Equity Analyst - Asia Consumer Sector, Investory

Devi Subhakesan

Equity Analyst - Asia Consumer Sector

ASIA CONSUMER: INSIGHTS AND INVESTMENT IDEAS

Investory

Investory is a Singapore-based boutique independent equity research firm founded in January 2017 with a primary focus on consumption themes across Asia-Pacific.

We aim to generate investible ideas based on consumption trends and outlook. We screen our ideas on several parameters - product potential, long-term growth and management commitment being the most critical.  We follow a fundamental analysis approach in our stock selection process and are not restricted by market cap.

We aspire to grow into a leading source of unbiased research, free of conflict of interest, for investors yearning for independent and disciplined analysis. 

We also undertake bespoke research mandates to support our Institutional clients’ investment needs.

Our team comprises of professionals with extensive experience in the Asian equity markets, in areas ranging from research, servicing institutional clients and investment management.

Equity Capital Markets

Kalyan Jewellers / Equity Capital Markets

In this report, we discuss Kalyan Jeweller's upcoming IPO pricing, post-money valuations and latest financials in conjunction with our earlier discussed view on the company's business outlook. In our earlier detailed report <a href="https://www.smartkarma.com/insights/kalyan-jewellers-ipo-lacks-lustre-look-beyond-the-prospectus" target="_blank" data-smartkarma-citation="insights:44841" rel="noopener">Kalyan Jewellers (IPO): Lacks Lustre. Look Beyond the Prospectus</a>, we had highlighted concerns on the company's growth prospects. Kalyan has reported steep losses for 9 months ending December 2020 and highlighted that sales from the Middle-east fell steeply compared to India. India based jewellers had managed to report a turnaround in this period helped by a strong recovery in the December quarter. Kalyan's downsized IPO is priced almost at the average investment cost price of its private equity investor, Warburg Pincus.

In this report, we discuss Kalyan Jeweller's upcoming IPO pricing, post-money valuations and latest financials in conjunction with our earlier discussed view on the company's business outlook. In our earlier detailed report Kalyan Jewellers (IPO): Lacks Lustre. Look Beyond the Prospectus, we had highlighted concerns on the company's growth prospects. Kalyan has reported steep losses for 9 months ending December 2020 and highlighted that sales from the Middle-east fell steeply compared to India. India based jewellers had managed to report a turnaround in this period helped by a strong recovery in the December quarter. Kalyan's downsized IPO is priced almost at the average investment cost price of its private equity investor, Warburg Pincus. 

Kalyan Jewellers IPO Priced Just Above PE Investor's Cost; Not for Quick Returns

Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

In our prior note <a href="https://www.smartkarma.com/insights/pre-ipo-kalyan-jewelers-nothing-differentiated-and-nowhere-near-to-market-leader-tanishq" target="_blank" data-smartkarma-citation="insights:48814" rel="noopener">Pre-IPO | Kalyan Jewelers: Nothing Differentiated and Nowhere Near to Market Leader Tanishq</a>, we had detailed our thesis around <a href="https://www.smartkarma.com/entities/kalyan-jewellers" target="_blank" data-smartkarma-citation="entities:29714:1" rel="noopener">Kalyan Jewellers (KALYAN IN)</a> and had commented that valuation will play a pivotal role in determining our recommendation on the IPO. With the IPO valuation out now, we discuss in detail our stance.

In our prior note Pre-IPO | Kalyan Jewelers: Nothing Differentiated and Nowhere Near to Market Leader Tanishq, we had detailed our thesis around Kalyan Jewellers (KALYAN IN) and had commented that valuation will play a pivotal role in determining our recommendation on the IPO. With the IPO valuation out now, we discuss in detail our stance.

IPO | Kalyan Jewelers: Valuation Too Premium Relative to Closest Listed Peer TBZ

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Kalyan Jewellers aims to raise around US$160m via a mix of selling new and existing shares in its Indian IPO. The company was established in 1993 and is backed by Warburg Pincus.The company is one of the largest jewellery companies in India based on FY20 (year ending Mar 2020) revenue, as per the Technopak report. As of Dec 2020, it had 107 showrooms across 21 states and union territories in India. It also had 30 showrooms in the Middle East.Earnings haven’t grown much over the past few years, as the company appears to have suffered from a strategic misstep. Over 9M21, revenue declined by 30.6% and the company suffered a loss.Having said that, the industry remains highly fragmented with ample scope remaining for organised players, like Kalyan, to gain market share. We have looked at the background of the company in our previous note, <a href="https://www.smartkarma.com/insights/kalyan-jewellers-pre-ipo-strategy-missteps-led-to-earnings-flatlining" target="_blank" rel="noopener">Kalyan Jewellers Pre-IPO - Strategy missteps led to earnings flatlining</a>. In this note, we will run the deal through our ECM framework and talk about updates since our last note.

Kalyan Jewellers aims to raise around US$160m via a mix of selling new and existing shares in its Indian IPO. The company was established in 1993 and is backed by Warburg Pincus.The company is one of the largest jewellery companies in India based on FY20 (year ending Mar 2020) revenue, as per the Technopak report. As of Dec 2020, it had 107 showrooms across 21 states and union territories in India. It also had 30 showrooms in the Middle East.Earnings haven’t grown much over the past few years, as the company appears to have suffered from a strategic misstep. Over 9M21, revenue declined by 30.6% and the company suffered a loss.Having said that, the industry remains highly fragmented with ample scope remaining for organised players, like Kalyan, to gain market share. We have looked at the background of the company in our previous note, Kalyan Jewellers Pre-IPO - Strategy missteps led to earnings flatlining. In this note, we will run the deal through our ECM framework and talk about updates since our last note.

<a href="https://www.smartkarma.com/entities/kalyan-jewellers" target="_blank" data-smartkarma-citation="entities:29714:1" rel="noopener">Kalyan Jewellers (KALYAN IN)</a> is a pan-India jeweler with 107 showrooms located across 21 states in India. It also has a sizeable presence in Middle East with 30 showrooms across UAE, Oman, Qatar, Kuwait and Bahrain. Our research on the jewelry industry in India suggests that except for Tanishq [owned by <a href="https://www.smartkarma.com/entities/titan-co-ltd" target="_blank" data-smartkarma-citation="entities:12630:1" rel="noopener">Titan Co Ltd (TTAN IN)</a>] which has carved out itself as a standout premium brand, most other pan-India and organized players have limited differentiation relative to competition. Kalyan is no exception. Its operational metrics suggest that it lags the market leader, Tanishq, by a wide margin despite being one of the largest organized players in the sector in terms of revenue and market share.

Kalyan Jewellers (KALYAN IN) is a pan-India jeweler with 107 showrooms located across 21 states in India. It also has a sizeable presence in Middle East with 30 showrooms across UAE, Oman, Qatar, Kuwait and Bahrain. Our research on the jewelry industry in India suggests that except for Tanishq [owned by Titan Co Ltd (TTAN IN)] which has carved out itself as a standout premium brand, most other pan-India and organized players have limited differentiation relative to competition. Kalyan is no exception. Its operational metrics suggest that it lags the market leader, Tanishq, by a wide margin despite being one of the largest organized players in the sector in terms of revenue and market share. 

Pre-IPO | Kalyan Jewelers: Nothing Differentiated and Nowhere Near to Market Leader Tanishq

Equity Bottom-Up

Tata Consumer Products / Equity Bottom-Up

In this insight, we discuss  <a href="https://www.smartkarma.com/entities/tata-consumer-products" target="_blank" data-smartkarma-citation="entities:258:1" rel="noopener">Tata Consumer Products (TATACONS IN)</a> 's potential to outperform peers in the India consumer sector in terms of revenue and profit growth over the next few years. Its inclusion in India's Nifty index from March 31st would attract more investor attention and investment to the stock. The predominantly beverages (branded tea, coffee) company that competes with global multinationals is now expanding its foods business to address the highly unorganised but growing domestic packaged kitchen staples and snacks/breakfast segment. From Tata salt to Tata Starbucks, this consumer goods company already have a wide array of brands under its portfolio. Leveraging on the goodwill enjoyed by the Tata brand in India and by expanding its reach and distribution wider, Tata Consumer is fast-tracking growth in the foods segment. The potential is immense, competition (national level) is scant and the young company (in its new avatar, name and structure) can make it big if it successfully adapts few pages from the playbook of <a href="https://www.smartkarma.com/entities/titan-co-ltd" target="_blank" data-smartkarma-citation="entities:12630:1" rel="noopener">Titan Co Ltd (TTAN IN)</a>- another Tata enterprise that leveraged quality and brand to take on large unorganised consumer sectors.

In this insight, we discuss  Tata Consumer Products (TATACONS IN) 's potential to outperform peers in the India consumer sector in terms of revenue and profit growth over the next few years. Its inclusion in India's Nifty index from March 31st would attract more investor attention and investment to the stock. The predominantly beverages (branded tea, coffee) company that competes with global multinationals is now expanding its foods business to address the highly unorganised but growing domestic packaged kitchen staples and snacks/breakfast segment. From Tata salt to Tata Starbucks, this consumer goods company already have a wide array of brands under its portfolio. Leveraging on the goodwill enjoyed by the Tata brand in India and by expanding its reach and distribution wider, Tata Consumer is fast-tracking growth in the foods segment. The potential is immense, competition (national level) is scant and the young company (in its new avatar, name and structure) can make it big if it successfully adapts few pages from the playbook of Titan Co Ltd (TTAN IN)- another Tata enterprise that leveraged quality and brand to take on large unorganised consumer sectors. 

Tata Consumer (TATACONS IN): Index Inclusion Adds Further Flavour. Tasty Mix.

India

Titan Co. Ltd. manufactures and retails jewelry and watches. The Company also produces perfume for men and women.

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Titan Co Ltd (TTAN IN)

Kalyan Jewellers IPO Priced Just Above PE Investor's Cost; Not for Quick Returns

Post money Valuations not excessive on a relative basis. Near term, concerns remain. Not for ST gains. Expect limited downside in 6-9 months. Will...

Devi Subhakesan

IPO | Kalyan Jewelers: Valuation Too Premium Relative to Closest Listed Peer TBZ

Kalyan's IPO valuation came out higher than our expectation. At >50x PE, it is valued at more than double that of its closest listed peer TBZ which...

Ankit Agrawal, CFA

Kalyan Jewellers IPO - No Glitter

Kalyan Jewellers aims to raise around US$160m via a mix of selling new and existing shares in its Indian IPO. The company was established in 1993...

Sumeet Singh

Pre-IPO | Kalyan Jewelers: Nothing Differentiated and Nowhere Near to Market Leader Tanishq

The jewelry industry in India is highly fragmented. Kalyan has limited differentiation relative to its competitors. It also lags behind...

Ankit Agrawal, CFA

Tata Consumer (TATACONS IN): Index Inclusion Adds Further Flavour. Tasty Mix.

Tata consumer is fast-tracking growth in the foods business by expanding into the unorganised India kitchen staples segment and expanding its...

Devi Subhakesan

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