major industry segments such as automobile, pharmaceutical, fast moving consumer goods (FMCG) and the emergence of organized retail. Exim trade volume of India is growing consistently from last decade hence India is set to increase its share in global trade from less than 1 % now to about 1.6 % in 2012. India’s level of containerization is less than 25 % as against global average of 60 % - 70 %. An average time taken to clear import and export cargo at ports is about 19 days in India as against 3-4 days in Singapore. The trend towards containerization picked up in India in the last decade. Container traffic has seen a growth of 12 % CAGR in India from 2.5 million TEU in 2000-01 to 7.5 million TEU in 2010-11.
Outlook and Valuation:
Sanghvi Movers has a near monopolistic position in the high tonnage crane rental market in India. Company is a great proxy play to the improvement in Indian Infrastructure industry. The company is led by a strong entrepreneur C. Sanghvi and his professional team, company has been able to maintain its competitive advantages. Company has its Economic Moat (A competitive advantage that one company has over the other companies in the same industry – by Warren Buffett) expanding moats which is a very strong sign of a future Multi-bagger stock. Logistics is responsible for all the movement that takes place within the organization whether it is inbound logistics of incoming, raw materials or movement within the company or the physical distribution of finished goods, logistics encompasses all of these. A typical logistics framework mainly consists of physical supply, internal operations and physical distribution of goods and services. To put it more simple manner, the material supply logistics starts from the base level of “generation of the demand”, through the “process of purchase” and “supply of material from the vendor” right through to “final acceptance” and “payments to the supplier” and “issue to the indenter” and has to be considered as a “one whole activity” with each stage having an impact on price/cost of material supply. Logistics is, in itself, a system; it is a network of related activities with the purpose of managing the orderly flow of material and personnel within the logistics channel. As said before the Indian logistics industry accounts for a mere 2 % ($100 billion) of the $5000 billion global logistics industry and trade volume of India is growing consistently from last decade & hence India is all set to increase its share in global trade from less than 1 % now to about 1.6 % in 2013, and Sanghvi Movers is well equipped for that, also as Prime minster of India has now emphasized more on infrastructure development – Sanghvi Movers is a silent play to that. It is expected that the Sanghvi Movers EBITDA margin to be down 4.37 % yoy (slightly up qoq) chiefly from lower yields due to keener competition and discounts. Yields continue under pressure and are expected to be lower in FY14 from 2.86 % in FY12 because of intensifying competition. This leading domestic crane-hiring company provides hydraulic and crawler cranes to industries in infrastructure. The slowdown, however, in its target market (wind and power) would weigh on its results. Competition from foreign and domestic crane rental service players and lackluster investment in the infrastructure sector will keep the capacity utilisation and blended yield under pressure and affect the profitability in FY14E. There could be a re-rating of the stock only after a reversal trend in the capex cycle. Keener competition from foreign operators at lower rates and the slowdown in fresh investment have led to less planned capex for the next two years. The company has been struggling with delays in executing wind and power projects and the slowdown in steel and cement capacity expansions. Its cranes are operating at lower utilisation and yields, and it is grappling with bad-debt issues. With no capex for the next two years, debt would slide 50 % from its current consolidated debt of around Rs. 590 Cr. At the CMP of Rs. 40.55 the stock quotes at 4.71 x FY14E and 1.231x FY15E earnings. One can ‘BUY’ SANGHVI MOVERS with a short term target price of Rs. 45.00 and for Medium to Long term investment it could be a good buy for the target price of Rs. 55.
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Saturday, November 23, 2013
CMP: Rs. 571.60; Buy at every dips.
Medium to Long term Target: Rs. 633; STOP LOSS – Rs. 525.90; Market Cap: Rs. 1,23,612.44 Cr; 52 Week High/Low: Rs. 725.00 / Rs. 432.15
Total Shares: 216,25,69,017 shares; Promoters : 145,44,12,858 shares –67.25 %; Total Public holding : 70,81,56,159 shares – 32.74 %; Book Value: Rs. 12.37; Face Value: Rs. 1.00; EPS: Rs. 16.61; Div: 1850.00 % ; P/E: 34.43 times; Ind. P/E: 38.24; EV/EBITDA: 25.69.
Total Debt: ZERO Cr; Enterprise Value: Rs. 1,23,287.81 Cr.
HINDUSTAN UNILEVER LTD: The Company was founded in 1931 and is based in Mumbai, India. The company was formerly known as Hindustan Lever Limited and changed its name to Hindustan Unilever Limited in 2007. Unilever Ltd on November 17, 1956, offered 5,57,000 shares of Rs. 10 each to the public at par. In February 1980, in order to reduce the Non- Resident holding in the company to 51 %, Unilever Ltd offered for sale of 42,39,523 equity shares of Rs. 10 each at a premium of Rs. 9.50 per share, this was out of its shareholding in the company. Hindustan Unilever Limited, is a Fast Moving Consumer Goods (FMCG) company – it provides home and personal care products; foods and beverages in India and internationally. The company operates in 7 business segments. The company offers soaps and detergents, including soaps, detergent bars, detergent powders, detergent liquids, and scourers; and personal products - such as oral care, skin care, hair care, deodorant, talcum powder, and color cosmetic products, as well as Ayush services. It also provides beverages - including tea and coffee; foods, such as atta (flour), salt, and bread; culinary products comprising tomato and fruit based products, and soups; and ice creams, such as ice creams and frozen desserts. In addition, the company offers chemicals, such as glycerin and fine chemicals; agri commodities; and water purifiers, as well as exports marine and leather products. HUL has over 35 brands spanning 20 distinct categories. Its portfolio of brands includes the brand names like - 3 Roses, Annapurna, Brooke Bond, Taaza, Bru, Kissan, Knorr, Kwality Wall’s, Lipton, Modern, Red Label, and Taj Mahal brand names; personal products under the Aviance, Axe, Breeze, Clear, Clinic Plus, Closeup, Dove, Fair & Lovely, Hamam, LEVER Ayush Therapy, Lakme, Lifebuoy, Liril 2000, Lux, Pears, Pepsodent, Pond's, Rexona Soap, Sunsilk, and Vaseline brand names; and home care products under the Active Wheel, Cif, Comfort, Domex, Rin, Sunlight, Surf Excel, and Vim brand names and water purifiers under the brand name Pureit. As on 31st March 2013, Company had over 35 brands spanning 20 distinct categories. From April 01, 2013, Aquagel Chemicals Pvt Ltd become a subsidiary of Hindustan Unilever Ltd. On July 04, 2013, the parent company Unilever Plc raised its stake in HUL from 52.48 % to 67.28 %, by acquiring 31,95,63,398 shares representing 14.784 % in HUL via open offer priced at Rs. 600 per share. The company is locally compared with ITC, Godrej Consumer, Dabur India, Colgate, Marico, Emami, Godrej Ind, P&G, Gillette India, Bajaj Corp, Jyothy Labs, Amar Remedies, JHS Svendgaard, GKB Ophthalmics and Globally compared with Associated British Foods Plc of London, Colgate-Palmolive Co of New York, Kimberly-Clark Corp of USA, Procter & Gamble Co of USA, Nestle S.A of Europe, Pepsico Inc of USA, Coca- Cola Co of USA, Mondelez International Inc of USA (earlier known as Kraft Foods Inc which acquired Cadbury’s), Heineken Nv of Amsterdam, Starbucks Corp of USA, McDonald’s Corp of USA, Yum! Brands Inc of USA, Danone of Paris, Asahi Group Hld Ltd of Japan, and Kerry Group of Dublin.
HINDUSTAN UNILEVER LTD is a play on consumption growth in India. The company has displayed its ability to effect price hikes and avoid impact of inflation in vegetable oils, which, combined with improved outlook for fabric wash and strong growth in processed foods and beverages, boosts the positive outlook on the stock. The recent moves by the company to dispose of its non-core assets including few properties give it a near term upside. The FMCGOn July 04, 2013, the parent company Unilever Plc raised its stake in HUL from 52.48 % to 67.28 %, by acquiring 31,95,63,398 shares representing 14.784 % in HUL via open offer priced at Rs. 600 per share amounting to Rs. 19,174 Crs. The total shares tendered by HUL shareholders were 31,99,91,578 shares out of which 31,95,63,398 shares were accepted by Unilever Plc. The tender offer was announced on April 30, 2013 and began on June 21, 2013 and ended on July 4, 2013. Unilever wanted to raise its stake to 75 % from 52.48 %, but managed to hike its stake to 67.26 %. The stake rise by the parent company shows confidence in the India consumption growth story and parent believes that India is one of the biggest markets for Unilever and it would be beneficial to acquire a larger share in its Indian Arm. HUL also launched few products in the beauty portfolio with offerings like Lakme Youth Infinity range, Lakme Cleanup Clear Pores range, Ponds Pimple Clear facewash and Dove facewash with Nutrium Moisture. HUL continues to focus on innovations as it believes that it is these innovations that will bring strong growth when the market scenario improves.
Outlook and Valuation:
Business environment for HUL continues to be challenging with slowing growth being witnessed on both the value and volume fronts. The overall competitive intensity has stepped up in various categories while the up-trending has come to an pause. The discretionary category which was outpacing the other category over a longer term has come to a pause, but the company believes it to be a short-term phenomenon. HUL, in its board meet in January 2013, approved a royalty of 3.15 per cent of turnover effective from February 2013. Till January 2013, the company paid 1.4 per cent of the total turnover as royalty to its parent company, Unilever. The company will increase the royalty from 1.4 per cent to 3.15 per cent in a phased manner till March 2018. On performance side, HUL’s 2QFY14 revenues grew by 9.2 % YoY to Rs. 6,890 Cr owing to higher than expected volume growth of 5 %. HUL saw a recovery in Personal Product (PP) growth to 12 % YoY against 2 % of 1QFY14 which is the key positive. Higher sales in PP were at the cost of lower margins which were down by 1.41 % YoY. Waning price led growth and higher competitive intensity in Sales & Distribution has not only impacted sales growth of the segment but also its margins. HUL’s EBITDA margin remained flat at 15.7 % as EBITDA grew 11.1 % to Rs. 1,080 Cr. Lower than expected tax rate led to Adjusted PAT growth of 9.6 %. HUL has a robust product pipe, and has a strong and lucrative personal products portfolio, and expanding distribution network. But with waning price growth in Sales & Distribution, difficult demand environment in packaged foods and personal products and with increased competitive intensity; it is expected that company’s revenue growth will curtail. However, good play because it has a revenue growth from a medium to long term perspective, however due to increase in royalty, steep hike in tax rate and slowdown in discretionary segments remains an overhang on this stock. Depreciation in rupee impacts price of imported raw materials. A rise in crude oil prices can impact packaging costs and indirectly / directly impact palm oil and LAB prices. Increase in palm oil prices may lead to gross margin contraction. The price war in HUL’s popular segments with new entrants entering the fray could hit the company hard. HUL pay’s rich dividends and one can hold this stock from a three five year perspective and focus on new product launches and market share gains in existing categories. At the current market price of Rs. 571.60, the stock P/E ratio is at 34.43 x FY14E and 30.73 x FY15E respectively. Company’s Earnings per share (EPS) of the company for FY14E and FY15E is seen at Rs. 16.60 and Rs. 18.60 respectively. Hindustan Unilever Ltd could be a good buy for the target price of Rs. 633 for Medium to Long term investment.
|SALES (₹ Crs)||22,987.70||26,317.20||28,726.20||32,417.20|
|NET PROFIT (₹ Cr)||2,686.50||3,385.10||35,90.30||4,034.80|
*As the author of this blog I disclose that I do hold HINDUSTAN UNILEVER LTD in my investment portfolio.
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