Yesterday’s Market Performance

Nifty: 16634.70 I 10.10 (0.06%)
FII Sell Net:  1071.83 CR
DAX: 15,860.66 I 45.19 (0.28%)

Sensex: 55944.21 I 14.77 (0.03%)
DII Sell Net: 151.39 CR
FTSE: 7,150.12 I 24.34 (0.34%)

We’d love to hear your thoughts on our newsletter. Please take this simple survey and give us your feedback. Survey

Howdy Toasters!

Join our Discord community where we discuss all things related to finance (trading, investing, economics, data, MFs & more) + memes (of-course). Join here (promise we won’t spam, have we ever??)

In today’s issue, we discuss;

• ABFRL’s stock price has corrected by 15%, the recovery rate is better & faster than most apparel brands.
• 10 years since Tim Cook became Apple’s CEO, let’s see how has the company flourished under his watch.
• Top movers and shakers of the market, other important financial news, and an educative concept to help you keep learning. Read along!

Allied Digital: 65.45 | +5.95 (+10.00)

• The share price jumped 10% after the company won a six-year contract for a global automotive giant. It had won a six-year contract valued at $88 million to transform the IT operating model and infrastructure landscape across workplace management for a global automotive giant, the company said in a release

CreditAccess Grameen: 601.25 | -19.15 (-3.09%)

• The script was down over 3% after the company’s board approved the issuance of non-convertible debentures aggregating up to Rs 100 crore

15% correction in ABFRL opens up a sweet opportunity (we believe); What’s happening & what can you deduce from this? 🤓

We covered the stock in our 02nd August issue (check here), making a case to track; since then the stock has corrected 15%, with no additional information released 

What’s happening? 

• ABFRL’s recovery has been faster than most apparel players (see image 1 below), excluding the wholesale channel (Lifestyle business), the company has seen industry leading recovery at 110% in Retail / Online channels (~80% of sales) in Q4FY21

• Post the second unlocking, the company recorded an industry leading revenue recovery of 40% in Q1FY22, with July-August trends / channel checks suggesting (source: Emkay Research) >90% recovery across brands

• Malls reopening (high % of Pantaloons sales), with a greater operational network (in addition to online channel) coupled with a strong demand due to end of season sale has helped the company at both ends of the spectrum (topline & bottomline)

• From a bottom line perspective, cost reductions (across the industry) were limited (see image 3 below), however ABFRL’s initiatives were in line with industry peers (in addition to cutting 35% of overhead costs)

• A faster recovery directly impacts margins (economics of scale et al.), with the structured cost saving initiatives, indicating a return to pre-Covid level margin profile

Interesting! Tell me more? 🤔

• The company indicated an aggressive growth strategy in their earnings call – 
  • Increase their digital presence (up 2.5x YoY in Q1FY22), with plans to launch a multi-brand website by Q4FY22 and targeting 2000 stores being omnichannel enabled by FY22
  • Launch of 2 new ethnic wear brands by Q3FY22
  • FY22 target to open 400 / 60 new stores across Lifestyle / Pantaloons
• In addition, company commentary in comparison to other players (from a recovery perspective) also indicates strong demand for the brand (see image below)
• Margin pressure (and the ability to execute such plans in the middle of a pandemic) may have spooked the markets (reflecting the selling pressure in the stock)

Okay! Valuations? What’s else? 🧐

• Post a 15% correction, the stock trades at a substantial discount to its peers, at 22x / 18x FY23E / 24E on an EV / EBITDA basis (see image below)

• A 15% fall in the stock price had us confused (guess the market does that to you), with facts / figures from our previous issue (& when the company released their earnings) still the same; we’ll be tracking to see if the stock breaks the cycle, and bridge the valuation gap present

Disclaimer: Authors of this newsletter don’t own the above-mentioned stock; Our content is educational in nature, we believe you should make your own decisions.

Tim Cook (Apple CEO) completed 10 years at the helm of the most valuable company on planet Earth; how’s it been and what next? 🤩

You can now invest in global equities. Check out more through this link

• 24th August 2011, the day Steve Jobs resigned as CEO, leaving the world’s newly crowned most valuable brand in the hands of his successor Tim Cook (who had previously held the title of COO & Interim CEO)

• 10 years later, Apple now consistently makes more money (& is likewise valued) than companies that effectively pump cash out of the ground (lolol), due to a meticulously crafted overseas supply chain (think: Foxconn) while delivering remarkably steady gross margins, and a growing product & services portfolio

• Then vs Now –

  • Numbers: 72 Million Iphones sold in 2011 vs 250 Mn Sold in 2021

  • Top Selling Phone: In 2011 it was Samsung Galaxy SII, with the Iphone at #4; in 2021, the top 4 sellers are all Iphones

  • Market Cap: In 2011, at the time of Tim Cook taking over, Apple was briefly the most valued company, at USD 337 Bn; in 2021, Apply is comfortably the most valued at USD 2.5 Tn

  • Profits: Q1FY11, Apply had USD 6 Billion in quarterly profits; in Q1FY22, the company recorded USD 29 Bn in quarter profits (wt*)

  • Returns: USD 1000 invested in Apple stock in 2011, is today worth ~USD 11,000, and that’s not including dividends (get outtt)

• As of June 2021, the company (feel like we do a dis-service calling it a company), makes USD 10,000 every second, of which USD 3,600 is pure profit (man what do we even say?

Damn!! If there ever was the quintessential blue-chip (sorry Jeff); Tell me more? 🤔

• Iphone’s still the core of the company, >50% of sales from that product line, with Cook unable to replicate the cross generational successes of the Mac, Ipad & the Iphone, and instead building out wearable products like Watch & Airpods (more recently) and scaling the services business

• In 2011, Apple Services constituted of Itunes, App Store and iCloud; today the company’s self-feeding ecosystem has expanded to include TV, streaming, fitness, games, recording USD 17.5 Billion in revenue in the last quarter, up from USD 4.8 Billion in Q1FY15 alone (which is more than all other hardware businesses, ex- Iphone)

• The company looks to be edging into banking as well, through Apple Pay, Apply Card, Apply Cash and now Apple Pay Later (their shot at the Buy Now Pay Later category)

• Apple’s a leader in privacy (personally championed by Tim Cook), from FaceID, to the multiple iOS upgrades that have focussed on ensuring your data is controlled by you

What else caught our eye? 👀

RBI re-approves appointment of Mr. Sandeep Bakshi as MD & CEO of ICICI Bank 

• RBI’s term extension of 2 years, will give Mr. Bakshi a total initial tenure of 5 years (October 2018 to 2023); at age 61, he will be eligible for two more terms as mandatory retirement age for bank MD & CEOs as stipulated by the RBI is 70

• Under the leadership, the bank has seen a major transformation across business & financial parameters (not to mention steadying the ship after the very public dismissal of Mrs. Chanda Kochhar)

• The bank has steered well through the pandemic, building strong provisional / capital flows, and is en-route to generating strong return ratios, delivering on strong growth

Reliance to club JustDial in the launch of superapp 

• Refurbishing JioApp (launched a couple of months ago) to include multiple consumer offerings (apart from grocery), the company plans to include the recently acquired JustDial, while also integrating Whatsapp Payments (similar to WeChat in China)

• Apart from the cellular entity (Jio), the company has built ~20 applications under its umbrella (with limited amounts of traction), with the soon to be announced e-commerce policy key for the company in terms of firming up the ‘Super App’

Delhivery plans USD 1 Billion IPO 

• Softbank Vision Fund & Carlyle backed logistics & supply-chain start-up plans to file the DRHP in October for a planned IPO of USD 1 Billion, with a view towards a March 2022 listing

• Founded in 2011, the company manages >1.5 Million packages a day, through its 43,000 strong force across India

• The company recently completed its Series H round in June, on-boarding investors like Fidelity, Fosun International & Tiger Global

Vulture Fund

A fund that buys the distressed debt of commercial companies or sovereign nations at a cheap price and then often sues them for the entire value of the debt. The resemblance to vultures is because these funds profit from the debt of failing companies or poor nations.

For more click here