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MOSL: Morning India (4/October/19): 1. Consumer (Amidst growth woes, weak earnings likely in 2QFY20); 2. Technology; 3. HDFC; 4. NTPC; 5. Coal India; 6. Expert Speak

MOrning India (4/October/19): 1. Consumer (Amidst growth woes, weak earnings likely in 2QFY20); 2. Technology; 3. HDFC; 4. NTPC; 5. Coal India; 6. Expert Speak

 

Today’s top research Idea

Consumer: Amidst growth woes, weak earnings likely in 2QFY20

• After 8Q of continued outperformance, rural growth slipped below urban for several consumer staple companies in 2QFY20. The operating environment in 2QFY20 was perhaps the most somber since 1QFY18, which had witnessed massive down-stocking ahead of the GST implementation from Jul'17.
• In such a weak demand environment, competitive intensity is increasing in the form of promotions and price-offs, which means that benefits of the low material costs will be nowhere as high as it would have been in a more favorable operating environment. Aggregate sales for 2QFY20 are likely to grow at 8.4% YoY while EBITDA/PAT to growth by 10.2%/7.4%.
• We are not assuming any corporate tax reduction benefit in 2QFY20 as many companies would have paid advance tax. We continue to prefer HUVR as our large-cap pick. Post corporate tax cuts and consequent, we have elevated BRIT and CLGT to our list of preferred picks and continue to be positive on MRCO and UNSP.

 Piping hot news

Apollo Global to invest up to $150 million in Altico

Private equity (PE) firm Apollo Global Management has offered to invest up to $150 million in troubled real estate lender Altico Capital India Ltd, said two people aware of the development, requesting anonymity. As part of the initial talks with Altico’s lenders, Apollo Global expressed its interest to pick up a stake in the company, which could be worth $100-150 million. Part of this investment will be used for interest payments, while the rest will be used to grow the company’s books, said the first person cited above.