{LONGTERMINVESTORS} Stock Update - Hindustan Unilever, Zee Entertainment Enterprises; MF - Sharekhan's top equity mutual fund picks, Sharekhan's top SIP fund picks

January 15, 2016   Stock Update Hindustan Unilever Reco: Hold PT: Rs900 CMP: Rs804   Volume growth sustains at 6%; price cuts affect revenue growth   Key points Volume growth sustained at 6%: In Q3FY2016, Hindustan Unilever Ltd (HUL)'s revenues grew by 3.2% to Rs7,822.9 crore affected by continued effect of phasing out of excise duty incentives and price deflation. The volume growth in the domestic consumer business stood at 6%, which was largely in line with 7% volume growth in Q2FY2016. The soap and detergent revenue grew by mere 1% (due to price deflation), while the revenues of personal care segment and the packaged food segment grew by 6% (affected by delay in winter season) and 12% respectively during the quarter. Benign input cost led to margin improvement: As anticipated, benign input prices resulted in a 293-BPS growth to 52.2% in gross profit margin (GPM). However, higher advertisement and promotional spends resulted in just 77-BPS improvement in the operating profit margin (OPM) to 16.3%. The operating profit grew by 8.3% and the adjusted PAT grew by 6.3% to Rs1,023.4 crore Outlook for near to medium term: With rural demand slowing down and urban demand yet to recover, we expect HUL's volume growth in the domestic consumer business to sustain in the range of 5-7%. The revenue growth in the near term would largely be a volume-led growth in the price deflationary environment. The fourth quarter is expected to be the last quarter to see the effect of phasing out of excise duty benefits. The process of re-alignment of channels is expected to be completed by the end of FY2016 and the management expects positive effect of the same in the long run. The focus continues to be on building portfolio through innovation in various categories. The decline in commodity prices would continue to support margins in the near term. Maintain Hold with unchanged price target of Rs900: We have fine-tuned our earnings estimates for FY2016 and FY2017 to factor in lower revenue growth due to price-deflation (introduced FY2018E earnings in this note). We have maintained our Hold recommendation on the stock and would keenly monitor the sales in the first half of FY2017. Our price target also remains unchanged at Rs900.   Zee Entertainment Enterprises Reco: Buy PT: Rs470 CMP: Rs402   In-line operating performance; profit marred by higher tax and lower other income   Key points Impressive top-line performance led by strong ads and subscription growth: For Q3FY2016, Zee Entertainment Enterprises Ltd (ZEEL)'s revenue growth was ahead of estimates with 17% Y-o-Y growth to Rs1,595.1 crore, aided by 26.8% growth in ads revenue and 17% growth in the subscriptions revenue (which was ahead of estimates owing to some catch-up in revenues booked during the quarter). The growth in advertisement revenue was attributed to market share gain and continual spends from top segments (FMCG and e-commerce, among others). The domestic subscription revenue was up by 21% YoY, while international subscription revenue was up by 2.3% YoY. For the quarter, the other income was down by 64% YoY to Rs28.9 crore, owing to some forex loss, while tax provisioning was higher at 36.9% vs 25.9% in Q3FY2015. The net income for the quarter was down by 11% YoY to Rs275 crore. Margins meet expectations: For Q3FY2016, operating profit margin (OPM) was at 27%, improved by 106BPS YoY, which was broadly in line with our expectations. For FY2016, the management continues to maintain the OPM similar to that of FY2015 level. The losses in sports segment for FY2016 is expected to be below Rs100 crore (the management refrained from giving lower numbers), despite having a loss of only Rs11.3 crore in M9FY2016. The company has completed its acquisition of Odia GEC channel, Sarthak TV, which became a subsidiary from December 4, 2015. Maintain Buy with a price target of Rs470: ZEEL continues to outperform the broadcasting advertising market and expects to continue the momentum with improvement in the macro economy. The management indicated that the strong momentum will continue in the ads revenue growth led by market share gains and improvement in spending from segments like FMCG, e-commerce, consumer durables, telcom and auto. Also, subscriptions revenue will see benefits from the run-up phase III and IV digitisation process (more visible in FY2017 and FY2018). We have broadly maintained our earnings estimates for FY2016, FY2017 and FY2018. We also continue to see ZEEL as the prime beneficiary of macro revival and digitisation. Therefore, we have maintained our Buy rating on the stock with an unchanged price target of Rs470. Mutual Fund Sharekhan's top equity mutual fund picks Large-cap funds Mid-cap funds Multi-cap funds SBI Bluechip Fund  Franklin India Smaller Companies Fund  Birla Sun Life Pure Value Fund  Reliance Top 200 Fund  Canara Robeco Emerging Equities  L&T India Value Fund  Birla Sun Life Frontline Equity Fund - Reg  Mirae Asset Emerging Bluechip Fund Franklin India High Growth Companies Fund  ICICI Prudential Focused Bluechip Equity Fund - Ret  HDFC Mid-Cap Opportunities Fund SBI Magnum Multiplier Fund  Kotak 50 - Reg  Religare Invesco Mid N Small Cap Fund  SBI Magnum Multi Cap Fund  Tax-saving funds Thematic funds Balanced funds Axis Long Term Equity Fund  ICICI Prudential Exports and Other Services Fund  L&T India Prudence Fund  Birla Sun Life Tax Relief 96  Franklin Build India Fund  Tata Balanced Fund - Reg  Tata India Tax Savings Fund Canara Robeco Infrastructure Fund  HDFC Balanced Fund  Birla Sun Life Tax Plan  L&T Infrastructure Fund  Franklin India Balanced Fund  SBI Magnum Tax Gain Scheme 93  Birla Sun Life Infrastructure Fund - Plan A  Reliance RSF - Balanced    Fund focus Birla Sun Life Tax Relief 96 Sharekhan's top SIP fund picks Large-cap funds Multi-cap funds SBI Bluechip Fund  Birla Sun Life Pure Value Fund Reliance Top 200 Fund  L&T India Value Fund  Birla Sun Life Frontline Equity Fund - Reg  Franklin India High Growth Companies Fund    Kotak 50 - Reg  SBI Magnum Multi Cap Fund  ICICI Prudential Focused Bluechip Equity Fund  Ret HDFC Capital Builder Fund  Mid-cap funds Tax-saving funds Canara Robeco Emerging Equities  Axis Long Term Equity Fund  Mirae Asset Emerging Bluechip Fund  Birla Sun Life Tax Relief 96  Franklin India Smaller Companies Fund Tata India Tax Savings Fund - Reg  HDFC Mid-Cap Opportunities Fund  Birla Sun Life Tax Plan  Religare Invesco Mid N Small Cap Fund  ICICI Prudential Long Term Equity Fund (Tax Saving) - Reg   Fund focus Birla Sun Life Frontline Equity Fund           Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article. Regards, Sharekhan Fundamental research team www.sharekhan.com

--
You received this message because you are subscribed to the Google Groups "LONGTERMINVESTORSRESEARCH" group.
To unsubscribe from this group and stop receiving emails from it, send an email to longterminvestorsresearch+unsubscribe@googlegroups.com.
Visit this group at https://groups.google.com/group/longterminvestorsresearch.
For more options, visit https://groups.google.com/d/optout.