The gross margin improved by 110bps YoY, aided by an improvement in product mix and higher realisation. However, EBITDA margin fell by 40 basis points year on year to 10.0% due to higher freight costs and additional brand investments.LTF has a strong focus on a value-added portfolio, which will support margin improvement in the long-term. The Health & Convenience product segments, which include ready-to-eat products, contributed 2% in FY22, an improvement from 1.5% in FY21. The company targets a 150 bps expansion in EBITDA margin through product mix, operational efficiency, and scale.
Nestle India reported a net profit of Rs. 515 crores:
Nestle India reported a total revenue growth of 16.1% YoY and 1.4% QoQ to Rs. 4036.6 crores. The net profit decreased by 4.3% YoY and 13.3% QoQ to Rs. 515.3 crores. Domestic sales increased by 16.4% with a healthy balance of pricing and volume & mix, and export sales increased by 0.7%. The cost of materials increased due to inflation, particularly edible oil, milk and its derivatives, and packaging materials, partly offset by better realizations. The 15% raw material inflation led to a 304bps decline in gross margins, to 54.0%. The EBITDA decreased by 3.4% YoY and 11.4% QoQ to Rs. 819.5 crores, while the EBITDA margin came in at 20.3%, which declined by 409bps YoY and 293bps QoQ.
Maintaining steady growth through the launch of new products.
The milk products and nutrition sectors witnessed double-digit growth, driven by strong growth in the Milkmaid brand. The out-of-home categories such as confectionaries and liquid beverages registered a strong growth of above 20% on the back of the opening up of offices and business-led initiatives, while the food category continued its strong double-digit streak of growth with improved market share in MAGGI Noodles. The company continued to see strong momentum in megacities and metros, as well as strong acceleration across smaller towns and classes.
Nestle is continuously focusing on entering new categories to maintain its consistent growth momentum in the medium to long term. The company acquired the pet food business of Purina Petcare India Pvt. Ltd. (PFB) from its parent entity Nestlé S.A. for Rs. 123.5 crores. The pet food business (PFB) has evolved very positively and has an exciting future with pet adoption on the rise post-pandemic. PFB has clocked a CAGR of 39.4% over CY18–21 and a turnover of Rs. 36 crores in FY22, valued at a price-to-sales ratio of 3.4x its sales. It derived 14% of its sales from the e-commerce channel. The pet food market in India has been estimated at Rs. 4,000 crores, with dry dog food comprising 75% of the category.
Going forward, leveraging Nestlé India’s network would further accelerate the growth of the pet food business in India. Nestle India Ltd. (NIL) is the market leader in instant noodles and baby food products in India and the No. 2 player in the instant coffee and chocolate segment. One of the most interesting aspects of NIL in recent years has been the spontaneous pace of launches. Since 2016, NIL has launched over 90 products across segments, including new launches as well as variants to boost volume growth and market share gain, with 20 projects in the pipeline.
Nestle continues to focus on innovation to drive growth. New launches across segments have led to strong volume growth over the last few years. The management stated that innovation will be undertaken across product categories and that some of the products launched in the global market can also be introduced in the domestic market. The company is also considering adding new categories that will add value to its existing portfolio. It is expected that the aggressive pace of new innovations, the success of new launches, and the improvement in demand could further accelerate the company’s growth. The major risks for the NIL are increased competitive intensity, rising input prices with an inability to pass on the same, and higher-than-expected A&P spending.
NIL will continue to deliver strong growth going forward as well and will gain share in the core categories, led by distribution expansion, further strengthening of its position in rural areas with the launch of new products backed by R&D capabilities, and growth in the premium portfolio. These factors, along with market leadership in 80% of its categories, mean the company has enough pricing power to further drive premiumization along with volume growth. The EPS was Rs. 53 in the June quarter. The stock is trading at a PE ratio of 80x. The EBITDA was at 50.4x. The ROCE and ROE stood at 147% and 113%, respectively. The stock was trading at Rs. 19196 on September 7th, down by 0.81%.
Dalmia Bharat posted a net profit of Rs. 280 Cr. in the June quarter.
Dalmia Bharat’s revenue from operations increased 27.44 percent to Rs 3,302 crore during the quarter under review, as against Rs 2,591 crore in the corresponding period of the previous fiscal. The company had posted a net profit of Rs 280 crore during the April-June quarter a year ago, Dalmia Bharat said in a regulatory filing. Dalmia Bharat’s total expenses rose 37.7 percent to Rs 3,072 crore in Q1 FY 2022–23 from Rs 2,231 crore a year ago.
In the April-June quarter, sales volume increased by 26.53 percent to 6.2 million tonnes, up from 4.9 million tonnes in Q1 FY2021-22.The net debt/EBITDA stood at 0.59x. The cost of borrowing was 5.7% for the current quarter compared to 5.3% in June 2021.
Key highlights for the quarter:
The continuous efforts and resilience of teams have enabled them to deliver good performance again on the back of strong volume growth and continuous cost leadership. The company did capacity additions and commenced commercial production of a 2.9 Mn Tonnes Murli Cement plant in Maharashtra. The firms’ total cement capacity increased to 35.9 MNT and their total clinker capacity stood at 18.9 MNT. In FY22, CO2 emissions were reduced further to 489kg/ton of cement, with a water positivity of 12.5x. They doubled renewable power capacity to 62.6 MW and signed an MoU with FLSmidth A/S, a leading supplier of technology for the cement industry, to develop a breakthrough innovation to support sustainability in the cement industry and a completed restructuring of the refractory business. The company will divest its IEX investment as and when it requires additional funds for CAPEX.
The management aims to save power and fuel costs as it commissions 41MW/69MW of WHRS/solar power units in FY23, taking the total renewable capacity to 173MW in FY23 from 105MW in FY22. The management is optimistic about demand and expects it to rise in FY23, led by government spending on infrastructure and housing. The major risks for the company to watch are lower demand and higher costs.
The EPS stood at Rs. 10.46 for June 2022, which was at Rs. 31.76 in March 2022 and Rs. 12.13 in June 2021. The stock has a ROCE of 7.09% and an ROE of 7.47%. The P/E ratio is now 26.6x, up from 25.1x five years ago. EBITDA is at 12.8x and the return on assets is 4.71%. The interest coverage ratio is 6.54x and the asset turnover ratio is 0.49. The share is trading at a price of Rs.1531, down by 0.37%.
ONCG made a profit of Rs. 15205 Cr.
ONCG reported a standalone profit of Rs 15,205.85 crore for the month of June 2022, up 251% compared to the year-ago period, driven by strong operating performance and top-line growth. The standalone profit in Q1 FY22 stood at Rs 4,334.75 crore. The standalone revenue for the June FY23 quarter grew by 84% to Rs 42,321 crore compared to the corresponding period last fiscal. ONGC had a 91% year-on-year growth in its offshore business at Rs 27,990.4 crore and its onshore business increased by 72% to Rs 14,330.3 crore during the quarter.
Consistent natural gas output
At 1.63 million tons, Oil and Natural Gas Corporation (ONGC) produced 1.7% less oil due to lower output from western offshore. The production decreased by 12.34% in fields run by private businesses. However, compared to April through July 2021, when output was 9.96 million tons, it was only slightly lower during the first four months of the current fiscal, which started on April 1. On August 4, Oil Minister Hardeep Singh Puri tweeted that the trend of diminishing crude oil production had changed. The data from the ministry showed that Vedanta’s Rajasthan block had a lower output than ONGC’s oilfields in Gujarat and Assam.
The natural gas output was nearly steady in July at 2.88 billion cubic metres but was 3.4% higher from April to July at 11.43 bcm. The refineries processed 83.96 million tonnes of crude oil between April and July, operating at 103.87% of their capacity, compared to an operating rate of 92.01% for processing 76.64 million tons. Fuel production increased by 6.23% in July to 21.97 million tonnes and by 11.67% from April to July to 90 million tons.
The company has fixed August 19th, 2022 as the “Record Date” for determining members eligible to receive a final dividend of 3.25 per share (i.e., @ 65%) for the financial year 2021-22.
The EPS stood at Rs. 12.09 for Q1 FY23. The price to book ratio was at 0.73x. The return on assets was at 12.3%. The interest coverage ratio was 24x for June 2021. The EBITDA was at 2.50x. The ROCE and ROE were at 18.0% and 18.2%, respectively. The stock is trading at 3.35x while the five-year P/E ratio is at 7.51x. The scrip closed at Rs.136, up by 1.68% on Wednesday.
DCB Bank’s (DCBB) Q1 FY23 earnings:
The PAT for DCB bank was at Rs. 97 cr. in comparison to Rs. 34 cr. from the same quarter a year ago, with a growth of 188%. Total revenue in the June quarter was Rs. 949 Cr., compared to Rs. 920 Cr. in March 2021 and Rs. 846 Cr. in June 2021. There was an 18% growth in advances YOY and a 14% growth in deposits. The Gross NPA as on June 2022 was at 4.21% while the Net NPA was at 1.82 qoq as on June 2022. Both Gross NPA and Net NPA declined sequentially as well as in comparison to last year.
Ratios to improve in the June quarter:
The Provision Coverage Ratio (PCR) was at 69.480 and the PCR without considering Gold Loans NPAs was at 73.39%. The Capital Adequacy Ratio was at 18.47%, with Tier I at 15.44% and Tier ll at 3.03% as per norms. The CASA (Current Account Savings Account) ratio was at 29% in the June quarter compared to 27% in the previous quarter. The savings account balances between 2 lakh and less than 5 lakh rupees had an interest rate of 5.00%, while balances between 5 lakh and less than 10 lakh rupees had an interest rate of 6.00%. On savings account balances between 10 lakh and less than 25 lakh, there is an interest rate of 6.75%. DCB Bank has given a maximum interest rate of 7% on savings account balances between 25 lakh and less than 2 crore. Savings accounts with balances of between 2 crore and less than 50 crore will now earn interest at a rate of 5.50%, while accounts with balances of over 50 crore will now earn interest at a rate of 5.00%.
Due to lower credit costs and better loan growth, gross slippages continued to remain elevated, mainly stemming from the gold portfolio, largely offset by higher recovery and upgrades, resulting in a GNPA of 4.3%. The stress pool continues to remain sticky, but the management expects improving collection efficiency to reflect in better asset quality on the back of a granular and secured portfolio of approximately 95%. With asset quality still stubborn and loan growth looking soft, there is less room for any positive surprise from operating efficiency.
The price to book ratio stood at 0.64x. The return on assets was 0.68%. The interest coverage ratio was 1.22x for June 2021. The return on capital employed was at 6.30% while the return on equity was at 7.37%. The EBITDA was recorded at 14.0x. The (CAR) capital adequacy ratio continues to be strong at 18.47%. The scrip was trading at Rs. 83.1, down by 0.54% on Wednesday.
Insecticide India reports a net profit of Rs. 38 Cr.
In the June quarter, Insecticide India reported total sales of Rs. 561 Cr. The company’s net profit stood at Rs 38 crores as compared to Rs 22 crores in the March quarter. EBITDA was 66 crores in Q1 FY23, compared to 42 crores in Q4 FY22 and 61 crores in Q1 FY22, with EBITDA margins contracting to 90 basis points. In the first quarter of FY23, B2C, B2B, and exports contributed 66%, 29%, and 5%, respectively. The better product mix, coupled with price hikes in the recent past, led to a gross margin improvement of 70bps. The Institutional (B2B) category grew by +30% YoY in 1Q.
New launches to increase demand:
Insecticide India has launched 3 new products in 1Q and intends to launch another 6 products in FY23E. There is a CAPEX of Rs1.1bn largely behind, and the technical synthesis plant is to commence at the end of the year. Going forward, we expect the business to pick up with new launches, a better margin profile of in-licensing, the inauguration of new capacities, and backward integration projects. The management expects double-digit revenue growth with at least 100 bps improvements in margins to be led by better contributions from new product launches and superior product mix in FY23E.
In 1Q FY23, the ITI (innovation turnover index) index was at 12.2%. They have recently received four patents for fungicides and pesticides, with a few more patents to be granted in the subsequent quarters. The company launched 3 new products in 1QFY23: Torry (Maize herbicide), Sargent Xpress (insecticide), and Himax (non-selective weedicide). While the revenues from the recently launched products in FY22-Hachiman, Oxim, and Shinwa grew 3x in 1QFY23. There has been a marginal increase in the CAPEX budget on account of inflationary costs and non-budgeted incidental expenditures. The technical synthesis plant at Dahej is expected to commence operations by the end of 1HFY23. We expect similar growth momentum in FY24. However, the company lowered export revenue guidance by 25% to Rs. 150 crore.
The EPS stood at Rs.54.0, while the stock is trading at a P/E of 18.5X. The 5-year P/E stood at 11.2x. The EBITDA was at 11.6x and the interest coverage ratio was at 25.7x. The ROCE was at 16% and the ROE was at 12.7%. The scrip closed at Rs.1000, down by 1.06% on Tuesday.
ICICI Prudential Life Insurance Q1 FY23 result update.
ICICI Prudential Life Insurance Company posted a net profit of Rs. 156Cr. in Q1FY23, on Saturday, compared to a loss of Rs.186Cr. in Q1FY22. The growth was primarily on account of lower claims and provisions due to Covid-19.
The AUM for the company grew by 3.1% to Rs. 2, 30,072Cr. The 13-month persistency ratio improved to 85.5% while 43-month ratio increased from 63.4% to 65.0% in FY23. As per the Management, the company 4P’s strategy guided by elements like Premium growth, Protection focus, Persistency improvement, and Productivity enhancement is on track with a target of doubling the FY19 value of the new business (VNB).
The business reported a negative investment income of Rs.6,884 Cr. in Q1FY23 versus a positive investment income of Rs.9,0609 Cr. in Q1 FY22. The total expenses incurred increased by 16.1% to Rs.1,411 Cr. in Q1 FY23 from Rs.1215 Cr. in FY22. The APE (Annual Premium Equivalent) witnessed a growth of 24.7% o Rs.1,520Cr. compared to Rs.1,219Cr. in FY22. The VNB was at Rs.471Cr a growth of 31% in FY23 which was previous at 28.0%, on account of a shift in the underlying product mix.
The business premium stood at Rs.3184 Cr. with a growth of 24.4% as compared to Rs.2,559Cr. The annuity APE rose to Rs.98Cr. in FY23 with robust growth of Rs.69% which was at Rs.58Cr. Savings APE was at Rs.892Cr. to Rs.1092Cr for the same period.
The company’s TWRP ratio (total weighted received premium) for savings business and the total cost was at 16.9% and 23.8% respectively. The APE of new business is significant and expenses will not affect margins. The ICICI bank-backed insurance company has a debt-equity mix of 54:46 as of 30 June 2022. The company has zero NPA with 98% of debt instruments being AAA rated and treasury bonds. The claims and benefits payout decreased by 2.8% to Rs.5,512Cr. in FY23.
The Company strives to target untouched customer segments and expand in distribution footprint which enabled them to maintain its market leader position and acquired a market share of 15.8% in Q1 FY23. The net worth is at Rs.9,053 Cr and a solvency ratio of 203.6% against the regulatory requirement of 150%. ICICI Bank and Prudential Corporation holdings promote ICICI Prudential Life Insurance.
The continued supply chain management, ongoing geopolitical crisis, spike in commodity prices, the surge in inflation, and net outflows from the capital market all the factors have directly affected the unit link business. The scrip closed at Rs. 520.55 on Monday, up by 0.67% or 3.45 points. The market cap of the company is Rs.74,246Cr. It touched an intraday high of Rs.527.55 and a low of Rs.514.30.