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Please refer to important disclosures at the end of this report
Equity Research March 4, 2019
BSE Sensex: 36064
ICICI Securities Limited is the author and distributor of this report
Sector update
Consumer Staples & Discretionary
Kumbh Mela – What we DIDN’T see!
Research Analysts:
Manoj Menon [email protected]
+91 22 6637 7209
Vismaya Agarwal, CFA vismaya.agarwal @icicisecurities.com
+91 22 2277 7632
INDIA
During our two-day visit to Kumbh Mela (KM) at Prayagraj, our focus was on what
we DIDN’T see and the missing brands. In our view, consumer companies
utilising platforms like KM for penetration-led growth and premiumisation is well
understood by consensus. We therefore highlight the companies that were absent
(or not prominently present) to capture eyeballs of c.100mn visitors (in just 48
days). Notable absentees at the Mela – those requiring improvement in execution,
in our view – were Britannia (despite the narrative of market share gains from
Parle in Uttar Pradesh as an important growth driver), P&G, Patanjali, all paint
companies, most building materials, private life insurers, M&M, Maruti, Bata, V-
Guard, Jyothy Labs, Bajaj Consumer, etc. Pages 5-17 have 72 photos from our KM
visit album.
What is Kumbh Mela: It is the largest religious congregation on earth – c.100mn
people expected to visit Prayagraj (a city with c.1.3mn population in Uttar Pradesh state)
– during the 48 day festival. The state government has allocated Rs42bn for the event.
We classify ‘what we saw’ into four baskets: (1) brands using KM as an advertising
platform, (2) brands sampling the products, (3) brands having immersive programs to
grab consumer attention, (4) brands having sales-oriented stalls.
Key observations:
Britannia’s absence was surprising given its focus on gaining market share from Parle
and aggressive distribution expansion in the Hindi speaking belt (Uttar Pradesh is the
largest of the four targeted states).
Another big surprise for us was the absence of Patanjali given the majority of
attendees belong to its target consumer group
On the companies that were present, HUL expectably had the largest presence across
the event. We noticed advertisements, immersive programs to grab consumer attention
and sales oriented stalls for various brands
Nestle had the next most prominent presence with immersive programs for Maggi and
sales oriented kiosks for Maggi and Nescafe brands
We were impressed with GSK Consumer’s sampling activity for Horlicks given North is
one of the weaker markets for the health food drink brand. It sampled over 30,000 cups
of Horlicks over the 48-day period.
Toothpaste category witnessed significant activity. Colgate’s sampling of Swarna
Vedshakti started 100km before Prayagraj (estimated 30mn samples distributed;
sampling cost comes to c.2% of quarterly revenue). Dabur organised an immersive
program for its Red Paste to grab consumer attention
Hair oil was the other category with high action. Dabur, Emami and Marico all had
various programs for their brands. Bajaj Consumer Care was the noticeable absentee
in the space.
We would like to point out that although we covered most of the prominent Mela
locations, we might still have missed some brands.
Consumer Staples & Discretionary, March 4, 2019 ICICI Securities
2
Brands using KM as an advertising platform:
1. ACC waterproofing products
2. Closeup (HUL)
3. Fena detergent powder
4. Havells
5. KEI wires and cables
6. Mother Dairy
7. Ponds cold cream (HUL)
8. Sprite (Coca Cola)
9. Taaza tea (HUL)
10. Tetmosol (Piramal)
11. Wheel detergent powder (HUL)
Brands sampling products
1. Colgate Swarna Vedshakti
2. Dabur Amla
3. Dabur Hajmola
4. Dabur Honitus
5. Horlicks
Brands having immersive programs to grab consumer attention
1. Dabur Red
2. Dettol
3. Fair & Lovely
4. LG Puricare (water purifier)
5. Lifebuoy
6. Maggi Safaai ke naam
7. Vim dishwash bar
8. Welspun quick dry towel stalls
Brands having sales-oriented stalls or just displays
1. Amul Dairy
2. Anmol biscuits
3. Apis India
4. Café Coffee Day
5. Emami Navratna oil
6. Emami Agrotech (unlisted) Best Choice edible oil
Consumer Staples & Discretionary, March 4, 2019 ICICI Securities
3
7. Eno (acidity relief product by GSK)
8. Ghadi detergent
9. Godrej No.1 soap (Godrej Consumer)
10. Godrej Nupur haircare (Godrej Consumer)
11. Godrej Protekt Mr. Magic handwash (Godrej Consumer)
12. Good Knight Power Chip (Godrej Consumer)
13. Himalaya
14. Himgange hair oil
15. Keva (S H Kelkar)
16. Kwality Walls icecream (HUL)
17. Lactalis – Anik
18. Life Insurance Corporation of India
19. Mangaldeep agarbathi (ITC)
20. Marico Nihar oil
21. Mediker shampoo (Marico)
22. Nestle – Maggi, Nescafe
23. Omnigel (Cipla)
24. Parachute Advansed
25. Parag Milk
26. Relaxo footwear
27. Sonalika Tractors
28. Sonata (watches by Titan)
29. VIP Luggage
Valuation and risks:
We value stocks on DCF (WACC and terminal growth ranging from 10-13%, 3-6%
respectively) except Godrej Consumer which we value on SoTP basis. Key upside risk
is better-than-expected gross margin due to recent correction in input prices. Key
downside risk is unexpected irrational competition due to deceleration in general
consumption demand.
Consumer Staples & Discretionary, March 4, 2019 ICICI Securities
4
Table 1: Valuation summary
Company CMP (Rs)
TP (Rs)
Upside (%) Rating
PE (x) EV/EBITDA (x) ADTV Market Cap
FY19E FY20E FY21E FY19E FY20E FY21E (US$ mn)
(Rs bn)
(US$ bn)
Staples
Britannia 3,077 2,500 (19) SELL 61 49 42 40 33 28 14 772 10.9 Colgate 1,246 1,550 24 BUY 46 39 34 26 23 21 10 347 4.9 Dabur 445 520 17 BUY 50 42 36 45 37 32 17 763 10.7 GCPL 679 720 6 HOLD 46 39 34 33 29 25 11 711 10.0 HUL 1,735 1,800 4 HOLD 62 52 45 42 35 31 43 3,780 53.2 ITC 278 290 4 ADD 28 25 22 19 17 15 46 3,366 47.4 Marico 335 360 8 HOLD 46 38 33 33 27 23 9 474 6.7 Nestle 10,452 12,300 18 BUY 63 53 45 37 31 27 14 1,101 15.5 Discretionary Jubilant Food 1,277 1,650 29 BUY 52 41 32 25 21 17 45 161 2.3 Page Ind. 22,247 26,000 17 ADD 59 49 40 37 31 26 20 259 3.6 Sheela Foam 1,376 1,600 16 BUY 48 36 32 29 22 19 0.2 64 0.9 Titan 1,021 1,150 13 BUY 61 49 40 41 32 26 37 863 12.2
Source: Company data, I-Sec research
Valuation summary
Company
EV/ sales (x) EV/ EBIT (x) P/BV (x) P/CEPS (x)
FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E
Staples
Britannia 6.6 5.7 5.0 44 36 31 19 17 15 54 44 38 Colgate 7.5 6.7 6.1 30 26 23 20 18 16 38 33 29 Dabur 9.1 7.9 7.0 50 41 35 14 12 10 45 38 33 GCPL 6.9 6.3 5.6 36 31 27 9 8 7 42 35 31 HUL 9.7 8.6 7.6 45 37 33 48 40 34 57 47 42 ITC 7.3 6.6 6.0 21 18 16 6 6 5 25 22 20 Marico 5.8 5.1 4.5 35 29 24 16 14 13 42 35 30 Nestle 8.7 7.5 6.6 42 35 30 27 25 23 52 45 38 Discretionary Jubilant Food 4.2 3.6 3.0 33 27 21 13 10 8 35 29 24 Page Ind. 8.3 7.0 5.9 39 33 28 31 23 18 54 46 37 Sheela Foam 3.0 2.6 2.2 26 20 18 18 15 12 37 28 25 Titan 4.5 3.8 3.1 45 35 28 15 13 10 59 44 35
Source: Company data, I-Sec research
Table 2: Key financials
Company
RoE (%) RoCE (%) CAGR (FY19-21) (%)
FY19E FY20E FY21E FY19E FY20E FY21E Revenues EBITDA PAT
Staples Britannia 31 34 36 27 30 31 15 19 20 Colgate 47 49 50 67 70 71 11 13 12 Dabur 28 30 31 18 21 21 14 18 18 GCPL 22 23 23 14 14 15 11 14 16 HUL 81 85 81 63 66 64 13 17 17 ITC 23 24 26 28 31 32 11 15 13 Marico 35 40 41 30 34 36 14 20 19 Nestle 45 50 53 25 28 29 15 17 18 Discretionary Jubilant Food 28 27 27 38 35 36 18 22 29 Page Ind. 51 54 51 44 46 44 18 19 21 Sheela Foam 21 23 21 20 22 21 14 21 23 Titan 27 28 28 35 38 39 20 27 24
Source: Bloomberg, I-Sec research
Consumer Staples & Discretionary, March 4, 2019 ICICI Securities
5
Hindustan Unilever – Wheel detergent powder Hindustan Unilever – Closeup toothpaste
Source: I-Sec research Source: I-Sec research
Hindustan Unilever – Brooke Bond Taaza tea Hindustan Unilever – Pond’s cold cream
Source: I-Sec research Source: I-Sec research
Hindustan Unilever – Vim dishwash bar Hindustan Unilever – Lifebuoy liquid soap
Source: I-Sec research Source: I-Sec research
Consumer Staples & Discretionary, March 4, 2019 ICICI Securities
6
Hindustan Unilever – Fair & Lovely cream Hindustan Unilever – Fair & Lovely cream
Source: I-Sec research Source: I-Sec research
Hindustan Unilever – Fair & Lovely cream Hindustan Unilever – Kwality Walls ice cream
Source: I-Sec research Source: I-Sec research
GSK Consumer – Horlicks health food drink (HFD) GSK Consumer – Horlicks HFD
Source: I-Sec research Source: I-Sec research
Consumer Staples & Discretionary, March 4, 2019 ICICI Securities
7
GSK Consumer – Horlicks HFD GSK Consumer – Eno acidity relief
Source: I-Sec research Source: I-Sec research
Nestle - Maggi Nestle - Maggi
Source: I-Sec research Source: I-Sec research
Consumer Staples & Discretionary, March 4, 2019 ICICI Securities
8
Nestle – Maggi Nestle – Maggi
Source: I-Sec research Source: I-Sec research
Nestle – Maggi Nestle – Maggi
Source: I-Sec research Source: I-Sec research
Nestle – Nescafe Nestle – Everyday Chai
Source: I-Sec research Source: I-Sec research
Consumer Staples & Discretionary, March 4, 2019 ICICI Securities
9
Nestle – RTDs Nestle – Munch
Source: I-Sec research Source: I-Sec research
Nestle – NesPlus Nestle – Outlet
Source: I-Sec research Source: I-Sec research
Godrej Consumer – Godrej No 1 soap Godrej Consumer – Good Night power chip
Source: I-Sec research Source: I-Sec research
Consumer Staples & Discretionary, March 4, 2019 ICICI Securities
10
Godrej Consumer – Nupur hair dye Godrej Consumer – Mr Magic Protekt handwash
Source: I-Sec research Source: I-Sec research
Colgate – Swarna Vedshakti toothpaste Colgate – Swarna Vedshakti toothpaste
Source: I-Sec research Source: I-Sec research
Consumer Staples & Discretionary, March 4, 2019 ICICI Securities
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Colgate – Swarna Vedshakti toothpaste Dabur – Red Toothpaste
Source: I-Sec research Source: I-Sec research
Dabur – Hajmola Dabur – Honitus
Source: I-Sec research Source: I-Sec research
Dabur – Amla Emami – Navratan
Source: I-Sec research Source: I-Sec research
Consumer Staples & Discretionary, March 4, 2019 ICICI Securities
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Emami – Navratan Emami – Navratan
Source: I-Sec research Source: I-Sec research
Marico – Parachute oil Marico – Nihar oil
Source: I-Sec research Source: I-Sec research
Marico – Mediker ITC – Mangaldeep agarbatti
Source: I-Sec research Source: I-Sec research
Consumer Staples & Discretionary, March 4, 2019 ICICI Securities
13
Titan – Sonata watches Titan – Sonata watches
Source: I-Sec research Source: I-Sec research
Ghadi detergent Fena detergent
Source: I-Sec research Source: I-Sec research
Reckitt Benckiser – Dettol Himalaya
Source: I-Sec research Source: I-Sec research
Consumer Staples & Discretionary, March 4, 2019 ICICI Securities
14
Anmol Industries Emami Agrotech (unlisted) – Best Choice edible oil
Source: I-Sec research Source: I-Sec research
Lactalis – Anik Apis India
Source: I-Sec research Source: I-Sec research
Relaxo Footwear S H Kelkar – Keva
Source: I-Sec research Source: I-Sec research
Consumer Staples & Discretionary, March 4, 2019 ICICI Securities
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Amul dairy Parag Milk
Source: I-Sec research Source: I-Sec research
Mother Dairy Himgange Cooling Oil
Source: I-Sec research Source: I-Sec research
Consumer Staples & Discretionary, March 4, 2019 ICICI Securities
16
Café Coffee Day ACC – Gold Water Shield
Source: I-Sec research Source: I-Sec research
Havells VIP luggage
Source: I-Sec research Source: I-Sec research
Welspun LG water purifier
Source: I-Sec research Source: I-Sec research
Consumer Staples & Discretionary, March 4, 2019 ICICI Securities
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Piramal – Tetmosol Cipta – Omnigel
Source: I-Sec research Source: I-Sec research
Coca Cola – Sprite KEI wires
Source: I-Sec research Source: I-Sec research
Life Insurance Corporation of India Sonalika tractors
Source: I-Sec research Source: I-Sec research
Consumer Staples & Discretionary, March 4, 2019 ICICI Securities
18
Price charts
Britannia Colgate Dabur GCPL
800
1,300
1,800
2,300
2,800
3,300
Mar-
16
Au
g-1
6
Fe
b-1
7
Au
g-1
7
Feb-1
8
Au
g-1
8
Fe
b-1
9
(Rs)
600
700
800
900
1,000
1,100
1,200
1,300
1,400
Ma
r-16
Au
g-1
6
Ma
r-17
Au
g-1
7
Fe
b-1
8
Au
g-1
8
Feb-1
9
(Rs)
160
200
240
280
320
360
400
440
480
520
Mar-
16
Au
g-1
6
Fe
b-1
7
Au
g-1
7
Feb-1
8
Au
g-1
8
Fe
b-1
9
(Rs)
320
420
520
620
720
820
920
1,020
Ma
r-16
Au
g-1
6
Mar-
17
Au
g-1
7
Fe
b-1
8
Au
g-1
8
Fe
b-1
9
(Rs)
HUL ITC Jubilant Foodworks Marico
300500700900
110013001500170019002100
Ma
r-1
6
Aug-1
6
Ma
r-1
7
Aug-1
7
Feb
-18
Aug-1
8
Fe
b-1
9
(Rs)
150
200
250
300
350
400
Ma
r-1
6
Au
g-1
6
Mar-
17
Au
g-1
7
Feb-1
8
Au
g-1
8
Feb-1
9
(Rs)
0200400600800
1,0001,2001,4001,6001,800
Ma
r-16
Au
g-1
6
Fe
b-1
7
Au
g-1
7
Feb-1
8
Au
g-1
8
Fe
b-1
9
(Rs)
150
200
250
300
350
400
450
Ma
r-16
Au
g-1
6
Ma
r-17
Au
g-1
7
Feb-1
8
Au
g-1
8
Fe
b-1
9
(Rs)
Nestle Titan Page Industries Sheela Foam
4,000
5,0006,0007,000
8,000
9,00010,00011,000
12,000
13,000
Ma
r-16
Au
g-1
6
Ma
r-17
Au
g-1
7
Fe
b-1
8
Au
g-1
8
Feb-1
9
(Rs)
150250350450550650750850950
1,0501,150
Mar-
16
Au
g-1
6
Ma
r-17
Au
g-1
7
Fe
b-1
8
Au
g-1
8
Fe
b-1
9
(Rs)
10,000
20,000
30,000
40,000
Mar-
16
Au
g-1
6
Ma
r-17
Au
g-1
7
Feb-1
8
Au
g-1
8
Feb-1
9
(Rs)
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Dec-1
6
Ju
n-1
7
Jan
-18
Jul-1
8
Fe
b-1
9
(Rs)
Source: Bloomberg
Consumer Staples & Discretionary, March 4, 2019 ICICI Securities
19
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specific report for that company.”
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New I-Sec investment ratings (all ratings based on absolute return; All ratings and target price refers to 12-month performance horizon, unless mentioned otherwise)
BUY: >15% return; ADD: 5% to 15% return; HOLD: Negative 5% to Positive 5% return; REDUCE: Negative 5% to Negative 15% return; SELL: < negative 15% return
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We /I, Manoj Menon, MBA, CMA; Vismaya Agarwal, CFA, BTech, PGDM Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Analysts are not registered as research analysts by FINRA and are not associated persons of the ICICI Securities Inc.
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