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MOSL: Morning India (18/September/18): 1. Hindustan Unilever; 2. Bank of Baroda (Govt announces merger of BOB, Dena Bk & Vijaya Bk); 3. Shriram Transport Finance; 4. Metals Weekly

MOrning India (18/September/18): 1. Hindustan Unilever (Outlook buoyant); 2. Bank of Baroda (Government announces merger of BOB, Dena Bank and Vijaya Bank); 3. Shriram Transport Finance; 4. Metals Weekly

 

Today’s top research idea

Hindustan Unilever: Outlook buoyant; Entry point attractive post recent correction

• 2QFY19 has seen stable market demand, continuing through 1QFY19. Rural continues to grow ahead of urban. Rural volumes are now growing at 1.5x of urban while value is at 1.3x of urban.
• Management stated that two-year CAGR on volumes should be in the range of 6-8%, going forward, which augurs well for growth in subsequent quarters.
• Company believes the inflation level is not alarming and should get mitigated by pricing action and cost savings. It will continue to see moderate operating margin expansion despite moderate inflation and high-ad spends.
• Recent price correction of over 10% offers a more attractive entry point. We maintain Buy with a revised target price of INR2,025 (52x September 2020 EPS)

Piping hot news

Govt proposes merger of Bank of Baroda, Dena and Vijaya Bank

• The government’s decision on Monday to merge three banks it owns—Bank of Baroda, Dena Bank and Vijaya Bank—is expected to reduce the amount of capital it needs to pump into these lenders and help clean their balance sheets. The merged entity, comprising two relatively stronger banks and a weak one, will be the third-largest lender in India after State Bank of India and HDFC Bank Ltd, with a total business of more than ₹14.82 trillion.