Jindal Steel & Power

Company Profile

Jindal Steel and Power Limited (JSPL), an O.P. Jindal Group company, has a dominant presence in steel, power, mining, and infrastructure sectors. The company uses backward and forward integration process for producing steel and power economically. The Company reports revenue under three segments, namely Iron & Steel, Power, and Other. The Other segment consists of aviation services and machinery division. The company holds the third position amongst the world’s top steel-producing countries after China and Japan in FY 2016-17.

It has an installed steel-making capacity of over 6.75 million tons per annum (MTPA); an installed power generation capacity of approximately 5,060 megawatts, and pellet-making capacity of over nine MTPA.JSPL operates the largest coal-based sponge iron plant in the world and has an installed capacity of 3 MTPA (million tonnes per annum) of steel at Raigarh in Chhattisgarh. Also, it has set up a 0.6 MTPA wire rod mill and a 1 MTPA capacity bar mill at Patratu, Jharkhand, a medium and light structural mill at Raigarh, Chhattisgarh and a 2.5 MTPA steel melting shop and a plate mill to produce up to 5.00-meter-wide plates at Angul, Odisha.

Latest results

In the third quarter FY18 ended December 31, the company reported consolidated revenue of Rs. 69.93 billion, up 21% YoY. JSPL produced 1.39 million tonnes of crude steel, up from 1.15 million tonnes in 3QFY17 and sold 1.36 million tonnes compared with 1.16 million tonnes in the prior year period. EBIDTA grew 26% YoY to Rs. 16.06 billion. The company was able to reduce its net loss to Rs. 2.77 billion as against Rs. 4.55 billion loss in the corresponding quarter of last year. The improvement could be attributed to the overall improvement in the steel prices, which made possible a better realisation per tonne. Amongst businesses that contributed to this growth were power that saw a 27% increase in units generated and 37% sales growth. Performance of its International business, which comprises three coal mines and one steel producing facility in Oman, was impressive.

What we like

Jindal Steel is entering the portfolio for the fourth time and that’s because of:

Broad-based product portfolio –The company offers a broad range of products that caters to markets across the steel value chain. JSPL's product portfolio consists of steel product mix, construction solutions, and construction material and solutions. Its steel product mix category includes rails and head hardened rails, parallel flange beams and columns, angles and channels, plates, coils and wire rods, and rounds. The company produces the world's longest (121-meter) rails and it is the first in the country to manufacture large-size parallel flange beams. Its construction solutions category includes fabricated steel section, speed floor, light gauge structures, insulated dry wall panel, and Jindal Global Road Stabilizers (JGRS). The company is also engaged in power generation through its wholly-owned subsidiary Jindal Power Limited.

Geographical reach– Apart from being an Indian steel-giant, JSPL has extended its reach in other parts of the globe too. It’s continually focusing to capitalise on opportunities in high growth markets, explore core areas, and diversify into new businesses. In Oman (Middle East), the company has set up a $50 billion, 1.5 MTPA gas-based Hot Briquetted Iron (HBI) plant, and also now added a 2 MTPA integrated steel plant. In FY17, the steel plant in Oman delivered the highest ever steel production of 1.33 MT that helped in augmenting market share in Oman to over 40%. In Africa, the company has a coal mine in Mozambique, where coal production resumed in October 2016. During the last fiscal, the company produced 0.29 MT coal, and is planning to augment the capacity of the existing coal washery and increase the number of shifts to enhance production of coking coal from the Chirodzimines. The company is also expanding into steel, energy, and cement verticals. In Australia, the company is investing in greenfield and brownfield resource sector companies and projects to supplement its planned steel and power projects in India and abroad. In Indonesia, the company has invested on the development of two greenfield exploration assets. It is also exploring investment opportunities in the power and infrastructure sector in Indonesia.

Expansion projects underway– The company is stepping towards leveraging the demand prospects of steel. According to the World Steel Association, steel demand is on course to expand by 1.3% in 2017 to 1.535 billion tonnes and a further 0.9% in 2018 to 1.549 billion tonnes. The demand is due to a gradual recovery in developed economies and accelerating growth in emerging and developing markets, especially Russia, Brazil and India. The company expects domestic market to grow by 5% to 6%.JSPLis on track to ramp up its steel plants in Odisha, Chhattisgarh and Oman in the coming quarters. The company is setting up a 12 MTPA integrated steel plant with a total investment of $10 billion is being set up in Jharkhand. Also, a 7 MTPA integrated steel plant and a 12.5 MTPA integrated steel plant is coming up in Chhattisgarh and Odisha, respectively.

Newsworthy

•  Jindal Steel and Power has posted its life-time high monthly crude steel production in March 2018. A company statement said that crude steel production for March stood at 0.45 million tonne, up 55% than the corresponding month of 2017. Sales of crude steel in the month stood at 0.45 MT. The higher production of steel was attributed to JSPL’s new Basic Oxygen Furnace at Angul.s

Jindal Steel & Power

Company Profile

Jubilant FoodWorks Limited (JFL), a unit of Jubilant Bhartia Group, is one of India’s largest food service company. JFL was incorporated in 1995 and started operations in 1996. JFL currently operates the Domino’s Pizza and Dunkin’ Donuts brands in India. The company owns exclusive rights to operate the U.S.-based Domino’s Pizza brand in India, Nepal, Bangladesh, and Sri Lanka, and Dunkin Donuts brand in India. Dunkin’ Donuts is the world’s leading food café brand and includes burgers, wraps, sandwiches and beverages. Domino’s Pizza India is the largest pizza chain in India in terms of Restaurant numbers, as well as the world’s largest franchisee outside USA for the Domino’s Pizza brand. The company has a network of 1128 Domino’s Pizza restaurants across 265 cities and has 43 Dunkin’ Donuts restaurants across 12 cities in India (as of January 19, 2018).

Latest results

Jubilant Foodworks’ third quarter revenue grew 20.7% to Rs. 7.95 billion from Rs. 6.59 billion in the same quarter last year. The company attributed the revenue growth to demand growth on account of product upgrade. Solid contribution also came from online ordering of pizzas. Same Store Growth (SSG) for Domino’s stood at 17.8%, way above the negative growth of 3.3% in the third quarter of last year, which can be attributed the popularity of the company’s “every day value pricing” program. On the other hand, Dunkin’ Donuts unit continued its journey towards break-even. The company remained extensively focussed on Donuts and Beverages and closure of unprofitable stores. Better revenues along with cost optimization efforts led to better profitability. EBITDA for 3Q18 coming in at Rs. 1.37 billion at 17.2% of revenue, and a growth of 113.7% over 3Q17. Profit after tax stood at Rs. 0.66 billion at 8.3% of revenue, and a growth of 230.6% over the previous year quarter.  

What we like

Jubilant Foodworks is entering for the third time in our portfolio and that’s because of:

Resilient nature vis-à-vis market situation– According to a survey conducted by franchiseindiaweb.in, Domios is currently the second largest pizza franchise. It has a market share of roughly 70% in the pizza segment, which is expected to get doubled in the coming years. Despite a blow during the latter half of 2016 (mainly due to the government’s demonetization program), it fought back due to strict adherence to its 'value for money' mantra. Two years ago from now, the company’s share price was hovering between Rs. 970 and Rs. 1,000. After the announcement of demonetization in November 2016, share prices came down below Rs. 850. Today it has crossed the Rs. 2,000-mark. It offers pizzas at a price as low as Rs. 59 and is now offering upgraded pizzas (tasty crust, bigger toppings, more cheese and larger base) at same prices. The company has added new variants like burger pizzas and chocolate pizzas. With rising income levels, changing consumer lifestyle and growing likeliness for global cuisine, Dominos looks well positioned to capitalize the opportunities.

Cost optimization– Over the last seven years, the company’s business excellence team has applied Lean Six Sigma and other statistical techniques to identify key problems around process variation, defects and waste to deliver significant cost benefits to the business. Sharp focus on improving efficiencies and cutting costs through headcount rationalization and closing of loss-making stores have streamlined processes and increased profitability margins.

Innovation and technological advancements – The company is continually upgrading its systems and processes leveraging the tremendous advantages of information technology. At the supply chain centres, the company has introduced a hand-held device that enables automated FIFO using barcode management system, resulting in major advances in food control through better batch control. Other notable process improvements have come in the form of sourcing efficiency from using the reverse auction of ARIBA software and transition from ERP systems to SAP. Most of the trucks are equipped with GPS-enabled devices resulting in end-to-end, real-time visibility of movement, better planning and higher utilisation of assets. With technology, infrastructure and innovation strongly in place, the company has managed to streamline operations, minimize delays, efficient energy consumption and in turn to enable margin expansion. The company has enlisted its name in the top 10 Indian enterprises that have nurtured innovation using technology as a key tool.

Newsworthy

• Analysts expect Jubilant Foodworks to report an eyebrow-raising 267.1% YoY net profit growth in its fourth quarter earnings results. Net Sales are expected to increase by 20.9 percent Y-o-Y to Rs. 7.41 billion. However, the company is expected to report a decline in both top and bottom lines sequentially.

Titan Company Ltd

Company Profile

Titan Company Limited, a joint venture between the TATA Group and the Tamil Nadu Industrial Development Corporation (TIDCO) commenced operations in 1984 under the name Titan Watches Limited. Titan Company Limited is TATA’s largest consumer company, and India’s leading producer and retailer of watches, jewellery, eyewear and accessories. The company, together with its subsidiaries, manufactures and sells watches, jewellery, precision engineering components, eyewear, and accessories in India and overseas.

The company operates through four segments: Watches, Jewellery, Eyewear, and Others. It provides watches under the Titan Edge, Titan Raga, Nebula, Zoop, Orion, Purple, Obaku, Automatic, Tycoon, Bandhan, Octane, HTSE series, Sonata, Xylys, and Fastrack brands, as well as under the Tommy Hilfiger, Timberland, Police, and FCUK brands under a licensed agreement.

The company sells jewellary under Tanishq, Zoya, Mia and CaratLane brands. The Tanishq retail chain currently has over 200 exclusive boutiques in over 115 cities.

Titan Eyeplus, the third major line of consumer business, offers a variety of differentiated products to the end consumer consisting of frames, lenses, contact lenses and sunglasses. Benchmarked against the best in the world, Titan Eyeplus heralds standardization in the eyewear industry.

Titan also forayed into fragrance and handloom space in 2013. It launched SKINN fragrance brand targeting the urban, well-travelled Indian men and women. Titan has also increased its portfolio with Taneira, the latest range of handloom sarees.

Latest results

Titan Company's third quarter FY18 earnings ended December 2017missed consensus expectations. Consolidated profit during the quarter grew 21.3% YoY to Rs. 2.82 billion from Rs. 2.32 billion in the year ago quarter. However, growth was hindered by higher tax expenses and finance cost. Consolidated revenue from operations increased 8.3% to Rs. 42.75 billion during the quarter, compared with Rs. 39.48 billion in same quarter last fiscal. Revenue growth was on account of suspension of applicability of Prevention of Money Laundering Act, which benefitted its jewellery business and reduction of GST rates for watches and sunglasses. However, revenue came lower than the estimate of Rs. 45.64 billion. EBITDA came in at Rs. 4.22 billion against estimate of Rs. 4.72 billion, up 21.2% YoY and 0.1% QoQ. EBITDA margin expanded by 113 bps YoY to 9.9%. However, EBITDA margin contracted by 218 bps on sequential basis. Adjusted PAT increased by 21.1% YoY and 1.4% QoQ to Rs. 2.82 billion (less than market expectation of Rs. 3.3 billion). As of December 31, 2017, total store count stood at 1,439 stores and retail area was 1.87 million sq ft.

What we like

Titan Company is entering our portfolio for the second time and that’s because of:

Strong brand image– Titan Company flaunts a number of brands, both affordable and premium. With its diversified offerings that cater to the needs of every level in a society, the company has become a sweet spot in the lifestyle space. The company has its operations spread across India and 32 countries globally. Under the jewellery business, Tanishq brand was listed in the “Best Retail Brands Report” in Asia Pacific region. The report was published by Interbrand, the world's leading brand consultancy. Notably, Tanishq was the first Indian brand to be listed in the report for the first time. In the watch segment, Titan’s flagship brand, other in-house brands like Sonata and Fastrack are the most popular brands. The company has always been in the forefront to enrich its brand value with precision. It has two exclusive design studios for watches and jewellery, which is a testimonial to the creative and innovative spirit of Titan Company and is a cross-disciplinary combination of some of the most renowned and skilled designers from across the country.

Jewellery segment will continue to be the dark horse – In India, sentiment is the prime driver for jewellery purchase. People not only consider jewellery as a mode to celebrate festivities, but also as a status symbol, long term investment and hedge against inflation. According to market research firm TechNavio, Indian jewellery market could grow at a CAGR of 15.95% over the period 2014-2019. Titan’s jewellery business is the maximum revenue-generating entity under the umbrella, led by the “Tanishq” brand that offers contemporary and traditional jewellery, ‘Zoya’ brand that caters to the luxury segment, “Mia” that targets the working women, and “CaratLane” e-commerce brand. In the fragmented Indian jewellery market, Titan created a differentiation by offering premium designs at attractive price points. With increasing income levels and growing awareness to consider jewellery as a safe haven investment, Titan has all that it needs to take advantage of the opportunity.

Newsworthy

• Titan has released its pre-quarterly update for Q4FY18, wherein the company mentioned that its jewellery segment saw mid-teen retail sales growth during the quarter. The jewellery division benefitted hugely from the expansion of its gold-exchange program, as well as weddings, which brought in many new customers. Titan also saw good retail growth in Q4FY18 across its multiple brands.
• Titan has launched a limited edition of watches, titled Forever Kolkata Collection, with four designs featuring the Howrah Bridge, Victoria Memorial, Dakshineshwar Temple and the Bengali script, to celebrate 30 years of the brand’s connection with the city.