| Summary of Contents STOCK UPDATE Marico
Cluster: Apple Green
Recommendation: Hold
Price target: Rs110
Current market price: Rs104
Kaya?Breakeven unlikely in FY2010 -
The cut in consumer discretionary spends have had a negative impact on Kaya?s domestic business with mature clinics facing a decline in revenues. The imposition of service tax and consequent price increase had its effect in the bleak macro environment. To add to this, the outbreak of swine flu (especially in Pune and Bangalore, where flu outbreak was more acute) impacted the footfalls. This led the same-store revenues from domestic operations to fall by 5% in Q2FY2010. Despite higher spending on brand-building activities, the same-store sales continued to be down on a year-on-year (y-o-y) in October 2009 and November 2009. Thus the company expects its revenues from the domestic operation to grow by 10% in FY2010. -
Considering the difficult business environment in domestic operations, our estimates for FY2010 already factor a relatively moderate revenue growth of 18.4% yoy (against the revenue growth of 61% yoy in FY2009). Thus we maintain our estimates for the company. -
With the overall economic activity reviving and on better consumer confidence, we expect discretionary spends to improve in the coming quarters. On this we expect Kaya to post better revenue growth and substantial improvement in its profitability in FY2011 and beyond. -
At the current market price the stock trades at 24.9x and 21x its FY2010E and FY2011E earnings of Rs4.2 and Rs5.0 respectively. We maintain our Hold recommendation on the stock with price target of Rs110.
SHAREKHAN SPECIAL Monthly economy review Economy: Inflation concerns returns amid sustained recovery -
The trade deficit for October 2009 came in at USD8.8 billion, declining on a year-on-year (y-o-y) basis while expanding on a sequential basis. On a y-o-y basis, the trade deficit fell by 25% whereas the sequential increase stood at 13.3%. Notably, the pace of decline (year on year [yoy]) in exports moderated in October 2009 as exports contracted by 6.6% yoy. According to provisional data, the exports have registered a turn around with 18% y-o-y growth during November 2009, though driven by lower base effect. -
In October 2009 the Index for Industrial Production (IIP) registered a growth of 10.3% yoy, which stood well below the consensus estimate of 12% yoy. The manufacturing segment posted the highest growth at 11.1% yoy followed by the mining and electricity segments with 8.2% and 4.7% growth respectively. From a use-based perspective, the growth in the capital goods segment continued its upward trend, registering a stellar growth of 12.2% vs the 4.2% rise seen during October 2008. The growth in consumer goods stood strong at 11.8% vs the 0.9% contraction seen during the previous year. -
The inflation rate for November 2009 came in at 4.78%, against the street estimate of 4.2%. This indicates a 344-basis-point increase from the October 2009 inflation rate of 1.34%, led primarily by rising prices of food products and articles. Excluding the food products and articles, the inflation rate is quite contained. -
Globally, the macro economic data continues to point towards signs of economic recovery, pushing central banks to ponder over the withdrawal of various stimulus measures announced earlier. Meanwhile, the emerging economies too are showing signs of recovery as indicated by the trend in their leading indicators (read more under ?Global round-up?). Banking: Credit offtake picks up marginally -
With a revival in the economy coupled with some easing in the high base effect of the previous year, the credit (non-food) growth expanded to 11% yoy (vs 10.3% a month ago). Furthermore, the deposit growth continued to moderate during December 2009 as it fell to 18.3% yoy. -
The credit-deposit (CD) ratio remained more or less stable at 68.4% (as on December 4, 2009), in line with that of the previous month. Meanwhile, the incremental CD ratio expanded to 43.6% (as on December 4, 2009) as compared to 41% seen as on November 6, 2009. -
The money supply (M3) growth as on December 4, 2009 stood at 17.7% yoy, more or less in line with that of the previous month (as on November 6, 2009). -
The yields on the government securities (G-Secs; ten-year) stood at 7.57% as on December 18, 2009, up by 30 basis points from the previous month?s levels. The G-Sec yields for all the other maturities rose on a month-on-month (m-o-m) basis by ~15-20 basis points each as the street expects monetary tightening measures from the Reserve Bank of India (RBI). Equity markets: Industry AUMs display a healthy growth -
During the month-till-date (MTD) period, ie December 01-17, 2009, the average daily volume contracted in both the futures and options (F&O) and cash segments. -
The positive growth momentum in the industry assets under management (AUMs) continued during November 2009, as the industry AUMs grew by a strong 100.7% yoy to Rs808,500 crore, higher than the 76.4% y-o-y growth seen in the previous month. However, the high growth in the AUMs could largely be attributed to the low base of the previous year in which the industry AUMs had declined by 26.7% yoy.
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