The recent border conflict with China in the Galwan Valley of Ladakh has boosted geopolitical tightness between Indian and China. Voices in India to boycott Chinese products across segments are booming. Sectors like auto, consumer durables, pharmaceuticals, telecom, chemicals and renewable power (solar) seem to be most dependent on China in terms of sourcing.
In many cases, substitute suppliers at the same scale or costs are lacking. While consumer durables is relying on China for components, pharmaceuticals is relying on the Chemical space, higher impact could be seen on stocks like Rallis India, Dhanuka, Sumitomo India, and Insecticide India. A lower impact could be seen on PI Industries, UPL, Coromandel, and Bayer. In the e-Commerce space, Info Edge would be impacted, as its investee companies like Zomato and Policy Bazaar have exposure to investments from China.
Telecom is dependent on China for network equipment as well as for 4G smartphone handsets as China caters to more than 75 percentage of the Indian handset demand. In the telecom space, Vodafone and Bharti Airtel would be the most affected in case of tariff or import curbs on telecom network equipment providers.
Motilal Oswal is of the view that any potential escalation between the two nations could increase operational/supply-chain risks in the current economic backdrop, even as economies look to recover from the pandemic.
Overall, it would be difficult and expensive for Indian firms to immediately find alternative suppliers.
In the Chemical space, higher impact could be seen on stocks like Rallis India, Dhanuka, Sumitomo India, and Insecticide India. A lower impact could be seen on PI Industries, UPL, Coromandel, and Bayer.
In the e-Commerce space, Info Edge would be impacted as its investee companies – Zomato and Policy Bazaar – have exposure to investments from China. Indian tech and e-commerce startups like Paytm, Snapdeal, Ola, Swiggy, BigBasket, and Byju have significant investments from Chinese companies..
In the utilities space, within our coverage universe, Tata Power has exposure to the execution and commissioning of solar power plants.
Here is a list of sector wise impact from dependency/ inter linkages with china:
Autos
Tata Motors, Motherson Sumi and Bharat Forge would be the least impacted due to their business diversified nature and global operations. The tyre industry has already seem multiple creates in anti dumping duties, which has benefited tyre companies
Consumer Durables
Havells and Crompton Greaves would be the least impacted due to low exposure to China. Voltas would be the most affected in case of tariff hikes
Pharma
Dependency on China is ~60-70 percentages for key starting materials. In case of any tariff or import curbs, Sun Pharma and Cipla would be the least impacted as they are fully integrated and have considerable exposure to the branded business
Telecom
Vodafone and Bharti Airtel would be the most impacted in case of tariff or import curbs on telecom network equipment providers. Reliance Jio would be the least impacted as it has no exposure to China in the network equipment space
Chemical And Agro Chemical
Higher impact: Rallis, Danuka,Sumitomo india, Insecticide india
Lower impact: UPL, Coromandel (company level), Bayer India.
Potential Beneficiaries: SRF, Aarti Industries, Atul Ltd, Bharat Rasayan, Excel industries
E Commerce
Info Edge would be impacted as invest companies - Zomato and Policy Bar have exposure to investments from China. Indian tech and E-commerce start-ups like Paytm Snapdeal, ola, Swiggy, Big basket and byjus have significant investments from Chinese companies
Utilities
Within coverage universe, Tata Power has exposure to execution and commissioning of solar power plants
