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18March 2021 India Daily

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18March 2021 India Daily INDIA DAILY March 18, 2021 India 17-Mar 1-day 1-mo 3-mo Sensex 49,802 (1.1) (3.7) 6.2 Nifty 14,721 (1.3) (3.2) 7.1 Contents Global/Regional indices Dow Jones 32,826 (0.4) 3.8 8.3 Special Reports Nasdaq Composite 13,472 0.1 (3.5) 5.5 Theme Report FTSE 6,786 (0.3) 1.1 3.6 Nikkei 29,914 (0.0) (1.2) 11.6 Reliance Industries: E2G: JioMart survey 2.0 Hang Seng 29,034 0.0 (6.6) 8.8 Daily Alerts KOSPI 3,048 (0.6) (2.8) 10.0 Value traded – India Company alerts Cash (NSE+BSE) 627 802 424 25,89 Derivatives (NSE) 34,492 36,608 L&T Technology Services: LTTS - Deputy CEO's perspectives 2 Deri. open interest 6,459 6,264 5,615 Sector alerts Automobiles & Components: Electric scooter segment at an inflection point Forex/money market Banks: The retail show goes on Change, basis points 17-Mar 1-day 1-mo 3-mo Telecommunication Services: Telemeter 3.0 - Bharti shines, Jio loses on VLR front; VIL gains majorly in UP (W) Rs/US$ 72.5 (8) (22) (104) 10yr govt bond, % 6.8 (1) 29 63 Net investment (US$ mn) 15-Mar MTD CYTD (8,390 FIIs (132) 23,258 ) MFs (21) 4,137 (7,073) Top movers Change, % Best performers 17-Mar 1-day 1-mo 3-mo TTMT/A in Equity 130 (3.7) (1.3) 70.3 TTMT in Equity 306 (4.4) (7.4) 68.3 VEDL in Equity 224 (1.1) 16.2 53.0 GRASIM in Equity 1,367 (1.3) 10.4 49.8 ADSEZ in Equity 688 (4.1) 5.0 47.1 Worst performers BIOS in Equity 388 (0.9) (7.3) (15.8) DRRD in Equity 4,359 (2.0) (5.2) (14.1) PLNG in Equity 229 (3.4) (4.8) (11.8) DIVI in Equity 3,378 0.0 (6.6) (11.7) IPRU in Equity 427 (3.9) (12.6) (11.5) [email protected] Contact: +91 22 6218 6427 For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES. REFER TO THE END OF THIS MATERIAL. Company Report Reliance Industries (RIL) ADD Oil, Gas & Consumable Fuels March 18, 2021 THEME Sector view: Attractive E2G: JioMart survey 2.0. Our key takeaways from primary survey of 100 retailers CMP (`): 2,055 using JioMart in Bengaluru region include—(1) JioMart has enhanced economics for Fair Value (`): 2,050 retailers through a combination of lower prices, higher discounts and reasonable credit terms, (2) all retailers are packaging and delivering B2C orders for JioMart in BSE-30: 49,802 lieu of margins and delivery fees, and (3) JioMart’s B2B service levels seemed to be better in Bengaluru vis-à-vis Mumbai, wherein we conducted a survey in December. Reliance Industries Stock data Forecasts/valuations 2021E 2022E 2023E CMP(Rs)/FV(Rs)/Rating 2,055/2,050/ADD EPS (Rs) 73.5 84.5 101.5 52-week range (Rs) (high-low) 2,369-867 EPS growth (%) 10.1 15.1 20.1 Mcap (bn) (Rs/US$) 12,183/168 P/E (X) 28.0 24.3 20.3 ADTV-3M (mn) (Rs/US$) 25,698/354 P/B (X) 2.4 2.2 2.0 Shareholding pattern (%) EV/EBITDA (X) 16.6 11.1 9.0 Promoters 49.1 RoE (%) 9.2 9.7 10.3 FPIs/MFs/BFIs 27.2/4.7/5.7 Div. yield (%) 0.3 0.4 0.4 Price performance (%) 1M 3M 12M Sales (Rs bn) 4,956 6,208 6,785 Absolute (1.3) 3.5 105.8 EBITDA (Rs bn) 787 1,112 1,328 Rel. to BSE-30 2.4 (2.5) 26.4 Net profits (Rs bn) 443 537 644 Survey of grocery retailers: JioMart stacking up as preferred distributor We surveyed 100 grocery retailers in Bengaluru who have been in a partnership with JioMart for an average of the past six months. The purpose of this survey was to understand: (1) JioMart’s value proposition to retailers versus other distributors, (2) willingness of retailers to act as sellers on JioMart’s B2C online platform and (3) perception of JioMart’s overall offering. Our survey may have an exclusion bias as we excluded retailers who are not partners with JioMart. We present key findings of the survey in brief below and in detail later in the note. JioMart has chalked up noteworthy economics for all retailers. All retailers suggested that product prices offered by JioMart are typically lower than other distributors. More than half of the surveyed retailers recognized that availability of products, comprehensive range and discounts offered by JioMart are also better than traditional distribution channels. Tarun Lakhotia All kiranas/retailers pack and deliver orders coming via JioMart. Interestingly, all respondents mentioned that B2C orders from JioMart’s portal are being supplied and Garima Mishra delivered to households directly by the retailers; this is contrary to Mumbai, wherein most retailers were providing only last-mile delivery for products supplied by JioMart. Retailers Iftekhar Bidkar earn their product margins besides an average delivery charge of Rs15-20 per order. JioMart’s servicing levels in Bengaluru seemed to be better than Mumbai. JioMart Shubhangi Nigam seems to be offering better servicing levels in Bengaluru compared to Mumbai, wherein we conducted a survey in December 2020. Nearly 63% of retailers surveyed in Bengaluru indicated that JioMart representatives visit the stores at least on a monthly basis. Retailers viewing the JioMart partnership as positive for their business. Approval ratings for JioMart were very high with most of the retailers indicating that they have benefited from their partnership with JioMart so far. JioMart’s private labels stocked by all retailers, unlike Amazon. JioMart’s products under the private labels of Reliance Retail are stocked by all the retail partners perhaps indicating push from JioMart as well as better general acceptance of these brands. On the contrary, only 22% of Amazon retailers seem to be stocking its private labels. [email protected] Contact: +91 22 6218 6427 For Private Circulation Only. In the US, this document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities Act of 1933. This document is not for public distribution and has been furnished to you solely for your information and may not be reproduced or redistributed to any other person. The manner of circulation and distribution of this document may be restricted by law or regulation in certain countries, including the United States. Persons into whose possession this document may come are required to inform themselves of, and to observe, such restrictions. Oil, Gas & Consumable Fuels Reliance Industries About E2G and KIE’s Primary Research Practice Ear to the Ground (E2G), our market research series, is supported by KIE’s Primary Research Practice, a proprietary initiative that focuses on qualitative and quantitative primary market research. The practice is backed by extensive analyst experience in primary market research relating to B2B, B2C retail and agriculture. The objective of this practice is to help analysts understand on-ground realities in the context of their research and offer investors a context for our research and insights. KIE’s primary research desk also conducts and analyses bespoke market research for clients. 2 KOTAK INSTITUTIONAL EQUITIES RESEARCH Reliance Industries Oil, Gas & Consumable Fuels SURVEY OBJECTIVE E2G – Ear to the Ground is KIE’s market research series, which is our proprietary model focusing on primary research survey. We conducted a primary research survey among 100 retailers based out of Bengaluru. These retailers are primarily small mom-and-pop grocery shops. The key objective of surveying these retailers was to understand: (1) JioMart’s value proposition to retailers versus other distributors, (2) willingness of retailers to act as sellers on JioMart’s B2C online platform, and (3) JioMart’s perception in the retailer community. We conducted a survey of 100 retail shops in Bengaluru with an aim to learn more about JioMart’s B2B and B2C grocery operations. All retailers that we interviewed have had a partnership with JioMart for the past few months. We detail below the key purpose of the survey: Key reasons for kirana shops to partner with JioMart. What is JioMart’s overall share in kiranas’ overall product purchase? What proportion of retailers are using JioMart for services other than product procurement (inventory management, B2C sales on JioMart, receiving payments)? What are the most important attributes that determine the order of preference of retailers for selecting their distributor partners? How does JioMart’s distributor service stack up against others? Overall satisfaction levels of retailers with JioMart. How many retailers are happy with JioMart’s service? What can JioMart do better in order to serve its customers better? How do retailers perceive JioMart? What, in their opinion, is the reason for JioMart to seek their partnership? METHODOLOGY We conducted field surveys across 100 local grocery shops (selling primarily staples, packaged food, snacks and beverages, HPC, etc.). These retailers have standalone stores in Bengaluru that cater largely to walk-in customers. Participants were shop owners who are the primary decision makers of procurement and merchandising. The survey was developed by KIE’s research team covering the retail sector. (For more details on our methodology, please refer to Appendix 2). KOTAK INSTITUTIONAL EQUITIES RESEARCH 3 Oil, Gas & Consumable Fuels Reliance Industries SURVEY OF GROCERY RETAIL SHOPS IN BENGALURU: KEY FINDINGS Key findings of the survey are: (1) JioMart is offering cheaper product price to retailers compared to other distributors, (2) food and grocery is the most important category accounting for bulk of sales at these retailers, (3) JioMart has improved its service levels but there is headroom available to get more kiranas onboarded on the JioMart B2C platform, and (4) for the shops surveyed, JioMart seems to have a much larger share of the distribution pie compared to competitors such as Amazon.
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