Mentioning Notes from Screener:

Operating Context and Financial Performance:

• Softening in prices of key commodities passed on to consumers.
• Nominal to no price growth due to high cumulative inflation and weak monsoon affecting rural demand.
• Urban, organized trade, and premium portfolio led growth for FMCG overall.
• Resilient performance with underlying sales growth of 3% and underlying volume growth of 2%.
• EBITDA margin up 40 bps year-on-year.
• Net profit crossed 10,000 crores in fiscal year.
• Market shares improved by almost 200 bps compared to 2021.
• Small and regional players resurgence affecting market shares marginally.
• Expectation of MAT business winning metric to come back towards the second half of calendar year 2024.
• Underlying volume growth of 2% in Q4.
• EBITDA margin at 23.4%.
• Profit after tax before exceptional items and profit after tax declined by 3% and 6%, respectively.
• Home Care grew 1%, Beauty and Personal Care declined by 2%, Foods and Refreshment had positive pricing and delivered mid-single-digit USG.
• Margins remained healthy in all three segments.

Key Thrust Areas and Business Strategy:

• Focus on growing the core through unmissable brand superiority.
• 19 brands with turnover over INR 1,000 crores each.
• Embarked on a journey of making brands unmissably superior.
• Market making and premiumization focus through persuasive communications, innovating in new demand spaces, and educating consumers.
• Strong portfolio leading growth, contributing to more than 25% of business.
• Transformation in Beauty segment focusing on contemporizing master brands, investing in high-growth demand spaces, and embedding core capabilities.
• Leveraging capabilities to outperform in the Beauty segment.
• Continuous focus on premiumization, innovation, and market penetration.
• Expecting improvements in rural consumption with better monsoon and macro-economic indicators.
• Optimistic outlook for the future with a focus on driving competitive growth and maintaining margins.

Segment Performance:

• Laundry Segment: Powders continue to grow in volume, liquids growing ahead due to faster conversion, bars returning back to growth, focus on premiumization.
• Health Food Drinks (HFD): High single-digit growth driven by pricing and volume growth, Nutrition Plus range accelerating growth, efforts to build consumption yielding results.
• Beauty Segment: Mid-single digit growth, premium portfolio growing in double digits, pioneers in liquids category, focus on premiumization and innovation.
• Soaps Business: Sharp decline in performance, actions taken to address low unit price value equation, premium brands performing well.
• Personal Care Segment: Decline in mass end of the portfolio, premium portfolio showing stronger growth, continued focus on building penetration and consumption in key categories.
• Horlicks and Health Food Drinks: Significant efforts in building penetration and consumption for Horlicks, focus on building premium portfolio and driving growth in the adult space.

Market Share and Channel Strategy:

• Gaining market share in the Beauty and Personal Care segment.
• Recovering market share in categories like mass skin cleansing and detergent bars.
• Focusing on building penetration and consumption in key categories.
• Channel split: under 70% in general trade, under 20% in modern trade, around 6-7% in e-commerce.
• E-commerce growing fastest, followed by modern trade and general trade.
• Quick commerce segment gaining traction within e-commerce.
• Focusing on high margin portfolio in quick commerce, beauty commerce, and marketplace.

Outlook and Future Plans:

• Expecting gradual improvement in FMCG demand.
• Forecast of above-normal monsoons and improving macro-economic indicators.
• Price growth expected to be low single-digit decline in near term.
• Focus on driving competitive volume-led growth across business.
• Actions underway to address performance in the skin cleansing segment.
• No immediate plans for price increase due to deflation in commodity basket.
• Planning for low single digit price increase in the second half of the financial year.
• Targeting 23-24% EBITDA margin band, with focus on maintaining current levels in the short term and modest margin improvement in the medium to long term.
• Unilever planning to separate the ice cream business by second half of 2025, further decisions and strategies to be communicated in the future.

5 Year and 10 Year Median P/E is 64 ad 61. Long Term Median P/E is 47.

Valuations are at 10 Year Low P/E of about 53 at the moment.

5 Year Sales and PAT Growth is 10% and 11%, and Stock Price CAGR is 6%. Slow growth will continue for some time. Price CAGR will depend of P/E re-rating.

Lincoln Pharmaceuticals Q4FY24 results. Profits rise y-o-y and Q-o-Q, but margins contract. Waiting for management commentary on results before deciding whether to exit or hold.

Q4FY24 Concall highlights:

• Ebidta declined due to high RM cost (platin which is a gold n platinum derivative)
• Platin cost comprises 14-15% sales
• Platin can’t be manufactured in house.
• Yearly sales breakup:
  – Branded: 89 Cr (margin 33-36%)
  – CDMO: 140 Cr (margin 15-17%)
  – Exports: 46 Cr (margin 28-32%)
  – API : 21 Cr (margin 22-23%)
  – Derma: 6.83 Cr
• halfyearly sales breakup:
  – Branded: 41.5 Cr
  – CDMO: 68 Cr
  – Export: 30 Cr
  – API: 11 Cr
  – Derma: 3.3 Cr
• Ebidta will try to bring to 26% in FY25
• Cosmotology:
  – division posted net loss
  – guidance FY25 min sales 14-15 Cr
  – gross margin is 65%
  – plant setup initiate by Fy25-26 ( 30 – 35 Cr)
  – recently launched 5 products (haircare, sunscreen, moisturizer)
  – Will focus on hair product segment
  – Future target 35% of business
  – Dr prescribed medicine after Dr approves.
• Cleared audit n received registration cert from Urasia
• Cytotoxic syrup facility started
• Own brand, injectable: Oral = 43 : 57
• FY25 guidance 25-30% sales.
• 70% Api in house manufactured.
• 2-3 months will migrate to main board, process already initiated.
• export business target 35% business in future.

Hi, could you please share the conviction behind starhealth in your portfolio?