In today’s briefing:
- Channel Insight #26 | M&M (Tractors), Bajaj Electricals (Murphy Richards), Havells
- Barbeque Nation Update: Discomforts Still Prevalent
- Mindtree: Robust Multi-Pronged Strategy To Capitalize On Healthy Demand
- Ujjivan Reverse Merger: Behind the Dull Response
- Margins impacted by RM Cost and operating deleverage
- Crompton Consumer (Update): Acquiring additional wings. Maintain BUY
- Investor meet reinforces strong demand visibility
- Butterfly Gandhimathi Appliances: Stake Sale to Provide Larger Canvas for Butterfly Brand
Channel Insight #26 | M&M (Tractors), Bajaj Electricals (Murphy Richards), Havells
- We interact with channels of Mahindra & Mahindra (MM IN) , Bajaj Electricals (BJE IN) & Havells India (HAVL IN) with an objective to understand sources of stress in rural India.
- Price increases, lack of savings and irregular rural cash flows are taking a toll on Tractor Sales.
- In durables, there are no signs of recovery, with lower prices being the only catalyst that would bring back volumes.
Barbeque Nation Update: Discomforts Still Prevalent
- Barbeque Nation Hospitality (0823884D IN) is among the largest casual dining chains in the country, and its been a year since it got listed on the bourses.
- In our earlier insight Barbeque Nation IPO: Not Grilling Fine , we had highlighted the business, financial and governance discomforts seen in the IPO document.
- A year later, these setbacks still continue to be visible in the balance sheet. In this insight, we try to update our insights regarding the company.
Mindtree: Robust Multi-Pronged Strategy To Capitalize On Healthy Demand
- Mindtree has a focused strategy to capitalize on the demand scenario. The company intends to focus on five verticals
- The management also has a strong focus on developing expertise in four service lines including Customer Success, Data Intelligence, Cloud, and Enterprises IT
- We recommend a BUY on the stock and assign 38x P/E multiple to its FY24E earnings of Rs 140.2/share to arrive at a TP of Rs 5,310/share, implying an upside potential of 39% from the CMP.
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Ujjivan Reverse Merger: Behind the Dull Response
- Ujjivan Financial Services (UJJIVAN IN) had announced a reverse merger back in October 2021 where the holding company (Ujjivan FS) will be merged with Ujjivan Small Finance Bank (UJJIVANS IN).
- The share swap ratio given in the scheme of amalgamation clearly showcases a significant merger arbitrage opportunity.
- However, there has been no major interest in this very visible opportunity. We try to justify the market behavior.
Margins impacted by RM Cost and operating deleverage
- New order wins in EVs/hybrids; Focus on energy cost pass on to customers MACA’s weak performance in 4QCY21 was reflection of high RM/energy cost and operating deleverage in both geographies.
- It is negotiating with customers to pass on hyper inflation in energy prices.
- We cut our CY22E EPS estimates by 3.5% to account for margin pressures across both geographies and maintain CY23E EPS estimates.
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Crompton Consumer (Update): Acquiring additional wings. Maintain BUY
- The deal is fairly valued (already at acquisition premium, the stock has run up 2x in the last 6 months).
- Any valuation upside from this deal will be based on Crompton’s success on execution (growth with margin improvement).
- Crompton has announced the acquisition of Butterfly Gandhimathi Appliances (Butterfly) in order to extend its kitchen product line.
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Investor meet reinforces strong demand visibility
- We attended MTCL’s annual investor meet, where the management reiterated its strong demand outlook and detailed the six strategic levers for FY23. It sees scope for continued performance in their 4x4x4 strategy and investments required to boost long-term.
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Butterfly Gandhimathi Appliances: Stake Sale to Provide Larger Canvas for Butterfly Brand
- Butterfly Gandhimathi (BGAL) is one of the leading manufacturers of kitchen & electrical appliances in India and sells its products branded as ‘Butterfly’.
- The company is a market leader in India for SS LPG stoves & table top wet grinders and major supplier of mixer grinders & pressure cookers
- Over the last three years, BGAL has enhanced its focus on modern trade/online distribution channels to capture higher revenue growth
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