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MOSL: Morning India (16/May/19): 1. Pidilite Industries (Improved margin outlook, but near-term headwinds exist); 2. ONGC (Stable oil prices; Gas production to get a fillip); 3. Lupin; 4. Petronet LNG; 5. Jubil

MOrning India (16/May/19): 1. Pidilite Industries (Improved margin outlook, but near-term headwinds exist); 2. ONGC (Stable oil prices; Gas production to get a fillip); 3. Lupin; 4. Petronet LNG; 5. Jubilant Food; 6. Aditya Birla Fas.; 7. Endurance Tech; 8. Tata Chemicals

 Today’s top research idea

Pidilite Industries: Improved margin outlook, but near-term headwinds exist

• Even, amidst a quarter of weak consumer results, Pidilite's operating performance, was particularly disappointing because its bulwark of strong volume growth seems to have collapsed for the near future. While margin gains are likely to be better than earlier forecasts, there is no certainly of these benefits extending beyond FY20. Changes to our model result in 2.8%/5.5% cut to FY20/FY21 EPS, largely arising due to lower topline growth forecasts.
• Despite assuming 16.5% EPS CAGR over FY19-21 v/s only 5.5% EPS CAGR in the preceding three years, valuations are not cheap at 53.3x FY20/46.1x FY21EPS.
• Since our upgrade in Dec'15, the stock has yielded 24.3% CAGR return, despite only 5.5% EPS growth over FY16-19. We value the stock at 45x FY21 EPS and derive TP of INR1,135, implying 2% downside, and thus downgrade to Neutral (Under Review earlier).

Piping hot news

Trade Deficit widens to $15.33 billion in April

• Trade deficit for the month of April has widened to $15.33 billion, mainly on the back of increased imports and lower growth in exports. India's exports rose marginally by 0.64 per cent in April to USD 26 billion while imports increased by 4.5 per cent to 41.4 billion compared to the year-ago month, according to official data released Wednesday.