Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Secular growth, cyclical peak
We spent three days meeting a range of consumer and internet/new media
businesses across India last week. The meetings helped showcase growth
across consumer segments, from rural India to the top 1%. Distribution
remains a challenge, which businesses are learning to address. Whilst FY11
was an exceptionally strong year in most categories, the growth was boosted
by the low base in FY09-10 and is expected to moderate. The moderation may
be sharper in segments with high inflation (eg. garments, diamond jewellery)
and cost pressures are biting. This is at odds with the premium valuations of
discretionary consumer names. We retain our U-PF recommendations on
Titan, Shoppers Stop and Pantaloon, while retaining O-PF on Jubilant Foods.
Long term growth across consumer segments
q All the companies we met expressed optimism around medium-long term growth
with even the most conservative talking about 15%+ CAGRs, with rising middle
class incomes, a young population and value consciousness being mentioned often
q The confidence in growth spans companies targeting consumers across income
segments, from rural India to the top 1% of the urban rich
q The one segment which is still relatively sub-scale, although growing well, is luxury
where India is 5-10 years away from becoming a meaningful market
Distribution a key challenge
q While the top 20 urban centres are major consumption centres, there is substantial
demand beyond these (eg. a multichannel retailer we met supplies to 3000 towns)
q Reaching these consumers remains a key challenge. With traditional distribution
platforms requiring years to build out, new players are trying innovative solutions
(eg. online platforms with couriers for distribution, building one state at a time etc.)
FY11 was exceptional, growth to moderate
q Growth across a range of discretionary consumer categories was exceptionally
strong in FY11 with growth rates of 50%+ relatively common
q Companies attribute this at least partly to a degree of catch-up after the modest
growth seen in FY09-10 and expect growth to moderate in FY12
q While there is little evidence of a sharp consumer slowdown, segments where price
inflation is high are seeing demand soften (eg. garments and diamond jewellery)
q Most companies highlighted staffing challenges as a key worry
Valuations rich, near term risks to the downside
q Strong demand in FY11 has driven a rerating in discretionary consumer stocks
q Whilst the long term potential remains high, moderating near term growth and high
cost pressures pose downside risks over the next year
q We retain U-PF on Titan, Shoppers Stop and Pantaloon; O-PF on Jubilant Foods
Secular growth, cyclical peak
CLSA India organised a ‘consumption and new media’ themed tour last week,
meeting a range of listed and unlisted consumer and internet businesses (see
table below for list). While the companies and people we met were spread
across a range of income segments as well as business models, we have tried
to synthesise the key messages here and drawn conclusions from a listed
market investor perspective.
Figure 1
Companies we met as part of the tour
Company Description
Redbus India's largest online bus ticketing company
United Breweries India's largest beer company
Madura Garments India's largest premium branded apparel player
Titan India's largest watches and branded jewellery company
Fossil India Indian arm of a US$6bn US watch and accessory manufacturer
InfoEdge India’s largest Internet company in job & real estate classifieds
HomeShop 18 India's largest TV shopping channel and 2
nd
largest e-shopping platform
Jubilant Foods Indian franchisee of Dominos Pizza and Dunkin Donuts
Mankind Pharma Upcoming pharma company with a burgeoning OTC/FMCG business
Infniti Motors Luxury car dealer
Cleartrip Second largest travel website in India
Sula Wines India's largest vintner
Groffr Upcoming website for group deals
Shoppers Stop India’s leading department store
Justdial India’s largest online yellow pages
Oberoi Site visit to the property development and mall in suburban Mumbai
Source: CLSA Asia-Pacific Markets
Long term growth across consumer segments
All the companies we met expressed optimism around medium-long term
growth with even the most conservative talking about 15%+ CAGRs. The
confidence in growth spans companies targeting consumers across income
segments, from rural India to the top 1% of the urban rich. The one segment
which is still relatively sub-scale, although growing well, is luxury where India
is 5-10 years away from becoming a meaningful market.
Some of the factors that companies highlighted as driving this growth were:
q A growing middle class, the incremental spending power of which is
boosted by historically high savings rate and lack of leverage among
Indian households
q A relatively young population with a large number of people entering the
working age population. Beyond the boost to overall household spending,
these consumers also drive adoption of new products and channels
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Secular growth, cyclical peak
We spent three days meeting a range of consumer and internet/new media
businesses across India last week. The meetings helped showcase growth
across consumer segments, from rural India to the top 1%. Distribution
remains a challenge, which businesses are learning to address. Whilst FY11
was an exceptionally strong year in most categories, the growth was boosted
by the low base in FY09-10 and is expected to moderate. The moderation may
be sharper in segments with high inflation (eg. garments, diamond jewellery)
and cost pressures are biting. This is at odds with the premium valuations of
discretionary consumer names. We retain our U-PF recommendations on
Titan, Shoppers Stop and Pantaloon, while retaining O-PF on Jubilant Foods.
Long term growth across consumer segments
q All the companies we met expressed optimism around medium-long term growth
with even the most conservative talking about 15%+ CAGRs, with rising middle
class incomes, a young population and value consciousness being mentioned often
q The confidence in growth spans companies targeting consumers across income
segments, from rural India to the top 1% of the urban rich
q The one segment which is still relatively sub-scale, although growing well, is luxury
where India is 5-10 years away from becoming a meaningful market
Distribution a key challenge
q While the top 20 urban centres are major consumption centres, there is substantial
demand beyond these (eg. a multichannel retailer we met supplies to 3000 towns)
q Reaching these consumers remains a key challenge. With traditional distribution
platforms requiring years to build out, new players are trying innovative solutions
(eg. online platforms with couriers for distribution, building one state at a time etc.)
FY11 was exceptional, growth to moderate
q Growth across a range of discretionary consumer categories was exceptionally
strong in FY11 with growth rates of 50%+ relatively common
q Companies attribute this at least partly to a degree of catch-up after the modest
growth seen in FY09-10 and expect growth to moderate in FY12
q While there is little evidence of a sharp consumer slowdown, segments where price
inflation is high are seeing demand soften (eg. garments and diamond jewellery)
q Most companies highlighted staffing challenges as a key worry
Valuations rich, near term risks to the downside
q Strong demand in FY11 has driven a rerating in discretionary consumer stocks
q Whilst the long term potential remains high, moderating near term growth and high
cost pressures pose downside risks over the next year
q We retain U-PF on Titan, Shoppers Stop and Pantaloon; O-PF on Jubilant Foods
Secular growth, cyclical peak
CLSA India organised a ‘consumption and new media’ themed tour last week,
meeting a range of listed and unlisted consumer and internet businesses (see
table below for list). While the companies and people we met were spread
across a range of income segments as well as business models, we have tried
to synthesise the key messages here and drawn conclusions from a listed
market investor perspective.
Figure 1
Companies we met as part of the tour
Company Description
Redbus India's largest online bus ticketing company
United Breweries India's largest beer company
Madura Garments India's largest premium branded apparel player
Titan India's largest watches and branded jewellery company
Fossil India Indian arm of a US$6bn US watch and accessory manufacturer
InfoEdge India’s largest Internet company in job & real estate classifieds
HomeShop 18 India's largest TV shopping channel and 2
nd
largest e-shopping platform
Jubilant Foods Indian franchisee of Dominos Pizza and Dunkin Donuts
Mankind Pharma Upcoming pharma company with a burgeoning OTC/FMCG business
Infniti Motors Luxury car dealer
Cleartrip Second largest travel website in India
Sula Wines India's largest vintner
Groffr Upcoming website for group deals
Shoppers Stop India’s leading department store
Justdial India’s largest online yellow pages
Oberoi Site visit to the property development and mall in suburban Mumbai
Source: CLSA Asia-Pacific Markets
Long term growth across consumer segments
All the companies we met expressed optimism around medium-long term
growth with even the most conservative talking about 15%+ CAGRs. The
confidence in growth spans companies targeting consumers across income
segments, from rural India to the top 1% of the urban rich. The one segment
which is still relatively sub-scale, although growing well, is luxury where India
is 5-10 years away from becoming a meaningful market.
Some of the factors that companies highlighted as driving this growth were:
q A growing middle class, the incremental spending power of which is
boosted by historically high savings rate and lack of leverage among
Indian households
q A relatively young population with a large number of people entering the
working age population. Beyond the boost to overall household spending,
these consumers also drive adoption of new products and channels
No comments:
Post a Comment