India Consumer - HUL, ITC, Marico

 India Consumer - HUL, ITC, Marico 

India Consumer

 India Consumer

TTK Prestige, Indian Consumer, Pantaloon

 TTK Prestige, Indian Consumer, Pantaloon 

Exit Consumer Stocks ?

Even as it has taken a cynical view of most other investment ideas, the stock market has pursued the consumption theme with single-minded devotion over the last two years. Sectors such as fast moving consumer goods (FMCGs), retail, white goods, foods, fitness — all things, in fact, that cater directly to the ravenous appetite of the young Indian consumer — have seen their stock prices zoom. Price-earnings multiples have expanded, with institutional investors making a beeline to accumulate them.

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Consumer sentiment in India continues to decline: survey

Customized knowledge services company Boston Analytics released the Boston Analytics Consumer Sentiment Index (BACSI) for India results for the month of July. The past month registered a marginal 3.8% decrease in the BACSI, a monthly barometer of Indian consumer opinion regarding the current state and future expectations of the macro economy, household financial conditions and consumption.

The index is based on a monthly survey targeting a diverse set of demographics representative of Indian consumers. In an effort to capture the country’s heterogeneity, the BACSI’s July survey has been extended in terms of both geographic coverage and sample size with the inclusion of Hyderabad.

The survey is now conducted across five cities—Delhi, Mumbai, Kolkata, Chennai, and Hyderabad—targeting a diverse set of demographics representative of Indian consumers. It addresses macro-level variables reflecting the nation’s economic conditions, including indicators such as employment, inflation, interest rates and real estate.

The BACSI also studies micro-level variables such as household income, commitment towards expenditure on basic necessities (durables, automobile, and house), savings and other elements.

The BACSI for the month of June stood at 93.2, down 3.8% from the previous month’s reading of 96.9. Disaggregation of the data reveals that the primary drivers of the decline in consumer sentiment were decreases in respondents’ confidence in the economy and in employment conditions. Sentiment related to inflation remained pessimistic but improved relative to the June reading, most likely due to the government’s highly visible campaign to combat inflation. Despite the overall composite sentiment index trending down, the consumer spending component remained strong in July.

"It appears that overall consumer sentiment in India is trending lower in a gradual manner, unlike the dramatic declines in consumer sentiment being reported in the United States and Europe," said Sam Thomas, Ph.D., Boston Analytics’ director of research and development. "It is also notable that despite a worldwide slowdown in consumer spending, and continued concerns about inflation, Indian consumer attitudes toward spending remain optimistic, reflecting an upward trend in the BACSI since May."

India Consumer Products

India Consumer Products

Tata Power, Tata Communications, Metals, Consumer Products

Tata Power, Tata Communications, Metals, Consumer Products

Consumer, Technology, Cairn India, Dr Reddys, Indian Banks, Metals, India Economy

Consumer, Technology, Cairn India, Dr Reddys, Indian Banks, Metals, India Economy

Reliance Energy, GAIL, Gateway Distripaks, Polaris Software, Consumer Products

Reliance Energy, GAIL, Gateway Distripaks, Polaris Software, Consumer Products

TCS, Axis Bank, Indian Bank, Welspun Gujarat, Reliance Industries, IDFC, Consumers

TCS, Axis Bank, Indian Bank, Welspun Gujarat, Reliance Industries, IDFC, Consumers

Indian Households

Indian Households

Sun TV, Tata Steel, Consumer Products

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Sun TV, Tata Steel, Consumer Products

India Consumer, Economics, Macro Views

India Consumer, Economics, Macro Views

Kotak Mahindra Bank, BPCL, Construction, Consumer, IOC, IVRCL

Morgan Stanley in their report on Kotak Mahindra Bank

Kotak’s stock is up 40% YTD, buoyed by strong capital markets. Its earnings continue to be largely dependent on capital markets: 78% of F2007 PBT was contributed by businesses linked to capital markets, such as securities, distribution income, investments, etc. With competition intensifying in these segments due to entry of strong players, we expect Kotak’s capital markets-related earnings to come under
pressure. This, coupled with steep valuations, will keep further stock performance in check, in our view.

Increased competition likely to depress brokerage earnings. Kotak’s average daily volume rose 52% in F2007, but its PBT increased by only 12%, implying downward pressure on brokerage rates – which we expect to accelerate with entry of Reliance Money (brokerage rates offered are significantly below the current market rates) in retail broking and distribution business.

Full Valuations – Our New Target Price of Rs450 implies 22% downside from current levels. Kotak is trading at 32x our F2008E earnings – highest in our coverage universe in India. Given its dependence on capital markets, we view these valuations as full. We
maintain our Underweight rating but raise our target price to Rs450 based on sum of parts.


HSBC in their report on BPCL say

BPCL’s FY07 profits almost quadrupled on higher oil bonds and increased subsidy sharing by upstream companies

Subsidy sharing based on oil bonds looks set to continue in high crude price scenario – positive for R&M companies

We revise our target price marginally upwards to INR445 to reflect change in EPS, BVPS and value of investments


B&K on Construction

In line with the NHDP, the government has embarked ambitious programme for the state highways and has urged state government to take a cue from the NHAI in expanding the road network. The government has also advised private sector to prepare for a bigger role in the development of infrastructure sector. The government is ready to provide financial assistance and do handholding for the state government in setting technical and procedure standards.

Although, few state governments have taken initiatives for highway construction. Ability and willingness of most of the state government and PWD departments to implement the projects of such magnitude is yet to be seen. The states needs to raise fair amount of resources on their own by taking the partnership route and even collecting levies from the public to meet the additional burden for highway construction.

Though, order book is not a concern for the construction sector, even if state governmentsare able to convert small portion of proposed investment into actual projects, it would be big opportunity for the construction sector. We remain upbeat on the construction sector.

JP Morgan on Consumer Shelf


Key highlights of our fourth edition of the consumer fortnightly:

Domestic : 1) HLL extends its premium soap brand 'Dove' into hair care segment with the launch of shampoos, conditioners and treatments under this brand to counter rising competition from L'Oreal in premium segment, 2) Godrej Consumer is planning to enter the shampoo segment with the launch of a mass market brand in near future. This is likely to intensify competition in this space which is currently dominated by HLL and Procter & Gamble, and 3) Diageo-Radico JV launches Masterstroke whisky targeting mid-premium segment in Maharashtra.
· Key commodity trends: Palm oil prices continued their uptrend rising almost 5% over the fortnight. Expected tightness in soyabean (closest substitute) supply and increased demand for bio-diesel is leading to new highs for palm oil (now at over M$2500/tonne). On the other hand prices for wheat softened by 2% over the past fortnight on the back of steady crop arrivals.
· International: 1) Luxury brand Christian Dior Couture is planning to set up its subsidiary in India and expand its operations, reflecting confidence of foreign luxury brands in India's fast growing luxury retailing market (35-40% growth p.a.), 2) UK based Cobra beer has announced plans to set up two Greenfield breweries in India.


Merrill Lynch on Indian Oil Corporation

IOC has attained a recurring consolidated EPS of Rs50.2/share in FY07, which implies 31% YoY earnings growth. The rise in earnings has been driven by generous issue of oil bonds in FY07 by the government. IOC received Rs139bn of oil bonds in FY07, which is almost twice the Rs70bn of oil bonds received in FY06. FY08E earnings outlook is uncertain. It is entirely dependent on the
government decision on oil bonds. We remain Neutral on IOC.

We are keeping our FY08E earning forecast unchanged at Rs49/share, which implies 2.5% YoY earnings decline. There could be upside risk to our earnings forecast if the government is generous in the issue of oil bonds to R&M companies even in FY08E. Clarity on earnings outlook for FY08E is possible in the next two months. The government may announce a subsidy sharing plan for FY08E as it did in June 2006 for FY07. The fact that it stuck to its announced subsidy sharing plan in FY07 would lend credibility to any such plan for FY08E

Merrill Lynch on IVRCL

IVRC, our top pick in the mid-cap E&C space, reported solid 4QFY07 on all fronts. Sales were up Rs10bn +67%YoY; EBITDA margin expanded by 140bpsYoY & PAT of Rs732mn, +67%YoY. PAT was ahead of MLe due to better margins & non-prov of full tax (25% v/s MLe 32%) pending appeal in tribunal. Order backlog remains robust at ~3x FY07 sales. Value creation through the listing of IVR Prime, and 42% earnings CAGR in core business are potential triggers ahead. Buy, PO Rs450.

Our PO of Rs450 is based on an SOTP approach. We have valued IVRCL's core construction business at PER 14x FY09E - a 30% discount to E&C majors despite its faster growth. Risk: Unrelated acquisitions (oil & gas), project execution.

JP Morgan - Pantaloon Retail & JP Morgan - India Consumer - Off the Shelf

JP Morgan - Pantaloon Retail

JP Morgan - India Consumer - Off the Shelf