Future consumer enterprises ltd multibagger: There are lot of questions being asked if future consumer is next multibagger? In 2017 during month of July, I was requested to write an answer for one Quora question about Future consumer enterprises ltd multibagger. You can find the the question below.
I wrote on 26 July 2017 when the price was 42.35, I have put forth a detailed answer in quora you can check here.
This post contains a detailed analysis adding some more recent developments happened in future consumer company. At the end of analysis you can safely bet on future consumer for long term, at least for 3 to 4 years.
Future consumer enterprises ltd multibagger [updated]
In the beginning of 2017, Porinnju Veliyath first brought future consumer to lime light. It has already given more than 100% in 2017. So you can say future consumer enterprises ltd was a multibagger in 2017. But past performance is not of highest importance; the question is future consumer next multibagger? or can you buy future consumer or FCEL in 2018?
- Date: 17-Dec-2017
- Sector : Finance-Investment (into retail companies mainly).
- CMP: 67.85
- Market cap: 12,476 Cr
- Duration: 3 years to 4 years
Retail Sector Outlook:
I am very much optimistic about Retail industry right now because GST and Demonetization would help quality retail companies to march ahead. Few business from unorganized sellers will flow to organized players.
Business Model for Future Consumer:
Future Consumer (FCL) , India’s first sourcing-to-supermarket food company by Future Group is built on the virtue of sharing. Starting from the seeding of food at the farm to its consumption from the plate, FCL acts as a catalyst for each of its stakeholders. From sourcing, processing, retailing to final act of consumption – FCL strikes a widespread cord between the lives of the farmer, a factory laborer, a worker on the shop floor and the housewife.
Under FCL’s spectrum, the company sources best quality commodities from world over, comprises of extensive portfolio of established brands in food and HPC space, builds urban convenience store for key metros and cash-n-carry rural distribution models for other cities across India. (Integrated front end to back end).
Earning and PL Statement:
Here is the annual growth and quarterly results available. Data credit screener.
The reason I am bullish about this company is mainly due to highly competent management.
Future Group is India‘s leading retail group with over 12 years of organised retail experience. Group has conceptualized, supported and developed various consumption-led business concepts such as Central, Big Bazaar, Easyday, Foodhall and Home Town. These store chains command significant brand recognition and customer loyalty. They intend to leverage the operational and managerial skills available within Future Group to enhance the value of operations.
FCEL management growth outlook:
- Future Consumer eyeing over 80% growth in FY18: Kishore Biyani
- Future Group to become debt-free in less than 4-5 years: Biyani
- Porinju Veliyath’s 12 % portfolio comprises of Future Consumer. -A personal bias as I respect Porinju’s investing philosophy.
- Based on a recent Future Consumer moneycontrol article, FCEL allotted NCDs worth Rs 150 Cr to expand business further into emerging markets.
- As quoted in the company presentation, future consumer is aiming for 70%+ growth next year.
Future consumer recommendation
Future consumer in Rakesh Jhunjhunwala portfolio? Well, no body really knows as there is no official confirmation on this. At least Rakesh Jhunjhunwala is not holding more than 1%, if at all he has any stake in FCEL.
There was a point where Porinju Veliyath openly told in public that Future consumer represents largest holdings in his portfolio. But now neither Porinju nor equity intelligence are shown as share holder of future consumer. So Has Porinju sold future consumer? Definitely he has reduced his stake but it is not confirmed that he has sold his entire stake.
But a great news is Morgan Stanley are bullish on Future Consumer. In fact Morgan Stanley have given a price target of 95 which is still more than 50% at current price of 60 (27 Feb 2018).
We think of Future Consumer as a start-up, building its business on the FMCG 2.0 platform— launching innovative products in emerging categories, leveraging digital assets, and focusing on consumer acquisition closer to the point of sale.
Morgan Stanley Research Report
Morgan Stanley believes Future consumer to improve it’s margin with increased sales volume going forward as outlined in bloombergquint report. Brokerage house believes FCEL to be fifth largest FMCG company in India by 2021.
Future consumer enterprises ltd multibagger: FMCG 2.0
India is still an under-branded economy with 1.3 billion people who are only just beginning to consume. So FMCG sector has a long way to go. The Indian kitchen has changed significantly. New technologies, gadgets, diets, fads, have had an impact. New influencers, food bloggers, gourmet chefs, YouTube celebrities, avant-grade restaurants speak a new language. So FMCG has to upgrade it self to 2.0.
And by owning the value chain- from sourcing, manufacturing to distribution future consumer see multiple benefits.
Cost of doing business for future consumer is considerably lower compared to it’s competitions. Being modern retail backed, it’s distribution costs is at 17% vis-à-vis established FMCG companies which are at 27%. Additionally, marketing costs are significantly lower as brands are built largely in stores and on digital platforms.
Future Group has the largest scale and coverage in India. The controlled distribution network allows company to respond in real time and have a superior demand forecasting capability.
FCEL is able to therefore engage directly with consumers – without distribution layers in between. With 30 million paid members, future consumer has assured business across categories and brands.
Board believes FCL will be 3 billion USD (Rs. 20,000 crore) and in 5 years a 15%+ EBITDA.
So is future consumer next multibagger?
We believe the future consumer is a strongshare for long term point of view. In near tern there could be some volality and consolidation as the share price has given huge return in 2017. But in long term this is one of the safest bet in FMCG space. This is the summary of attractive factors we can draw for future enterprises ltd multibagger.
- Management: Competent and ethical management
- Vision: Many companies lacks vision to grow in long term but FCEL is not one of them for sure.
- FMCG Sector: When it comes to the longevity of an Industry, you can safely bet on sectors like FMCG. For example there won’t be any time where you will stop buying grocery products.
- Innovation : The best part of the Future consumer is they rely on advanced/ futuristic technology like AI/ Big data to measure their performance and drive their growth.
- Low cost of doing business: Cash requirement is a key factor while deciding on the durability of business. Less cash needed to run a business, better it is for the company.
Hope you find Future consumer enterprises ltd multibagger useful and beneficial. Add a comment below and let me know your views on this. If you still have queries, you can contact us here.
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