Citigroup Inc

Citigroup Details

Citigroup Inc (NYSE: C) is the leading global bank and it provides various financial products and services that include consumer banking as well as credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.

Result Performance for Q3FY21 (For the Quarter Ended 30 September 2021)

• Revenue declined by 1% YoY to $17.2 billion, including a pre-tax loss of around $680 million with respect to the sale of the Australia consumer business in Global Consumer Banking (GCB).
• Without considering the loss on the sale, revenues grew by 3% mainly supported by growth across the Institutional Clients Group (ICG).
• Net income surged by 48% YoY to $4.6 billion led by the benefit of lower cost of credit, partly offset by the lower revenues and higher expenses.
• Earnings per share increased to $2.15, up by 58% YoY due to the growth in net income and a 3% decline in shares outstanding.
• Citigroup's end-of-period loans mostly remained in line with the prior-year period at $665 billion on a reported basis.

Source: Analysis by Kalkine Group

Recent Update

• On 24 November 2021, Citi and Taskize Limited declared that they have entered into a strategic agreement. Through this agreement, Citi Securities Services’ custody clients can leverage Taskize’s query management platform to directly connect to their Citi Operations counterparts.
• In the press release dated 17 November 2021, Citi declared that its annual e-for-education campaign has raised $9.6 million to support education-focused non-profits.
• Citi, on 15 November 2021, informed that Citi’s Issuer Services, acting through Citibank, N.A., has been appointed as the depositary bank by LianBio for its American Depositary Receipt (ADR) program.

Key Risks

The group is exposed to the risk of uncertainties associated with COVID-19 pandemic that could adversely hurt its businesses as well as results and financial condition. Further, it is susceptible to the risk of changes in regulation and legislative uncertainties in the U.S. and globally.

Outlook

It is advancing with urgency on its top priorities that include - the Transformation, refreshing its strategy and building a culture of excellence to responsibly narrow the returns gap among its peers. It is working on strengthening its risk and control environment to attain operational excellence. As per the press release 14^th October 2021, Citigroup has returned around $11 billion to shareholders by way of healthy dividends and stock repurchases.

Valuation Methodology: Price/BVPS Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Information                                           

The stock has been valued using a Price/BVPS multiple-based illustrative relative valuation and the target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to Price/BVPS Multiple (NTM) (Peer Average) considering the decent outlook.

Considering the aforementioned factors, we give a “Buy” recommendation on the stock at the closing market price of $62.52 per share, down by 1.85% on 1^st December 2021.

The Scotts Miracle-Gro Company

SMG Details

The Scotts Miracle-Gro Company (NYSE: SMG) is amongst the world’s largest marketers of branded consumer products for lawn and garden care. It is having the industry’s most recognized brands and its Scotts®, Miracle-Gro® and Ortho® brands are market-leading in their categories.

Record Results in FY21 (For the Year Ended 30 September 2021)

• The company has delivered record financial results in FY21 driven by a company-wide sales growth and sustained growth in all major operating segments.
• The company-wide sales grew by 19% to a record $4.93 billion from $4.13 billion in FY20 and sales in the U.S. Consumer segment rose to $3.20 billion, up by 11% driven by robust consumer demand throughout the year.
• Further, Hawthorne sales grew by 39% to $1.42 billion owing to strong growth in all category segments in both emerging and legacy markets.
• GAAP earnings from continuing operations increased to $9.03 per diluted share against $6.78 per diluted share in FY20.

Source: Analysis by Kalkine Group

Declared Quarterly Dividend

The board of directors of the company, on 2 November 2021, have approved the payment of a cash dividend of $0.66 per share. The dividend will be paid to the shareholders on 10 December 2021.

Key Risks

The prevailing COVID-19 pandemic could have an adverse impact on its business, results of operation, financial condition and/or cash flows. Further, it is exposed to the risk of changes in regulations or regulatory enforcement priorities that could lead to an increase in its costs or restrict its ability to market all of its products.

Outlook

The company has guided achieving company-wide sales growth of 0 to 3% in FY22 and the U.S. Consumer segment sales is expected to remain between 0 to negative 4%. It forecasts Hawthorne sales to grow by around 8 to 12% with maximum growth anticipated in the second half of the year.

Moreover, the non-GAAP adjusted earnings per share is likely to stay in a range of $8.50 to $8.90 and the gross margin rate is expected to decline by around 100 to 150 basis points.

Additionally, it has guided SG&A to remain in a range of negative 6% to positive 1% and the interest expense is expected to increase by around $25 million.

Valuation Methodology: EV/EBITDA Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Recommendation

The stock has been valued using EV/EBITDA multiple based relative valuation (on an illustrative basis) and the target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to peer average EV/EBITDA multiple (NTM basis) considering better current ratio in FY 2021 on the YoY basis.

For the purposes of relative valuation, peers like FMC Corp (FMC.N), HB Fuller Co (FUL.N), among others have been considered.

Considering the aforementioned factors, we give a “Buy” recommendation on the stock at the closing market price of US$138.22 per share, down by 4.6% on 1^st December 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices

Disclaimer

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