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MOSL: Morning India (7/January/20): 1. Consumer 3QFY20 Preview (Persistent volume woes lead to weak earnings outlook); 2. Fuel or Engines (Economy); 3. HDFC Bank; 4. GCPL; 5. PI Industries

MOrning India (7/January/20):  1. Consumer 3QFY20 Preview (Persistent volume woes lead to weak earnings outlook); 2. Fuel or Engines (Economy); 3. HDFC Bank; 4. GCPL; 5. PI Industries

 

Today’s top research idea

Consumer (3QFY20 Preview): Persistent volume woes lead to weak earnings outlook

• After eight quarters of continued outperformance, the slipping of rural growth below urban growth witnessed in 2QFY20 is likely to continue in 3QFY20. Impact of floods in the early part of the quarter and liquidity concerns were also factors affecting volumes.
• Aggregate sales for 3QFY20 are likely to grow at 5.7% YoY while EBITDA growth is likely to come in at 7.5%, the lowest since 1QFY18. PAT growth is expected to be higher at 16.9%, mainly due to lower corporate tax rate assumption YoY.
• HUVR is likely to report 4.0%/4.3%/9.3%/14.5% growth in volumes/sales/ EBITDA and PAT respectively for 3QFY20. We expect ITC to report 3% cigarette volume growth, while Net Sales/ EBITDA and PAT are likely to grow by 5.6%/ 5.7% and 22.9% respectively, aided by the corporate tax cut. Tepid operating performance for the quarter is expected from most others barring Nestle and TGBL.