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MOSL: Morning India (15/April/20): 1. Consumer (Weak earnings continue, exacerbated by COVID-19 situation); 2. Motherson Sumi; 3. Metals

Morning India (15/April/20):

Today’s top research idea
Consumer: Weak earnings continue, exacerbated by COVID-19 situation
** The extremely weak trend in the sector topline and earnings, which began 2QFY20 onward, is likely to continue, with ~4%/~8% YoY sales / EBITDA growth expected in 4QFY20.

** The impact of COVID-19, and consequent Janta Curfew and lockdown, has been witnessed on both the supply chain and consumer goods manufacturing. The outlook for FY21 is also weak, with GDP decline likely for the year, resulting in sharp EPS cuts (ranging from 4-11% for staples and 15-33% for discretionary).

** The benefit of low material cost is now not expected to be as high as it would have been in a more favorable operating environment. PAT growth is estimated to be higher at 13.9%, largely on the assumption of lower tax rates.

** Our framework for earnings visibility, longevity of growth, and quality management drives our choices in the consumer universe. We continue to prefer HUVR, MRCO, and UNSP.

Piping hot news
India to grow at 1.9% in FY21, recover to 7.4% path in 2021-22: IMF
The International Monetary Fund (IMF) has cut its projection of India’s economic growth to 1.9 per cent for the current financial year, the lowest since the 1991 balance of payments (BoP) crisis. It had earlier forecast a growth rate of 5.8 per cent. This revision was done in light of the impact of the coronavirus disease (Covid-19), and the subsequent nationwide lockdown imposed by the central government to check the spread of the virus.