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Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods company with a heritage of over 80 years in India. On any given day, nine out of ten Indian households use our products to feel good, look good and get more out of life – giving us a unique opportunity to build a brighter future.With over 35 brands spanning 20 distinct categories such as soaps, detergents, shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers, the Company is a part of the everyday life of millions of consumers across India. Its portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Pond’s, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall’s and Pureit.

HUL works to create a better future every day and helps people feel good, look good and get more out of life with brands and services that are good for them and good for others.

The Company has about 18,000 employees and has a net sales of INR 33895 crores (financial year 2016-17). HUL is a subsidiary of Unilever, one of the world’s leading suppliers of Food, Home Care, Personal Care and Refreshment products with sales in over 190 countries and an annual sales turnover of €52.7 billion in 2016. Unilever has over 67% shareholding in HUL.

Strong improvement in margins:

* Strong quarter on profitability: Revenue grew by 4.9% yoy to Rs85.3bn, led by price hikes; EBITDA grew by 14.1% yoy to Rs18.7bn while APAT grew by 14.9% yoy to Rs12.9bn.

* Volume growth was flat, impacted by thinning of trade pipeline (CSD channel worst hit). If CSD channel was normal, volume growth would have been 2% yoy. Expect sales to normalize in the next few months. Rural growth revival is expected to be gradual.

* Gross margin expanded by 80bps to 52.1%, led by premiumisation and price increases. EBITDA margin came in strong at 21.9%, up 180bps yoy (similar to pre-2004 level). EBITDA margin was aided by lower other expenditure and reduced ad spends.

* We believe HUL is moving into a phase of strong earnings growth, driven by expansion in margins. We upgrade our earnings estimates by 0.5%/2% for FY18E/FY19E and estimate 18.9% CAGR in EPS for FY17-19E. We believe strong earnings would re-rate the stock and maintain ACCUMULATE rating. We assign a P/E of 45x and arrive at a target price of Rs1,250.

 Revenue growth steady while margin performance strong

HUL’s Q1FY18 result was ahead of our expectations on profitability front. Key highlights were: 1) Revenue at Rs85.3bn grew by 4.9% yoy with underlying volume growth flat. Domestic business witnessed a healthy growth of 6% yoy, 2) EBITDA at Rs18.7bn grew by 14.1% yoy, while gross margin was healthy at 52.1% (+80bps), aided by better mix and price. EBITDA margin increased by 180bps yoy to 21.9% on the back of prudent cost management across every line item of P&L and 3) APAT grew by 14.9% yoy to Rs12.9bn.

Volumes marred by CSD, expect things to normalize in H2FY18

Volume got impacted, as trade pipeline in Personal Care and Foods segments contracted due to destocking ahead of GST rollout, with CSD channel being the worst hit. Had CSD channel sales been normal, volume growth would have been 2% yoy. Even in the first half of July, the CSD channel continued to be affected, the same is likely to normalise in few weeks. The company expects overall channel to normalize in the next few months. Rural growth was in line with urban growth, and uptick in rural growth is expected to be gradual. After successful launch of Lever Ayush brand in South India, the company will now roll it out nationally.

Outlook and valuation:

We believe that HUL is gradually moving into a phase of strong earnings growth, driven by margin expansion. We have revised our estimates to factor in lower revenue growth, as the company passed on the benefit of GST and increased our margin estimates to factor in a 300bps improvement in margin during FY17-19E. We have our earnings estimates by 0.5%/2% for FY18E/FY19E. We maintain our ACCUMULATE rating with a price target of Rs1,250.

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MSSL is a flagship company of the SamvardhanaMothersonGroup . MSSL, along with its subsidiaries and joint ventures, is one of the top manufacturers of automotive wiring harnesses and mirrors for passenger cars and a leading supplier of plastic components and modules to the automotive industry globally. The company operates over 230 facilities spread across 33 countries.

Broadly, MSSL’s products can be classified into three categories – modules and polymer products (under SMP), rear view mirrors (under SMR) and wiring harnesses. The company’s product portfolio spans across a wide array of products, including wiring harnesses, mirrors for passenger cars, injectionmoulded products, modules including dashboards, door trims, bumpers, blow-moulded components, liquid silicone rubber-moulded components, injection-moulding tools, extruded rubber products, precision machined metal components and waste recycling systems.

MSSL supplies to most of the leading auto OEMs in the domestic as well as global markets. Some of the company’s key clients include Volkswagen AG, Daimler, Ford, BMW, Maruti Suzuki and Renault Nissan.

MSSL to outpace industry growth; Aims at $18 billion revenue by FY2020:

MothersonSumi Systems Limited (MSSL) has given a revenue target of $18 billion for FY2020, indicating almost triple of revenues from $6.5 billion in FY2017. MSSL has indicated that half of the growth (about $6 billion) would come through organic growth opportunities. The company has identified opportunities across its product range – wiring harnesses (complex wiring systems to comply with stringent emission norms), mirrors (camera-based rear view systems and digital mirrors with greater field of vision) and polymers (lightweight foam plastics and increased sensor technology in bumpers) – all of which would significantly enhance the company’s topline. Further MSSL’s subsidiaries – SamvardhanaMothersonPeguform (SMP) and SamvardhanaMothersonReflectec (SMR) – reported a combined order book of Euro12.9 billion as of March 2017 (includes Euro4 billion of new orders), which highlights consumer confidence and provides topline growth visibility. Apart from organic growth, MSSL also highlighted inorganic growth opportunities ($5 billion-6 billion), which would significantly boost the company’s topline going ahead.

PKC’s acquisition to fuel growth; Open up huge cross-selling opportunities:

MSSL recently completed the acquisition of PKC Group (PKC) by purchasing 93.75% shares for a consideration of Euro571 million (Rs.4,150crore). PKC is the leading supplier of wiring harnesses to the commercial vehicle (CV) industry (commanding 62% and 43% market share in the US and Europe heavy-duty truck market, respectively; and 31% and 23% market share in the US and Europe medium-duty truck market, respectively). As per MSSL, the acquisition is complementary as PKC supplies to the CV segment, while MSSL predominantly is a passenger vehicle (PV) wiring harness provider. Acquisition of PKC would enable MSSL to become a full-fledged wiring harness solutions provider (catering to both the PV and CV segments). Further, PKC is exploring opportunities to almost double its topline to Euro1.4 billion by 2018 (as compared to Euro0.84 billion in 2016) by enhancing its presence in the Asian truck market (particularly China) and entering new segments such as railways and aerospace wiring harness. Further, MSSL is targeting to cross-sell (mirrors and polymer products) to PKC’s existing customers (such as MAN, Paccar, Volvo and Ford).

Focus to improve margins; Targets ROCE of 40% by FY2020:

SMP and SMR have opened up several new plants in the past three to four years to cater to increasing customer requirements. The plants have now reached optimum utilisation levels, giving benefits of operating leverage, which would improve margins. Additionally, MSSL’s focus on value-added products in wake of the stricter emission and enhanced safety norms is likely to augment margins (MSSL has indicated that new order wins offer better margins). MSSL is also targeting to significantly enhance PKC’s performance by improving operational efficiencies and incorporating best manufacturing practices. MSSL is targeting to augment PKC’s ROCE from 7-8% currently to about 40% by FY2020 (MSSL’s wiring harness division ex. PKC generates ROCE of 40%). We expect MSSL’s consolidated margins to improve from 10% in FY2017 to 11.4% in FY2019.

Key risks:

MSSL derives about 85% of its revenue from exports, which are predominantly Euro denominated. Any adverse movement in the currency would impact the company’s performance.

On a robust growth path; Expect 15-18% upside in the next 6-8 months:

MSSL is likely to post 24% and 36% growth in its topline and bottom line, respectively, over FY2017- 2019, which is amongst the fastest in the auto ancillary space. MSSL is well placed to outpace the auto industry’s growth through increasing content per vehicle and opening up cross-selling opportunities through PKC’s acquisition. Moreover, with increasing valueadded products and improved performance by PKC, we expect MSSL’s return on equity (ROE) to improve significantly from about 18.8% in FY2017 to 22.4% in FY2019. MSSL is a quality auto ancillary company having a diversified product and customer profile with a proven track record of outpacing the industry’s growth and successful improvement in the performance of its subsidiaries.

At the CMP of Rs.318, MSSL is trading at 32.4x FY2018E and 22.4x FY2019E earnings, respectively. We have a positive view on the stock and expect 15-18% upside over the next six to eight months.

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Events to watch this week

• Fed chair briefs Congress on monetary policy

• China inflation running low

• G-20 summit concludes

• Bank of Canada hikes rates

• US retail sales miss

The Week ahead:

For the week,Global equities moved up this week with solid gains. The yield on the US 10-year Treasury note faded seven basis points on the week, to 2.32%, while the price of West Texas Intermediate crude oil moved up to $46.35 a barrel from $44.50 a week ago. Volatility, as measured by the Chicago Board Options Exchange Volatility Index (VIX), dropped to 9.89 from 11.75 last week.

NIFTY- 9,886.35
CRUDE OIL-Rs 2990barrel
GOLD-Rs 27,996gram
Rs/$-Rs 64.44

MARKET ROUND UP 
Key benchmark indices hit record high with the BSE Sensex conquering the psychologically significant 32,000-level as a drop in June retail inflation data sparked hopes of a rate cut by the Reserve Bank of India. Global stock markets also provided some tailwind after US Federal Reserve chair Janet Yellen, in a House testimony, signalled that the approach to higher rates will be steady, prompting investors to buy more in risky emerging markets. 

The government data released after market hours on Wednesday, 12 July 2017, showed that retail inflation has eased to a record in June and factory output growth slowed sharply in May. Inflation as measured by the Consumer Price Index (CPI) slowed to 1.54% in June from 2.18% in May. The Index of Industrial Production (IIP) rose 1.7% in May compared with 3.1% in April. 
During the week, the Sensex surged 660.12 points or 2.10% to settle at 32,020.75. The Nifty 50 index advanced 220.55 points or 2.28% to settle at 9,886.35. 

Broader market trailed large caps. The S&P BSE Mid-Cap index jumped 1.64%. The S&P BSE Small-Cap index surged 0.49%. Both these indices underperformed the Sensex. 

Macro Economic Front: 
On the Economic Front,The government data released after market hours on Wednesday, 12 July 2017, showed that retail inflation has eased to a record in June and factory output growth slowed sharply in May. Inflation as measured by the Consumer Price Index (CPI) slowed to 1.54% in June from 2.18% in May. The Index of Industrial Production (IIP) rose 1.7% in May compared with 3.1% in April.

Major Action &Announcement:
Telecom major BhartiAirtel was the major Sensex gainer last week. It rose 5.45% to Rs 405.60. Last week certain media reports indicated that the Tata group and Bharti Enterprises are in discussions to form an alliance across telecom and direct-to-home television businesses. Both the groups have held exploratory talks to evaluate a mega alliance involving their telecom, overseas cable & enterprise services, and direct-to-home TV businesses. Discussions between both sides have revolved around a possible merger between Tata Teleservices, Tata Sky and Tata Communications with the Sunil Mittal-owned BhartiAirtel, which includes its wholly-owned DTH arm, reports added. 

IT major Infosys 3.85% to Rs 972.05.The company increased its revenue growth guidance in both dollar and rupee terms for FY 2018 at the time of announcing Q1 June 2017 results. Infosys' consolidated net profit fell 3.3% to Rs 3483 crore on 0.2% decline in revenue to Rs 17078 crore in Q1 June 2017 over Q4 March 2017. The results are as per International Financial Reporting Standards (IFRS) and was announced before market hours on Friday, 14 July 2017. 

Bank shares were in demand. State Bank of India rose 4.07% to Rs 291.60 after the bank's executive committee gave final approval for divestment of 8 crore shares in SBI Life through an initial public offering (IPO). The shares being offered for sale by SBI will be available at a price that would be fixed and determined by SBI Life, SBI, and BNP Paribas Cardiff, in consultation with the book-running lead managers, SBI said. 

Reliance Industries (RIL) rose 2.70% to Rs 1,531.05. RIL's telecom subsidiary Reliance JioInfocomm (Jio) announced on 11 July 2017 that Jio Prime Members can enjoy unlimited services for 3 months with Rs 399 plan. The earlier launched Rs 309 plan will provide 2 months of unlimited Jio services. 

Tata Motors rose 3.46% to Rs 451.90 after the company's British luxury unit Jaguar Land Rover (JLR) reporting good sales growth in June 2017. JLR reported a 11% growth in sales at 51,591 units in June 2017 over June 2016, driven by healthy China market. Shares of Tata Motors advanced 2.28% to settle at Rs 446.75 yesterday, 10 July 2017. Jaguar sales grew by 16.4% to 15,343 units in June 2017 over June 2016. Land Rover sales rose 8.9% to 36,248 units in June 2017 over June 2016. 

Drug major Sun Pharmaceutical Industries gained 0.20% to Rs 570.50 after the company said it has entered into settlements with certain plaintiffs in re Modafinil Antitrust Litigation matter currently pending in the United States District Court for the Eastern District of Pennsylvania. The settlements extend to all claims brought by Apotex Corporation and the Retailer Purchaser Plaintiffs. The settlements remain are confidential. 

Global Front: 
In Overseas Markets,China will unveil GDP data for second quarter on Sunday, 16 July 2017. China's industrial production data for June 2017 will be unveiled on Sunday, 16 July 2017. Eurozone Consumer Price Index (CPI) data for June will be declared on Monday, 17 July 2017. 

Eurozone interest rate decision will be held on Thursday, 20 July 2017. The six members of the European Central Bank (ECB) Executive Board and the 16 governors of the euro area central banks vote on where to set the rate. 

Global Economic News:

Yellen testifies on Capitol Hill
US Federal Reserve chair Janet Yellen testified on monetary policy before the House Financial Services Committee this week as markets continued to digest the Fed's recently announced balance sheet reduction plans. Chair Yellen reiterated that the Fed expects a tightening labor market to lead to increased inflation, despite recent weak inflation data. She added, however, that the Fed may change course from its policy plans if needed. Last month, the central bank raised rates for the third time since December 2016.

China inflation running Low
The United States is not the only region experiencing low inflation. China's consumer price index was reported at 1.5%, missing a 3% target. Its producer price index was reported at 5.5%, which was in line with expectations. It is worth noting that the slowdown in inflation is consistent with the slowdown in inflation in the US and many other countries. It is occurring as policymakers in the US, Canada and eurozone are all moving, or signaling that they will move, away from the low-interest-rate environment of recent years.

Bank of Canada raises rates
The Bank of Canada raised rates by a quarter of a percentage point to .75% while suggesting that monetary policy will remain accommodative for the foreseeable future. Of concern is the stability of the housing market, where prices have risen rapidly in recent years, particularly in areas such as Toronto and Vancouver, where prices have doubled since 2009.

GLOBAL CORPORATE NEWS

G-20 summit concludes
The G-20 summit of leaders of major economies concluded in Hamburg, Germany this week after discussions on a broad range of topics, including trade, climate change and immigration policy. Many leaders attending the summit appeared at odds with US president Donald Trump, particularly over trade policy and climate change. On the trade front, Japan and the European Union signed the Japan–EU Economic Partnership Agreement after several years of negotiation.

US retail sales off
Headline retail sales were down .2% month over month, with six of the 16 categories falling into negative territory. Department stores in particular were hurt, falling .7% after a similar drop in May. The recent drop in sales and subsequent selloff in retail stocks have attracted the interest of professional investors in search of a bargain.

NEW 52-WEEK HIGH BSE (A):

NEW 52-WEEK LOWS BSE (A):

MAJOR WEEKLY GAINERS IN BSE A CATEGORY(%):

MAJOR WEEKLY LOSERS IN BSE A CATEGORY:

Eyes will be set on the certain US economic data releases are:
Monday (17July)
Week Bill Announcement 
Tuesday (18 July)
Housing Market Index 
Wednesday (19 July)
Housing Starts
Thursday (20 July)
Jobless Claims &Natural Gas Report
Friday (21 July)
Note Major Event

FundamantelPick of the week:

Derivative Ideas Dewan Housing Finance Corporation Ltd For Target Rs.465.00

Derivative Ideas 
DHFL added around 3% of open interest as fresh long positions. On charts, it has breached past 10 sessions’ congestion zone on the higher side with noticeable rise in volumes. It is also trading in higher highs-higher lows formation on charts. Hence, we suggest buying DHFL July futures as per levels given below.

Strategy: 
BUY DHFL JULY FUTS BETWEEN 442-444, SL 432, TARGET 465.

MARKET OUTLOOK: 
Due to yesterday's move, we are now at a touching distance from 9900. We must accept the fact that we were unable to catch last 140 points on the index as we generally avoid chasing extended moves in the market. We would still continue with this strategy and would keep advising booking index specific longs in this rally. The main reason behind not participating in such kind of extended moves is we have historically seen how market surprises in the last leg of the euphoric moves. But, at the same time, one can look to find potential trades in individual stocks. Now, since the index is an uncharted territory, it becomes very difficult to give upside levels; but, 9900 - 9920 should be the levels to watch out for on a closing basis. On the other hand, 9850 - 9800 would be seen as an immediate support zone.

Other technical observations 
Bearish below 9610 only. As per time cycle till 9787 is held bulls can push nifty towards the scarocant figure of 10000 by 30 July.  Low made today was 9853 so nifty opened gap up above 9830 and rallied all the way till 9897, now bulls are holding 9830 we can move towards 9936/9961/10000. Bearish below 9792 for a move towards 9700/9610. Time cycle turn date of 12 July again helped in capturing good move in market. Till 9820 is held bulls are in control, bulls are in control and can push nifty towards 9936/9961/10000. Bearish below 9792 for a move towards 9700/9610 

Conclusion: 
Normal rainfall in most parts of India, retail inflation falling to eight months low, hopes of rate cut in the upcoming RBI policy meet in August and dovish statements from Federal Reserve Chair Janet Yellen lifted the Indian equity market to scale fresh all time high. Markets even chose to ignore the worst outage (technical glitch) witnessed on the National Stock Exchange, which kept the biggest exchange of the country halted nearly for three hours on July 10. AU Small Finance Bank saw a successful listing and gained over 51% on debut although the stock slipped significantly on Friday. For the week, NSE Nifty and BSE Sensex surged by 2.2% each. Nifty had crossed 9900 while Sensex hit 32000 for the first time ever.

Results season which kicked off was a mixed bag as IndusInd Bank reported decent numbers for the first quarter of FY18. Although Net NPAs as a percentage of net advances, came in at 0.44% as against 0.38% YoY. TCS reported lower than expected June quarter results while Infosys fared much better as it managed to beat markets estimates. It reported 1.3% growth in consolidated net profit at Rs 3,483 crore for the quarter ended June 2017.