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Summary
of Contents
PULSE TRACK
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Infrastructure
Index up 9% for October 2006
STOCK IDEA
Fem Care Pharma
Cluster: Ugly
Duckling
Recommendation: Buy
Price target: Rs500
Current
market price: Rs358
A name FEM(mes)
trust
Key
points
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Leadership position in a niche
category: Fem Care Pharma Ltd (FCPL) has a dominant market
share (around 65%) in the niche segment of bleach cream. It is
also among the leading players in the liquid soap and
hair-removing categories. To boost its overall growth, the company
has introduced several product variants at various price points to
effectively tap the expected growth in the FMCG industry,
especially the fast growing beauty treatment and skin care
segments.
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Incremental growth from
exports: In FY2006, FCPL acquired a US-registered premium
bleaching cream brand, Jaquline, which has an established
presence in the UAE and Middle-East markets. The company plans to
utilise it as an umbrella brand to introduce skin care and beauty
products, and boost the overall growth of its export
business.
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Margins to firm up: The
introduction of high-margin premium products has positively
affected its operating margins. The company has also commissioned
a new manufacturing facility in the tax-blessed region of Baddi,
Himachal Pradesh. The fiscal incentives in the form of income tax
and excise duty exemptions are further boosting its overall
profitability.
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Consolidation of its marketing
arm: The distribution of FCPL's products is done exclusively
by its 60% subsidiary, Mirasu Marketing. FCPL is expected to
acquire the remaining 40% stake (held directly by the promoters)
in Mirasu Marketing over the next one year. The consolidation is
likely to result in marginal dilution in its equity base (about
1-1.5% on the higher side) but would be earnings accretive.
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Attractive valuation: The
consolidated revenues and earnings are estimated to grow at a CAGR
of 17.5% and 48.3% respectively during FY2006-08. Currently the
stock trades at 9.9x FY2007E and 8x FY2008E earnings. We recommend
a Buy on FCPL with a price target of Rs500.
SECTOR UPDATE
Telecom
Record breaking
month
Riding on the cellular boom and the
aggressive strategy by the operators to add new users, the Indian
telecom operators are breaking new records. Both the GSM and CDMA
industries witnessed a robust growth in subscriber add-ons taking
the mobile subscriber base to 140.0 million at the end of November.
However the key highlight for the month was witnessed in the GSM
space. With an additional 5.0 million GSM subscribers bagged during
the month, the total GSM mobile subscriber base stands at 100.7
million at the end of November, marking its entry into the elite 100
million GSM subscriber club. India now has the third largest number
of GSM mobile subscribers next only to China (401.7 million) and
Russia (152.2 million).
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