vaibhav global ltd -...
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BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING
VAIBHAV GLOBAL LTD
Stock Coverage
Date 22nd Nov 2018
BSE Code 532156
NSE Code VAIBHAVGBL
Market Cap (Rs Cr) 2379.80
52 week High/Low 795/573.30
Industry Diamond &
Jewellery
Face Value Rs 10/Share
Shares O/S (In No) 3.26 Cr
EPS * 44.92
Book Value* 192.83
P/E 16.25
P/B 3.79
*Note: On Consolidated TTM basis
Shareholding Pattern as on Sept’ 2018
Research Analyst : Astha Jain
Vaibhav Global is an electronic retailer of fashion jewellery and lifestyle products in the US and UK markets, selling on its proprietary TV shopping and web platforms with direct access to almost 100 million TV households. The Company delivers deep value proposition to discount seeking customers and has organically developed a robust B2C franchisee in its focus markets. VGL has expanded its portfolio, focusing on adjacent product categories that target similar market segments. While fashion jewellery forms a large part of the portfolio, the company also sells lifestyle accessories, home textiles, kitchenware and cosmetics, all of which are targeted at the same customer and enable access to a larger part of the customer’s shopping value pie. Healthy Financial performance: In Q2FY19, company’s revenues grew 28% to Rs.452 crore driven by strong growth in both retail and B2B businesses. Retail growth was based on volume expansion across both geographies - US and UK and both sales format - TV and web. Retail revenue grew 26% YoY in INR terms with web and TV growing at strong 32% and 23% respectively. In constant currency terms company delivered 14% revenue growth in US and 24% in UK which is ahead of the growth guidance shared by company earlier. During the quarter, gross margins were at a healthy 62%. EBITDA during the quarter increased by 77% YoY to Rs.55 crore, as company expanded margins by 340 basis points to 12.2% while PAT grew by 96% to Rs.39 crore during the Q2FY19. Increasing market share: Since last 12-13 quarters company have been gaining market share. Company’s market share in US and UK together accounts for around 2.3% presently against 2% last year. Given low cost structure along with proximity to the sourcing channels which enable company to sell cheaper than its peers, & its agility to be able to sell through social media, through market places, company have an advantage over its competitors in terms of gaining market share. Also, in Q2FY19, company added over 42,000 new registrations and is now catering to over 329,000 unique customers on an annualized basis. Average annualized quantity purchased by each customer has increased to 29 pieces in Q2 FY19 versus 28.3 pieces in Q2 of last year & company’s overall customer retention rates stood at 46.4% in US and 54.3% in UK .
Valuation
The company is currently trading at 16.25 of TTM eps of Rs 44.92 while it is trading at 16x of FY19E eps & 13x of FY20E eps. Company has shown stellar financial performance in Q2FY19 & will continue to derive significant benefits of operating leverage on a fixed cost base. Given company’s unique vertical business model, strong financial performance & upcoming festive season in the US and UK which is seasonally the strongest quarter for company ,we expect company to continue its healthy financial performance going forward. Hence we recommend “Buy” on the stock with price target of Rs 840 for long term horizon.
www.hemsecurities.com
For Private Circulation Only HEM RESEARCH
BUY CMP 730 TARGET 840 LONG TERM INVESTMENT
Promoter 65%
FII 9%
Others26%
VAIBHAV GLOBAL LTD
BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING
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Product Portfolio of company consists of Fashion Jewellery which includes bracelets, Bangles ,Earrings, Studded Jewellery etc. Fashion Accessories segment consists of products like Watches, Handbags & Scarves while Lifestyle Products includes Home Décor, Bed Linens, Pillow Covers & beauty products. Co’s channel in USA is Shop LC (TV channel & e-com website/mobile app)while in UK it is TJC -The Jewellery Channel (TV channel & e-com website/mobile app) Company source product s by leveraging its global supply chain, engage in world-class manufacturing at its state-of-the-art facilities in India and beam television content through its longstanding relationships with a large number of television networks in the US and the UK, while also streaming this content on the web. Co’s global supply chain capability of 12 million pieces spans the micro-markets of India, Indonesia, Thailand and China. Co’s manufacturing processes and operations are characterised by low costs and minimal wastages, ensuring efficient resource use. Out of co’s two modern manufacturing units in Jaipur, while one is ISO 9001:2008-certified, the other is a fully integrated LEED-certified ‘Gold level’ building located in a SEZ with a capacity of six million pieces per annum. Company’s US market is served by a large number of television networks, enabling company to beam content in 71.2 million households on FTE basis, out of the 120 million households. Company have improved product presentation by investing in a large and state-of-the-art studio facility and also reinforced its backend through operationalising a new warehouse. Company’s consumption market of the UK is also catered to by a broad range of television network carriers that enables company to have a 100% presence in 25 million households (FTE basis). With a view to understand customer psychology better, company incorporated the IBM Unica platform for targeted behavioural marketing. Company beam live television content on the web, ensuring that company is present where its customers want to be. Company is witnessing rising sales traction on the web,. Also, both Shop LC and TJC have a mobile app and company is witnessing growing interest in these among its customers, reflected in the rising number of downloads every day. Company during last one year introduced in-house brands such as Sukriti, Morocco Collection and Chaos natural leather hand bags and TjC One for One home products,.Brands launched in US were Art Natural beauty brand, Crayol Essence Beauty brand, Note Cosmetics, My Magic Mud Charcoal based Oral care brand, Manuka Doctor of New Zealand skin care collection, Sankom of Switzerland shapewear, Southwest handbag collection by P&G. Brands launched in UK were Babor skin care brand, Turbo body Massager, DMM makeup brand, Serenity Spa diffusers, Sun Believable Tanning brand, Hair Secrets hair extension brand, Naturally tribal skin healing brand, Sankom Switzerland shapewear, TW11 Collection fashion handbags and finally Harry Potter Children toys. Company also offer a large portion of its channel inventory on online marketplaces like Ebay, Amazon, WalMart.com and Wish.com. This helps to supplement sales from existing inventory and also acquire new customers for the business.
For Private Circulation Only HEM RESEARCH
\
Tv Sales63%
Web Sales24%
B2B Sales13%
FY18 Jewellery & Lifestyle product Revenue
Tv Sales64%
Web Sales25%
B2B Sales11%
H1FY19 Jewellery & Lifestyle Product Revenue
VAIBHAV GLOBAL LTD
BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING
www.hemsecurities.com
Strong growth strategy
Company is following strong growth strategy which is reflected in strong financial performance by company. Company is emphasizing on Four R strategy, i.e Reach, Registertaion,Repeat purchase & Retention . Company have expanded the reach of its programming whether its television footprint, or through e-com or through market places. Secondly company is looking after registration, i.e, customer acquisition as a result of which company have seen the growth of customer acquisition stronger in recent months than in earlier periods. Thirdly, company has focused on increasing repeat purchase, and the fourth is retention, which have been witnessed in UK numbers that has got robust retention rate. Also, company has changed its strategy to organically grow the following on Facebook, Instagram and it have set up a completely new group for social media presently in US to take advantage of this phenomenon and its new strategy is to go with product offering on social media that in turn can generate sales as well as awareness on those platforms. Company has witnessed strong growth in volumes in Q2FY19 on the back of lower average price point. In last almost two year , company have optimized its cost structure into air time substantially. Company has successfully able to reduce its cost through negotiation and exiting from non-performing locations as company follows the model of assessing performance of particular segment or particular affiliate & if it doesn’t perform, company negotiate, and futher if no positive outcome comes from negotiation, company exit. As a result of which company has seen strong reduction in number of homes under its coverage over the last few quarters. Company have recently introduced a welcome pack for its new customers – giving them an understanding of its varied product catalogue, pedigree and promotions that company undertake. Under this, when company make new customers, company offers this package which consists of a letter from the local head of the business, Managing Director or President consisting of sample of some perfumes and some beauty products and also history about company .
For Private Circulation only HEM RESEARCH
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TV sales Web Sales
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TV sales Web Sales
VAIBHAV GLOBAL LTD
BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING
www.hemsecurities.com
Company has
consecutively posted
strong growth in ROE
since FY16 .
Co has turned positive
on free cash flow front
in FY17 & FY18
High volume growth
led the strong financial
performance by
company with eps
rising continously
Company is on its way
of deleveraging
balance sheet as a
result of which
company’s debt to
equity ratio is
continuously lowering.
Co’s expertise in manufacturing and sourcing quality products at optimal prices allows it to maintain industry leading gross margins.
-50.94
87.69
36.79 11.46 16.3523.49
-100
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FY13 FY14 FY15 FY16 FY17 FY18Net Worth ROE
For Private Circulation only HEM RESEARCH
-100
0
100
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FY13 FY14 FY15 FY16 FY17 FY18
Free Cash Flow (Rs Cr)
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Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19
EPS
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FY13 FY14 FY15 FY16 FY17 FY18
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20
Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19
OPM NPM
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VAIBHAV GLOBAL LTD
P&L A/c
Rs Cr
Particulars FY16 FY17 FY18 FY19E FY20E
Net Sales 1276.65 1438.94 1575.40 1811.71 2047.23 Growth ( %) -- 12.71 9.48 15.00 13.00 Expenditure 1218.31 1352.73 1426.97 1612.42 1811.80 EBIDTA 58.34 86.21 148.43 199.29 235.43 Growth (%) --- 47.77 72.17 34.27 18.13 EBIDTA Margin (%)
4.57 5.99 9.42 11.00 11.50
Other Income 16.92 15.70 10.47 12.04 13.61 Depreciation 23.65 29.41 25.45 27.42 30.98 EBIT 51.61 72.50 133.45 183.91 218.06 EBIT Margin (%) 4.04 5.04 8.47 10.15 10.65 Interest 6.82 6.41 4.30 3.53 2.89 Exceptional Item 0.00 0.00 0.00 0.00 0.00 PBT 44.79 66.09 129.15 180.38 215.17 Tax 4.97 1.51 16.68 32.47 38.73 PAT 39.82 64.58 112.47 147.91 176.44 Min Int & Ass Sh (0.01) 0.00 0.00 0.00 0.00 Consolidated PAT 39.82 64.58 112.47 147.91 176.44 Growth (%) -- 62.18 74.16 31.51 19.29 NPM (%) 3.12 4.49 7.14 8.16 8.62
Ratios
Particulars FY16 FY17 FY18 FY19E FY20E
EPS 12.21 19.81 34.50 45.37 54.12
ROCE(%) 10.83 14.02 20.85 24.98 24.58
ROE(%) 10.84 14.87 20.44 21.70 20.95
Book Value 112.69 133.25 168.76 209.13 258.34
Debt/Equity 0.30 0.19 0.12 0.08 0.05
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VAIBHAV GLOBAL LTD
Balance Sheet
Rs Cr
Particulars FY16 FY17 FY18 FY19E FY20E
Sh Capital 32.50 32.53 32.58 32.58 32.58
Res & Surplus 334.84 390.01 502.31 633.93 794.36
Sh App/Warrants 0.03 11.85 15.26 15.26 15.26
Minority Interest 0.01 0.00 0.00 0.00 0.00
Total Debt(Long Term+Short Term Borrowings)
109.16 82.72 66.58 54.60 44.77
Other Long Term Liab & Provison
2.33 4.36 3.75 5.01 10.50
Net Deferred Tax Liability
(6.72) (22.98) (31.41) (31.41) (31.41)
Sources Of Fund 472.15 498.49 589.07 709.97 866.07
Net Fixed Assets 128.62 126.19 119.75 106.78 101.97
Non –Current Investments
2.88 0.41 0.00 0.00 0.00
Intangible Assets 0.00 0.00 0.00 0.00 0.00
Other Non –Current Assets
21.23 17.15 12.95 15.76 17.58
Total Current Assets 459.83 509.22 598.72 739.66 982.88
Current Liabilities & Provisions
140.41 154.49 142.35 152.23 236.36
Net Current Assets 319.42 354.73 455.37 587.43 746.52
Uses Of Funds 472.15 498.48 589.07 709.97 866.07
For Private Circulation only HEM RESEARCH
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VAIBHAV GLOBAL LTD
Consolidated Quarterly Financial Highlights
Rs Cr Rs. Crore
Particulars Q2FY19 Q2FY18 Q1FY19 YoY% QoQ%
Total Income 451.73 353.32 385.92 27.86 17.05
Total Expenses 398.77 324.83 349.65 22.76 14.05
Operating Profit 52.97 28.49 36.27 85.91 46.04
Net Profit 39.16 19.96 30.05 96.17 30.32
PBIDTM % 11.73 8.06 9.40 45.41 24.79
NPM % 8.67 5.65 7.79 53.43 11.30
EPS 12.01 6.13 9.22 95.76 30.26
Past Price Movement
For Private Circulation only HEM RESEARCH
16 23 30 7
May
14 21 28 4
June
11 18 25 2
July
9 16 23 30 6
August
13 20 27 3 10
September
17 24 1 8
October
15 22 29 5 12
November
19 26 3
December
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SENSEX (35,492.62, 35,494.25, 35,112.49, 35,199.80, -274.711), VAIBHAV GEMS (744.450, 744.450, 715.500, 720.250, -10.4500)
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Sebi Registration No For Research Analyst: INH100002250
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NBFC REGISTERED WITH RBI
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Disclosure of Interest Statement
1.Analyst Ownership of the Stocks No
2. Hem & its Group Company ownership of the Stock No
3. Hem & its Group Company Director ownership of the Stock Yes
4.Broking relationship with company covered No