In today’s briefing:
- Sapphire Foods (SAPPHIRE IN) | Outperformance Not Justified
- Dixon Technologies: Forensic Analysis
- Escorts Kubota Limited (ESCORTS IN) | Market Share Gains Priced In
- Nesco: BEC Business Is Now Recovering
- RPSG Ventures: FMCG and Sports Business Have Significant Potential to Scale Up
Sapphire Foods (SAPPHIRE IN) | Outperformance Not Justified
- YTD Sapphire Foods (SAPPHIRE IN) has delivered 10.5% vs Devyani International (DEVYANI IN) which has delivered 7.9% and Jubilant Foodworks (JUBI IN) which has delivered -16.43% (Relative to NIFTY).
- On an NTM basis, SAPPHIRE at 58x trades 30% cheaper compared to DEVYANI, and only 16% cheaper than JUBI.
- The business performance is poor, the worst capital allocation among peers is not expected to change materially in the near term warranting attention to YTD outperformance.
Dixon Technologies: Forensic Analysis
- Dixon Technologies India Ltd (DIXON IN) is a manufacturer of various electric goods such as washing machines, mobiles, etc.
- Dixon’s annual report and forensic analysis revealed several setbacks from related party transactions to questionable setting off of liabilities.
- Other aspects which requires attention include heavy off-balance sheet liabilities, cash allocation woes, risks arising from debtor concentration and forex exposure, etc.
Escorts Kubota Limited (ESCORTS IN) | Market Share Gains Priced In
- Based on current consensus estimates, Escorts Kubota Limited (ESCORTS IN) is expected to deliver implied domestic volume growth of 6.5% for FY23 and 10% for FY24.
- Our earlier checks have indicated a challenging environment for gaining market share or growing ahead of the Industry for ESCORTS.
- Even if we assume market share gains and volume recovery leading to above industry growth, at CMP it is already priced in.
Nesco: BEC Business Is Now Recovering
- Nesco’s Bombay Exhibition Center (BEC) business where revenues declined to almost negligible during the last couple of years due to COVID, is now recovering as COVID restrictions have receded.
- During Q1FY23, BEC business did INR 16.8cr in revenues (annualized INR 65cr+) and is on track to normalize to pre-COVID levels of INR 150cr+.
- Nesco’s IT Park business continues to remain strong with 90%+ occupancy in Tower 4 and 80% occupancy in Tower 3.
RPSG Ventures: FMCG and Sports Business Have Significant Potential to Scale Up
- RPSG Ventures Limited (RPSGVENT IN) [“RPSGV”] is scaling up its FMCG and Sports business via Its Too Yumm! and Naturali brands in FMCG and IPL franchise in Sports.
- Within Too Yumm!, RPSGV is now entering into the Indian Namkeens category – the largest category in salty snacks in India.
- Within Sports, RPSGV’s IPL franchise representing Lucknow, capital city of the India’s largest state, Uttar Pradesh that comprises 15%+ of India’s population, holds lot of promise to scale up.
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