Companies & Sectors
Nestlé India still waiting for volume growth to rebound
While the long-term picture for Nestle India is still intact, near-term growth concerns will weigh the company’s stock down, says Nomura Equity Research
 
Nestlé India's revenues and adjusted net profit growth of less than 10% during the March quarter continue to be underwhelming feels Nomura Equity Research. More important is the fact that volume growth trajectory continues to lag in low single digits, which remains a cause for concern for the company and the shareholders alike, the brokerage said.
 
Nomura said, “We believe these results show that a turnaround in volume growth trajectory is still some way off, which should hold back stock price performance from current levels”.
 
Nomura has also pointed out the favourable aspect in the company’s performance. Exports are up 51%, which have pushed the consolidated net sales up.  However, domestic business reported growth of just 7.7% (primarily lead by price increases), which was 2% below Nomura’s estimates.  Domestic sales were on the lower base of last year where growth was just 13.7%. 
 
The company’s performance is given in the table below:
 
 
“We continue to maintain a Neutral stance and believe that while the long-term picture is still intact, near-term growth concerns will weigh the stock down. The market price of the company's share is likely to fall up to about Rs4,516. Investors are advised to await the volume growth rebound,” Nomura concluded.

User

Asset quality pain continues in 4QFY13 for Bank of Baroda

During the quarter there was a tax write-back of Rs4.8 billion which boosted the net profit for Bank of Baroda, points out Nomura Equity Research in its Quick Note

 
Bank of Baroda’s management expects domestic loan delinquency for the next couple of quarters to be at the level seen in 4QFY13, while international loan delinquency should improve starting 1QFY14. This means that the asset quality pain will continue for the bank from recent quarters, according to Nomura Equity Research in its Quick Note. Delinquencies came in higher at Rs20.8 billion compared to Rs20 billion in 3Q. The bank restructured loans of Rs28.4 billion versus Rs15.9 billion in the previous quarter. This takes the total impairment to Rs49.6 billion compared to Rs35.9 billion in the previous quarter. The management has further guided for a restructuring pipeline of Rs53 billion for 1QFY14F. 
 
There is healthy balance sheet growth for the bank in the recent quarter, point out Nomura analysts. Loans grew 14.2% year-on-year compared to Nomura’s estimate of 13.1% year-on-year. Loan growth was supported by 30.3% year-on-year growth in SME segment and 21.8% year-on-year growth in international book. The management has guided for 1-2% higher than industry loan growth for FY14F. The bank is looking to grow the retail and SME books more aggressively than the corporate loan book. The bank is looking at adding 600 plus branches in FY14.
 
NIMs (net interest margins) declined 14bps quarter-on-quarter during the quarter to 2.51% (2.65 in 3Q) as yields on advances declined 32bps quarter-on-quarter. Yield on domestic advances declined 26bps quarter-on-quarter, whereas cost of domestic deposits increased 8bps quarter-on-quarter.
 
During the quarter there was a tax write-back of Rs4.8 billion which boosted the net profits for Bank of Baroda, points out Nomura Equity Research.
 
According to Nomura’s analysts, the key ratios of the bank are as below:
 
 
The analysts have also summarised the asset quality position as follows:
 

User

Amara Raja Batteries posts 19.2% increase in net sales amidst difficult conditions
Despite difficulties in the automotive sector, the company has managed to scale new milestones as its market capitalisation crossed Rs5,000 crore
 
Amara Raja Batteries recorded net sales of Rs 801 crore for the quarter ended 31 March 2013 when compared to the Rs672 crore for the corresponding period last year, an increase of 19.20% year-on-year (y-o-y). Similarly, it recorded net profit of Rs59.6 crore versus the Rs58.3 crore for the three quarters ended March 2013. The lower realisation on profit was due to the provision of Rs7.55 crore set towards impairment in value of assets and additional depreciation of Rs5.15 crore.
 

Nomura has rated revised downwards its target price to Rs342 per share but still retained the ‘Buy’ call, in a recent note to clients. It also expects earnings to grow at 15% per annum till 2015 fiscal. It said in its report: “We estimate the company to deliver a 17% revenue compounded annual growth rate (CAGR) and 15% earnings CAGR over FY13-15F”. Furthermore, it said, “We believe that as the company increases its scale of operations, the multiples will improve.” Some of the concerns, according to Nomura, is the increase in price of lead and slowdown in automotive growth.

Commenting on the full year performance, K Suresh, chief financial officer, said, “The company continues to enjoy debt-free status and has free cash of over Rs3.50 billion at the end of the financial year. The year under review saw the company’s market capitalisation touching Rs5,000 crore with considerable improvement in PE ratio reflecting growing investor confidence. Various capacity enhancement projects, undertaken during the year, are progressing as per schedule and are well within the approved costs. Continuing debt free status and sound credit rating of the company will help us to leverage as and when required, at minimal cost. 
 
The Moneylife database reveals that the company’s market capitalisation is quoting at just 9.97 times operating profit while its return on equity and return on capital employed stood at an impressive 35% and 34% respectively.
 
Moneylife had written about the company in its 3 May 2012 issue and had recommended the stock at Rs157.5. Currently its share price is trading at over Rs264.60 on the Bombay Stock Exchange (BSE). More can be read over here: 
 
During the quarter, it continued to invest in its greenfield capacity expansion, from 1.8 million to 3.6 million per annum, and the expansion is progressing as per schedule. The company has committed to invest about Rs760 crore for various capacity expansion projects and is looking into possible growth opportunities. 
 
The board of directors have recommended a dividend of Rs2.52 per share, of face value Re1 each, and in line with the declared policy of distributing up to 15% profits, subject to approval of shareholders.

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Online Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Online Magazine)