Results Update: Info Edge India Ltd, Parag Milk Foods, Narayana Healthcare, Healthcare Global, Max India Ltd:

Info Edge India Ltd: Info edge is my all-time favorite from E-commerce sector (click here for earlier study). It has never resorted to predatory discount offerings to have a transitory feel good factor and in the process destroying the long term survival and growth in the process. 

In spite of general slow down in the economy, it is continuously giving improved performance quarter by quarter. So this quarter was not an exception. Topline is 208 cr vs 193 cr however operating profits have shown even better at 58 cr vs 40 cr. NP is not comparable due to taxation impact in Mar-17. But for full year turnover is at 888 cr vs 748 cr, Operating profit at 144 cr vs 63 cr which is a great achievement. Net profit is also not comparable due to one time other income effect. Apart from good growth in Naukri.com business, other main factor behind the improved result is lower losses from 99acres.com. Operating loss from 99acres have fallen to 66 cr from 106 cr although 99acres is going to see high growth due to demand for affordable housing and overall economic growth and lower interest rates.

With all these efforts, Info Edge is now trading at a PE of 40-50 although it is deriving almost 40-50% of its value from its investments in Zomato, Jeevansathi etc. Zomato is on a strong growth path and I feel competition will be even lower as most of the players in so called food tech arena are leaving. So I think we may see the real re-rating of Info Edge from here on which I badly deserves.

Good time to buy at 880 levels. I am continuously sharing the views on Info Edge via emails. For non-subscribers I am pasting some of the discussions here:

---------- Forwarded message ----------
From: Gurpreet Singh
Date: 10 April 2017 at 12:18
Subject: Fwd: Info edge
To: Gurpreet Singh
Dear All, Just bought Info edge at 852...buying is just in final stages. I am buying this one in small since Jul-2015 with a keen eye on Zomato and 99acres as i never had doubts on Naukri. Management is top class. Zomato is doing great in the market with revenues for 2016-17 around 350 cr...80% jump...Operating burn down 81% to just 70-80 cr from 400 cr!!!

Ad growth is great at 60% to 270 cr. Food order business will see huge growth as Zomato never focused on lure of discounting instead its focus was always on genuine customers who needed ordering.

I think Zomato will touch 550-600 cr revenues this year (May be over optimistic) but i feel after 2nd quarter Info edge may cease to be a risky pick.

Regards

Gurpreet Singh.

---------- Forwarded message ----------
From: Gurpreet Singh
Date: 3 April 2017 at 10:34

Subject: Fwd: Info edge
To: Gurpreet Singh  
Dear All, Bought more Info Edge today at 810. But it should be a part of one's risky portfolio. Zomato is showing strong growth. Their food ordering business is growing 25-30% monthly. I am buying this for one and half year...but as i do always to buy these stocks slowly at every significant event. So far only bought 60% of my target qty. But i think this year by 2nd qtr i'll have finished the total quota.

But still a risky one...

Regards
---------- Forwarded message ----------
From: Gurpreet Singh Date: 6 December 2016 at 15:10 

Subject: Fwd: Info edge 

Dear All, Bought more at 872 today. Earlier avg is 825. This qtr results were great. Naukri.com is seeing good growth, losses in 99acres are coming down, Zomato is going well and is profitable in 6 countries including India.

I always like Zomato for their aggressiveness in growing across globe. No Indian brand is visible outside India. all the fights of tata/mahindra are only in India. So zomato may be the first indian global brand. They are just like TripAdvisor and i hope one day they can become the TripAdvisor of food. Food delivery is not food-tech and i think that our so called high headed food-tech newbies like Foodpanda has realized this and going to disappear.

Tech is always about value addition. So i feel Naukri.com will be here to reap the benefits of networking effects when high growth brings more employment and more business to Info edge.

Regards 

---------- Forwarded message ----------
From: Gurpreet Singh Date: 25 July 2016 at 22:03
Subject: Info edge
To: Gurpreet Singh

Dear all,

Info Edge has given stellar performance this qtr. turnover at 197 from 175 cr. However Op profit is at 41 cr from 19 cr which is mainly due to cost reduction in advertising from 46 cr from 25 cr which i think pertains to rationalization of 99acres.com. As explained earlier, Info Edge has weathered the negativity in india ecommerce very well so far..It is still above our buy price...My Avg is around 790. Its results does not include the results of Zomato since it is not its subsidiary; i think it is holding around 47% in it. Its owner Sanjeev Bikhchandani is one of the few in India who "feels" the e-commerce. He has made some great investments like Zomato, Policybazaar over time. It has been quite some time that i have studied it...so it needs a revisit. It is having around 1200 cr cash which is sufficient for further expansion. Looks like we should add more.

Actually the most important thing in understanding the business models of these e-commerce businesses is getting Network Effects....e-commerce is a completely different ball game. Links to study at our Blog:

http://oscillationss.blogspot.in/2015/08/info-edge-india-ltd-and-network-18_16.html

Parag Milk Foods: Parag Milk Foods is a proxy for changing Indian food habits (Click here for earlier study). With growth in income, we’ll be consuming more value added premium and branded products whether it is food, fashion or entertainment. Keeping in view all these themes we are buying structural shift stories like Tata Chemicals (Branded Pulses, Spices), Aditya Birla Fashion (Fashion), EID Parry (Branded sugar), Zydus wellness etc. Parag Milk is a play on dairy sector wherein we are moving from milk and Dahi to cheese. Whenever an economy grows especially the middle class then the consumption pattern takes a big shift; from low quality unprocessed products to premium high quality products with more value addition. We can recall the times when we could watch any movie in low quality pirated versions. But now pirated movies are a goner.

Selling of milk and straight milk derivatives like Curd is not Dairy....for me it is just logistics as no or minimum value addition is done to Milk. So as discussed earlier, it is better to call them retailer or distribution companies as they are not earning from "Production" but from distribution. But Parag chose the difficult path of premium value added products like Cheese than generic commodity products like Milk/Curd. We are already having another stunning diary player “Heritage foods” from lower levels of 200 and 370 and the same was advised at 500 again last year. It is trading at 1200 at present but will grow even faster from here on.

Parag Milk had a very bad 3^rd quarter due to demonetization and high milk prices which it couldn’t pass on to customers due to demonetization effect as demand was even lower for value added products at that point of time. So I was thinking that due to demoney this quarter results would also be bad taking the clue from muted results of Heritage foods due to difficult operating scenario in Jan-Feb-2017. But Parag has surprised big time. Its topline is at 428 cr vs 414 cr YOY but it is the operating results which are the big game changer. Its Operating profits is at 35 cr vs 30 cr last year (In spite of the increase in depreciation from 10 cr to 17 cr) although in Dec-16 quarter it was a loss of 26 cr. So this is big improvement and a sign that value added segment has better pricing power. Even its raw material costs are down at 68% of turnover as compared to 70% last year. 

I am sharing about Parag since it IPO days via emails and when it was down to 210 levels due to bad results of Dec-16 quarter I made good buying at those levels and I feel that we may not see these levels again. It should get its true valuation.

Parag has created another fantastic premium product with their organic fresh premium quality milk brand "pride of cows" which at present is available to around 25000 customers around Mumbai and Pune. But Parag has grand plans to launch this to pan India.

Just few days back they created another specialty product "Avvataar Absolute" which is 100% veg whey protein supplement by investing 110 cr. Whey solution is a byproduct of cheese manufacturing. I think this can turn out to be a master stroke as demand for protein supplements especially veg is growing fast in India and most products are costly as they are imported. Venky is also into it (Non-Veg) but this is from their unlisted company.

Few days back, they have also introduced milk based mango drink with brand name ‘Slurp”. Here again they have tried to be different from others by adding milk into the mango drink and they have kept the price at reasonable levels of 20 bucks for 200 ml pack. But it is interesting to see their brand promotion strategy as they have 3 consumer brand to establish; Pride of Cows, Avvataar Absolute and Slurp although their “GO” is already an established brand.

These products are having huge untapped market. Parag is spending big for branding after IPO. We can see some serious wealth creation here.

Narayana Healthcare, Healthcare Global and Max India Ltd: I am so sure about the growth of these two that I don’t even want to check their results. But I am doing this as I am yet to buy almost 40% of my target quantity. High quality and affordable healthcare is a segment which market is going to take some more time to identify but we are not. Just like Water, I feel affordable healthcare is a basic right and Government should make serious attempt (apart from wasting money on wasteful subsidies for vote bank) to provide the same to its citizens. Rather than wasting huge amounts on running Government useless Hospitals; I think they should think of something better alternative unless we assume that their IQ level is degraded like the service standards in their hospitals. Most of the Politicians have strong vocal muscles…so they just shout and shout. But irony is that there are some people who can still find value in these although these are just sounds…asymmetrical and originating from the stomach acids (not from third eye).

But still I think the likes of Narayana Healthcare, Healthcare Global, Thyrocare and Aravind Eye care are doing fantastic work in making healthcare affordable when in front of their eyes Government is making everything around healthcare unaffordable. I have no doubt that India will emerge as global hub in quality healthcare. Actually until now, healthcare (quality) is like a luxury as most of Indian (Global) population still can't afford it...but healthcare just can't be a luxury (Like Mobile telephony, you see where it is now)...it is a basic need...the need is to just think how it make it affordable....and companies like NH, HCG and Aravind eye care are just doing this...in some cases they are providing healthcare at 2-5% of the cost of western world.

I feel good that although the results of both have shown huge growth in last 2-3 quarters since we are buying; their stock prices are still around the same levels. It is good that we are being able to buy these at current prices....no need to worry about the under-performance of these relative to the market. Developed countries across the globe now just can't afford the high healthcare costs...they need some remedy...Poor countries (Asia and Africa) drastically need to find the sources of low cost healthcare. The answer to all of them is companies like NH, HCG because of their awe inspiring low cost model.

Medical tourism will be the next big story in India...it is good that nobody is talking about it in the market. But i am seeing this to be the much bigger story than IT. These two have unmatched capabilities in offering high quality care at fraction of cost of western world...some of their performance metrics are even better than their western counterparts. Like crisis response time taken by Narayana of their patients (like sudden heart attack in hospital) is just 7 minutes when western world has 30 minutes (don't think of the best hospitals in your cities).

Max India Ltd is another great play on healthcare. Its health insurance business under “Max Bupa” gets big synergy from its healthcare business. Max Healthcare has expanded its capacity to 5000 beds...turnover is around 2600 cr...but still almost 50% of capacity is fresh (may be more). Max India has 46% share of healthcare business.

Max Bupa is one of the largest brand in Health insurance.....i am highly optimistic on the growth of this vertical. Its premium will be around 650 cr this year. Max India has 51% share in it. I feel Max Bupa and Max Healthcare will provide great synergy to each other. Indians are badly under insured in healthcare and we pay most of the healthcare expenses out of pocket.

Antara Senior living is a novel concept in India. Breaking of joint family and Jobs commitment calls for senior living due to security and care aspects. I think their Dehradun project has been launched this qtr...ticket prices are upward from 1 cr  or so.

Both HCG and NH have given stellar numbers this quarter. They are still looking affordable even at premium valuations of 60-70 PE. Healthcare segment hasn’t performed so far in this bull run and I feel they can’t be kept far away as healthcare is a direct play of economic growth.

(Views are personal and should not be taken as a recommendation for buying or selling a stock. Stock markets are inherently risky so kindly do your Due Diligence before investing. I am not a certified Sebi Analyst and holding the shares discussed in this Post).