Aiming For The Sky

Earnings Roundup

Colgate dropped 5%. The company’s topline and bottomline missed estimates. Also, volume growth of 10%-11% (on a low base) failed to impress. 😕 To its credit though, the company did manage to improve margins. Price hikes and tighter cost controls aided the expansion. Here are the key stats: 📊 

• Sales: Rs 1166 cr (vs Est: Rs 1200 cr)
• EBITDA: Rs 355 cr (vs Est: Rs 365 cr)
• Margins: 30.5% (vs Est: 30.4%)
• PAT: Rs 233 cr (vs Est: Rs 243 cr) 

Ram Raghavan, Managing Director at Colgate-Palmolive (India) Ltd, said :

Despite the challenging external circumstances we are pleased with our sustained growth momentum across all categories… Our continued investment in brand building and innovation has seen our core brand metrics also strengthen. 

Current valuations largely discount most of the positives. A meaningful pick-up in sales will be key for the stock’s future. Maybe brush your teeth thrice a day? 🤭

Colgate is up 9% YTD. 

Coforge rallied +8% on strong earnings. 💪 Broad-based growth across its key verticals drove the outperformance. Margins fell 245 basis points due to higher wage costs. 💸 Order book rose +39% over the previous year to $645 million. Here’s more details: 

• Revenue: $200 million (vs Est: $189 million)
• Net Profit: Rs 124 cr (vs Est: Rs 133 cr)

Sudhir Singh, Chief Executive Officer at Coforge Ltd said: 

With a signed order book, net headcount addition, and large deal size that have set a new record for the firm, we are primed to deliver robust, predictable, and profitable growth

Coforge raised its FY22 revenue growth guidance to at least 19% vs 17% earlier. Also, the company said that it does not see any headwind to growth and that the guidance is conservative. Now that’s what you want to hear. 🤗

Coforge is +91% YTD. 📈

Sky Is The Limit

Billionaire investor Rakesh Jhunjhunwala is entering the aviation business. ✈ Jhunjhunwala, along with a few industry veterans, is planning to launch a new ultra-low-cost airline Akasa Air. Reports indicate that he may invest $35 million in the airline venture for a 40% stake. 💰

Even by Jhunjhunwala’s standards, this appears to be a risky bet. Airlines in India were struggling even before the Covid-19 pandemic. Weak pricing power and high fixed costs have been the key culprits for this *cough* Kingfisher/Jet *cough*.

So what’s different this time around? To put it simply, it’s the timing. ⌚Jhunjhunwala is entering at a time when the market cycle is at the lowest level. Current players like IndiGo and SpiceJet are struggling. And a majority of the competition is out of business. 🔒 This sets up perfectly for Akasa to lift off, at least theoretically. Rising preference for air travel, infrastructure buildup, and Govt support are key long-term positives. ✅

Will this be the aviation sector’s “Jio moment”? Or another Kingfisher flop? Only time will tell. 🤷‍♂️

In Search Of The One

Paytm is looking for a partner to kick start its general insurance business. 🤝 According to reports, they are exploring joint venture options with existing players. 

Due to its foreign ownership structure, Paytm cannot launch its general insurance business on its own. But, roping in a domestic player will help bypass the regulatory hurdles. ✌

As we all know, Paytm is a digital payment firm at its core. This has attracted their first 300M+ users. But, the company’s future growth depends on upselling its existing customer base with other financial services such as insurance, lending, and investing. 

We expect its future equity investors to really focus on its ability to 1) launch credible offerings that compete with pure-play firms, and 2) up-sell its huge customer base. 📊

Calendar

We’re in the thick of the earnings season. Here’s all the companies that will announce their results: