CLSA likes HUL, but Morgan Stanley says ITC better bet
CLSA is convinced that HUL is leaving no stone unturned to lead on way to recovery led by urban markets. It adds that southern region has already started recovering due to higher banking density/penetration.
HUL management is positive on India growth story and believes both demonetisation and GST will be significant growth drivers. However, the company is concerned that market growth will likely be affected for a few months, and recovery will be gradual, led by urban markets. The key concerns are poor consumer sentiment, trade de-stocking, and liquidity squeeze, especially for the wholesale channel
Likewise, CLSA is also convinced that HUL is leaving no stone unturned to lead on way to recovery led by urban markets. It adds that southern region has already started recovering due to higher banking density/penetration. The brokerage firm likes HUL given its broad-based portfolio, strong distribution reach and superior execution. It maintains outperform rating on the stock with target price of Rs 925 per share.
However, Morgan Stanley is not convinced and recommends switching to ITC where it sees more compelling risk-reward. It argues that potential sharp improvement in volume growth for home and personal care (HPC) categories, led by good monsoons and Seventh Pay Commission appear less likely post demonetisation. It says HPC categories will benefit from pipeline filling in Q4FY17.
Posted by Nasrin Sultana