Yesterday’s Market Performance
Nifty: 15856.00 I 32.00 (0.20%)
FII Sell Net: 163.31 CR
DAX: 15,669.29 I 154.75 (1.00%)
Sensex: 52975.80 I 138.59 (0.26%)
DII Buy Net: 2187.80 CR
FTSE: 7,027.58 I 59.28 (0.85%)
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In today’s issue, we discuss;
- Bharti Airtel announces price hike for its postpaid subscribers; a bigger picture for the company’s revenue and EBITDA.
- Jubilant FoodWorks released their Q1FY22 numbers- company’s Q1 revenue grew by ~131%.
- Top movers and shakers of the market, other important financial news, and an educative concept to help you keep learning. Read along!
Magma Fincorp: 151.90 | 7.20 (4.98%)
The share jumped 5% after Adar Poonawalla-led Rising Sun Holdings acquired a controlling stake in the company
Mahindra Holidays: 324.30 | 14.15 (4.56%)
The stock gained over 4 percent after the company said at a meeting to be held on July 29 a proposal for issuance of bonus equity shares, subject to requisite approvals, would also be considered.
Note: Above are not owned by the authors of the newsletter and are neither recommendations to buy the stocks; not our style at FinLearn.
Bharti Airtel raises postpaid tariffs (finally); sign of changing times? Or does Jio continue pulling a Jio?😶
Bharti IN has recalibrated its postpaid plan offerings for both, retail & corporate subscribers, taking small (?) but huge EBITDA accretive steps; there have been significant changes on the corporate side, with miniscule changes on the retail side of things (an increase of data limits for some plans)
For corporate plans, the entry-level tariff has been revised upwards to INR 299, implying an INR 50 & INR 100 increase from the earlier offerings; this transpires to a tariff hike of 20% and 50% respectively (massive); plans come into force from the next billing cycle
In financial terms, this is massive; a price hike of INR 50 & INR 100 directly contributes to a 2% and 3% increase to the India Wireless revenue and EBITDA numbers respectively in FY21 (as a consolidated level, the impact is 1% and 2% respectively)
At the end of Q4FY21, the total postpaid subscriber count for the company stood at 16.6 Mn (5.2% of overall mobile base), evenly split between retail & corporate and currently contributing ~13% to the revenues of the India wireless business
Considering the relatively low Average Revenue Per Customer (ARPU) for the corporate segment, the new tariffs in this category can now account for ~40% of the overall revenue
Damn!! How did this happen? And should I be worried about my bill? :PP 😅
Historically speaking, and we highlighted this in one of our earlier issues as well, but Bharti IN has categorically stated that they would be price takers, and not makers (for all those Eco 101 folks out there), so this is a pleasant surprise
So a couple of positives to extrapolate from this (by us that is) –
Stickiness is high in the Corporate customer base, so inelasticity of demand will continue, and risk of churn would be on the lower side (in % terms)
Jio is strong in the PrePaid space, and has often tried to find a way to break Bharti IN hold, with deep discounts and greater plans, but to little success; a price hike puts that to bed (for now?)
VIL is the third player in the telecom market in India (just about right? Jk jk) and a price hike is what they’ve been promising investors looking to pump money; this gives Vi a pathway to that
A price hike is overdue, like 4 quarters overdue :P; very likely this is going to be positively appreciated by the investor community (i.e. track the stock)
Next in line is the proposed tariff hike in the prepaid segment, (also has a much larger impact on revenue & EBITDA) although the company didn’t indicate when / if they were planning one in the near term (why would they, with Jio lurking)
Jubilant Foodworks (Dominoes & more) dropped their numbers; what did we make of them and what can you extrapolate for other listed players like Zomato (feels weird right?) 🧐
- JUBI IN witnessed near 100% sales recovery in operational stores on June 21 vs 94%/88% in April / May 21 (comparing to FY20 levels); street consensus revenue estimates missed by 3-4%
The company’s Q1 revenue grew by ~131% and recovered to 94% pre-covid levels, helped by a 150% / 100% recovery in Delivery / Takeaway Channels; dine-in channel remained impacted with a low 12% recovery (pandemic et al.)
New store addition was impacted due to localized lockdowns (20 stores in Q1 vs 50 in Q3/Q4 FY21) and restrictions on hours of operations and decline in dine-in operations severely impacted recovery chances
EBITDA % remained flat at 24.1%, helped by a variable employee cost structure (-18% QoQ) and likely benefits of some rental concessions; the company took some product price and delivery charge hikes during the quarter to manage the impact of raw material/fuel inflation on margins
Okay and? Give me something exciting man!🤔
- The company’s on a mission to make up for a lost time (like the rest of us?) with aggressive expansion plans; they plan to open 150-175 new stores in FY22 (mix of full service & delivery only);
JUBI IN management believes times have changed post-pandemic, especially given the stress restaurants have faced (leading to the closure of ~30-35% in the last year), and revising previous estimates pertaining to the total number of permissible Dominoes outlets in the country (by area and consumption) from 1800-2000 to 3000
The company highlighted increased expenditure in data science and artificial intelligence teams with the aim of becoming a food-tech giant (more details were in short supply); our guess is a play on dine-in + delivery across Dominoes and the other franchisees (Dunkin Donuts, Hong Chinese & Ekdum Biryani) and possibly more?
Given the handle on costs the company commands (proven in this quarter’s results), the street expects the company to deliver 55-60% earnings growth in the next 2/3 years, on the back of an aggressive expansion plan and quasi tech play
The market was enthused (to say the least), the stock reacted positively (+10%) on Thursday (results and calls were on a trading holiday)
What else caught our eye? 👀
Retail chicken prices cross INR 200 per kg (might as well try mock meat now?)
- With a jump of about 35% in the last 2 months, retail poultry prices are expected to stay rooted due to the doubling of poultry feed prices and a reduction in production amid falling demand
- The average cost of branded poultry has increased to INR 78,000 per tonne from INR 37,000 per tonne last year, due to the increased cost of soybean (that makes up 30% of the feed) and maize (which has increased from INR 14 per kg to INR 20 per kg)
- Losses due to high production costs and uncertainty over demand have forced several poultry shops to shut operations (~30% of small farmers in the unorganized space have been rendered unemployed)
- A possible solution is to allow duty-free import of soybean to neutralize the demand vs supply mismatch and restart operations
No hike in fuel prices for the 6th day in a row (why thank you very much)
- Holding steady for the longest time in weeks, fuel prices maintained their 100+ level on the back of global development in fuel production and rising US inventories
- Mumbai has the highest price across metros (for this too lol) with petrol at INR 107 and Diesel at INR 97
Arbitrage means purchasing something like foreign money from one place and selling it to another place where the price of the foreign money is higher than buying it.