MOSL: Morning India (20/March/20): 1. Hindustan Unilever (No reversal yet in last quarter’s slowdown); 2. Ashok Leyland (To buy 19% stake in HLFL, incl. 12% from promoters); 3. Technology (Accenture’s outlook
MOrning India (20/March/20): 1. Hindustan Unilever (No reversal yet in last quarter’s slowdown); 2. Ashok Leyland (To buy 19% stake in HLFL, incl. 12% from promoters); 3. Technology (Accenture’s outlook should calm the nerves!); 4. Utilities
Today’s top research idea
Hindustan Unilever: No reversal yet in last quarter’s slowdown
- Slowdown in 3QFY20 persisted in 4QFY20 as well and many categories reported flattish sequential growth with some personal care categories reporting negative growth.
- Over the past week HUVR have witnessed strong growth not just in hand washes but also in the overall soaps category which otherwise had shown a disappointing trend in the first two months of the quarter.
- Government decision on closure of retail shops on alternate days, if prolonged, could affect demand. Despite the near term demand blip, earnings are likely to clock an impressive 16% CAGR over the next two years. If we take the GSKCH merger into account, EPS CAGR is likely to be at ~22% over FY20-22E.
- With best-of-breed earnings growth as well as far superior RoEs compared to peers, we maintain target multiple of 50x FY22E EPS on the merged numbers resulting in a target price INR2,425.
Piping hot news
Rupee slips to new lows as FPIs continue to sell stocks, bonds
Continuing forex outflows from the stock and bond markets and a strengthening dollar sent the rupee to new lifetime lows on Thursday. The Indian currency closed at 74.98 against the greenback, 76 paise lower than Wednesday’s close. During the day, it fell to levels of 75.31 against the dollar, Bloomberg data showed. Foreign portfolio investors (FPI) have now sold close to $10 billion worth of stocks and bonds in March so far in what is believed to be the biggest ever monthly outflow.
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