Hero MotoCorp replaces HUL as JPMorgan's top stock to avoid

MUMBAI: JPMorgan has removed Hindustan Unilever as a 'top avoid', and instead added Hero MotoCorp in its Asia Analyst Focus List.

JP Morgan announced the launch of its Asia Analyst Focus List (Asia AFL) in 2012.

The list comprises the highest conviction overweight (OW) and underweight (UW) ideas from each country and sector team (one OW and one UW idea from each team).

In its latest list, the brokerage expects Hero MotoCorp to underperform as intense competition from peers may impact the company’s performance.

“We have an UW rating on Hero MotoCorp. While domestic consumer sentiment remains weak, impacting overall two-wheeler sales, competitive intensity remains intense as Bajaj has launched its next generation Discover model and Honda continues to expand its distribution network into rural India,” a JPMorgan report says.

“Thus, slowing motorbike volumes, increased competitive pressure and market share losses will weigh on the stock price, in our view,” the report added.

JPMorgan points out that underperformer Hindustan Unilever may continue to show tepid growth in FY15, as macro environment remains challenging, and is likely to keep volume and value growth rates subdued.

“We expect volume growth trends for HUL to remain tepid in FY15. The volatile input cost environment, sustained competitive intensity and uncertain media inflation were cited as other key challenges for the industry. Valuations, though moderated, are still not attractive at 30x FY15E P/E,” the report said.

“We have an underweight rating on Hindustan Unilever; however, we remove it from our Asia Analyst Focus List as the stock has underperformed the market by 17 per cent over the past six months and we are not expecting more than 20 per cent potential downside this year for this name,” the report added.

At 10:20 a.m.; HUL was at Rs 556.35, down 0.42 per cent, on the NSE. It touched a high of Rs 558.90 and a low of Rs 554.55 in trade today.

Hero MotoCorp was at Rs 1,950.30, up 0.31 per cent, on the NSE. It touched a high of Rs 1,939 and a low of Rs 1,930 in trade today.