FREE

MOSL: Morning India (4/December/18): 1. Hindustan Unilever (A healthy deal); 2. Sun Pharma; 3. Technology (Implications of a supply crunch); 4. Automobiles; 5. Metals Weekly

MOrning India (4/December/18): 1. Hindustan Unilever (A healthy deal); 2. Sun Pharma; 3. Technology (Implications of a supply crunch); 4. Automobiles; 5. Metals Weekly

 

Today’s top research idea

Hindustan Unilever: A healthy deal for HUVR; Significant medium-term benefits for growth and margins

• Steel price volatility in the global markets triggered by the supply glut in China should eventually seep into the Indian steel market. Imports of HRC are about INR3,000/t cheaper than the current domestic prices.
• Focus of Chinese mills appears to be shifting from high productivity to protecting profits, and therefore, we believe that the earlier supernormal steel mill spreads are a thing of the past. Hence, we are lowering estimates for all steel companies.
• Valuations of steel stocks are getting de-rated globally, similar to events seen during 2008 i.e. before the financial crisis.
• We are downgrading Tata Steel to Sell and recommend switching to JSW Steel for superior returns.

Piping hot news

Manufacturing PMI hits 11-month high in Nov.

• Manufacturing activity expanded in November for the third month in a row, on the back of a growth in new orders and output, according to a private sector survey. The Nikkei India Manufacturing Purchasing Managers’ Index registered a reading of 54 in November, the highest in 11 months, up from 53.1 in October. A reading above 50 denotes an expansion, while one below 50 implies a contraction.