Morning Insight

Morning Insight
15 April 2015
For private circulation only
Global Economies and Equities
 This morning the Asian stock indices have posted mixed performance – Chinese data on
its exports and GDP growth have led to some of the Asian equity indices to fall while
Chinese indices are in significantly positive territory;
China’s March exports fell 15% yoy while its imports fell 12.7%, which is the sharpest
rate since 2009. Due to poor performance on both exports and imports, there were
worries on China’s January-March GDP growth rate. However, China reported this
morning 7% GDP growth for this first quarter of 2015. This 7% growth is the weakest
expansion since 2009 – however, in our view, as long as China maintains its growth at 7%,
there may not be serious setback to the global equities.
The World Bank cut its 2015 growth forecasts for developing East Asia and China,
and warned of "significant" risks from global uncertainties including the potential
impact from a strengthening dollar and higher U.S. interest rates. It expects the
developing East Asia and Pacific (EAP) region, which includes China, to grow 6.7% in
each of 2015 and 2016, down from 6.9% growth in 2014. That's down from its
previous forecast in October of 6.9% growth this year and 6.8% in 2016;
Singapore joined regional peers in refraining from easing monetary policy further after
economic growth last quarter beat analysts’ estimates. GDP rose an annualized
1.1% in the three months through March from the previous quarter;
Oil production from the fastest-growing U.S. shale plays is set to fall some 45,000
barrels per day to 4.98 million bpd in May from April, the first monthly decline in
over four years, projections from the U.S. Energy Information Administration
showed on Monday. The projected slip from 5.02 million bpd in April underscores how
record crude production from the U.S. shale boom may be backtracking after global
markets saw prices effectively slashed by 60% since June on oversupply and lacklustre
Indian Economy and the Equity Markets
 The domestic market gained strength in last couple of hours of trade on Monday
with the equity benchmarks closing at more than one month high ahead of JanuaryMarch quarter earnings. The BSE Sensex closed above the 29,000- mark, up 165 points at
29,044, the highest level since March 5. The NSE Nifty index reclaimed 8,800 level,
climbing 54 points to close at 8,834. Both the FIIs & DIIs were net buyers of stock worth
Rs.417.01 crore & 46.42 crore respectively;
The World Bank has said India continues to be the leading nation in remittances
pulling in $70 billion from its global migrant workforce in 2014. “Total remittances
in 2014 reached $ 583 billion. While India received $ 70 billion, China $ 64 billion and
the Philippines $28 billion;
Retail inflation, as measured by the consumer price index (CPI), slowed to 5.17%
year-on-year in March, compared to 5.37% in February. The fall was largely broadbased with food inflation, which constitutes nearly half the index, coming in at 6.14%
compared to 6.79% in February, clothing and footwear slowed to 6.27% yoy from 6.38%,
though fuel and light inflation perked up a bit;
S&P warns that India’s fiscal balance is vulnerable to financial or commodity risk;
Mutual funds pumped in over Rs.40,000 crore in equity markets in FY2015, making
it their first net inflow in six years for an entire fiscal. It should be noted that they
pulled out over Rs.14,000 crore in the preceding financial year, FY2014;
The World Bank has predicted that India’s GDP growth would outperform that of
China in both 2015 and 2016. While it expects China to grow at 7.1% and 7%, India is
estimated to grow at 7.5% and 7.9% respectively in 2015 and 2016;
Founder &
Managing Director
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Equinomics Research & Advisory Private Limited - Investment Adviser
15 April 2015
Morning Insight
Indian Economy (Continued)
 The RBI has been quite aggressively buying dollar from the spot markets – it has purchased $49.2 billion of
dollar from the spot markets during the first 10 months (April-February) of FY2015. In our view, this is the
brilliant move and it would help the economy in any possible event of pull out by the FIIs from the Indian debt or
equity markets;
We initiate our “BUY” recommendation on Bambino Agro Industries Ltd.
Bambino Agro Industries Limited (Bambino) is more than 3 decades old a small FMCG company engaged in
manufacturing vermicelli, macaroni and other pasta products at its manufacturing units located in Bibinagar- Andhra
Pradesh, Gurgaon-Haryana and at Indore -Madhya Pradesh. Over the years, Bambino has emerged as a market leader
in the pasta industry. The installed capacity of the company as on date stands at 1,30,460 tonnes p.a and products are
sold under the Brand name “Bambino” acquiring enviable reputation in domestic and overseas markets. Bambino has
a wide distribution network for selling the products.
Though Bambino is more than 3 decade old company, it still remains as a small FMCG company with a turnover of
Rs.262 crore in FY2014 (year end September). However, in the last 5 years it started growing significantly – while its
net sales have grown significantly. While its net sales have grown by 36% from Rs.193 crore in FY2009 to Rs.262
crore in FY2014, its net profits has grown little more than 3-fold from Rs.1.63 crore to Rs.7.11 crore during the
same period.
Cheaply valued FMCG stock, reporting consistent & improving numbers & performance
Bambino is one of the cheaply valued FMCG stocks (trades at 1.4x FY2014 EPS of Rs.8.56) with good brand
reputation in the domestic and overseas markets. Bambino has reported total income from operations of Rs.61.45
crore and a net profit of Rs.1.60 crore for the quarter ended Dec 2014.
Innovative range of products with global reach
From its ongoing efforts, Bambino has introduced an innovative range of products such as Spaghetti, Macaroni, and
Instant Pasta besides Indian Ethnic Food like spices, instant food mix, ready to eat sweets, snacks, soups powders, and
hing (compounded asafoefida) as value-added products to the already existing product line. At present, Bambino has
more than 74 prestigious products in variant styles, tastes & types and varieties. Its products are being
exported to various countries including USA, Canada, Australia, New Zealand, South East Asia, Middle East, Far
East, Japan & Africa. The decades of experience in Indian palate, understanding the global consumer
preferences, most modern machinery and large production capacity enriched the company to establish wide
international network and global reach to be a reliable business partner;
Pressure on Wheat prices to help improve margins
The global wheat prices are turning bearish due to surplus wheat production globally, which will lead to unlikely
pickup in the exports from India. This will pile up the inventory levels with the domestic producers which will put
pressure on the prices. As the company is in a segment which is more dependent on wheat flour for its products,
the pressure on the wheat prices will result in lower procurement cost to the company and hence will help
improving margins going forward;
Looking to reposition itself as a food – healthcare organization
As a pioneer in the vermicelli & pasta industry, Bambino is looking at future to reposition itself as a food healthcare
organization. With this objective, the company has strengthened its R&D by identifying lifestyle diseases and
developing traditional food of India, which also has health benefits. In order to establish that the product has got
proper certification, it is being tested in reputed institutions & hospitals by clinical trials, to ensure what we claim will
be in the final product. This will definitely enhances the value of the brand to enter a unique area of lifestyle diseases
and giving them suitable solutions, without having side effects. This will also broaden the company’s spectrum of
distribution to new channels like chemists, hospitals and other wellness stores. This will not only help the
company to grow further but also bestow good profits. This will transform Bambino into a trans-national company
with functional foods;
Equinomics Research & Advisory Private Ltd | For private circulation only
Outlook and Valuation
In our view, Bambino is a niche company in the small cap space which is set to emerge as a reasonable-sized FMCG
company in the long term. It is a deep-value stock and we expect the stock to move up to Rs.170/ in 12 to 18 months
timeframe, based on 15x FY2016E EPS of Rs.11.33. In the long term, this stock has a potential to emerge as a multibagger. Hence, we suggest our investors to buy Bambino Agro Industries at the current market price of Rs.114.50/.
Product suitability: This is a deep-value stock in the small cap space. Stocks in this space many times disappoint the
investors in the short to medium terms. It is unlikely to move along with the broader indices and in fact, it may underperform them in the short to medium terms. Hence, this stock is suitable for only for those investors, who are
very long term investors and also can take a significant amount of risk;
Disclosure: I, G.Chokkalingam, do not hold the shares of Bambino directly or indirectly through friends, relatives or
any proxies;
| Equinomics Research & Advisory Private Ltd
Stock Disclosure: Whether Stock Held By:
Bambino Agro Industries Ltd.
G.Chokkalingam & Family
Equinomics Research & Advisory Private Ltd
Investment Adviser
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G. Chokkalingam - Founder & Managing Director
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