In today’s briefing:
- India: AMFI Stock Reclassification Preview
- Sona Comstar Lock-Up – Blackstone up 17x, Sold Half in the IPO with over US$1bn Left
- Apollo Tyres – Maintaining FY26 Target of USD5bn Revenue with 12-15% ROCE
- ICICI Bank – Best Placed
- Apollo Tyres – Margin Headwinds Owing to Rising RM Prices; Maintain BUY
- Shriram Transport Finance – FY22 – Annual Report Analysis
- Morning Views Asia: Fosun International, Sands China Ltd, SJM Holdings, Vedanta Resources
India: AMFI Stock Reclassification Preview
- Nearing the end of the review period, we see 5 stocks moving from MidCap to LargeCap, 2 new listings added to LargeCap and 7 stocks moving from LargeCap to MidCap.
- We see 7 stocks moving from SmallCap to MidCap, 3 new listings added to MidCap, and 12 stocks moving from MidCap to SmallCap.
- Stock migrating upward have, on average, outperformed stocks that are downward migrations. Stocks moving from MidCap to LargeCap have performed the best.
Sona Comstar Lock-Up – Blackstone up 17x, Sold Half in the IPO with over US$1bn Left
- Sona Comstar (Sona) raised around US$761m in its Indian IPO in Jun 2021.
- The shares are now trading well above the IPO price and its largest PE investor, Blackstone, will be released from its lockup soon.
- In this note, we will talk about the lock-up dynamics and updates since our last note.
Apollo Tyres – Maintaining FY26 Target of USD5bn Revenue with 12-15% ROCE
- In its analyst meet, APTY management reiterated its revenue target of USD5bn in FY26, implying a 15% CAGR over FY22-26E vs. a 9% CAGR over FY18-22.
- Management maintained the ROCE (pre-tax) target at 12-15% by FY26E (7% in FY22), led by better asset turnover and margins.
- In the near term, cost pressures due to an increase in prices of crude derivatives and a lag in the pass-through of commodity inflation are likely to impact margins.
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ICICI Bank – Best Placed
- Higher EBLR-linkage places the bank favorably: In the current increasing interest rate environment, ICICI Bank seems well placed given that its loan book has 48% linkage to EBLR compared to 22-46% for most other banks under our coverage.
- Large Cap banks better placed to transmit systemic rate movements: We had outlined in our note that we see Large Cap banks being better placed in the current rising interest rate cycle given that they are more flexible, nimbler and overall better placed in terms of their ability to transmit systemic rate movements.
- Expect well-rounded growth given bank’s strong market share: Overall, we expect system credit growth to be well-rounded. Retail growth is expected to be supported by increasing penetration across sub-segments such as mortgages and unsecured loans.
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Apollo Tyres – Margin Headwinds Owing to Rising RM Prices; Maintain BUY
- Market share gains in TBR & PCR led by R&D investment: APTY’s R&D spends have been consistently ahead of competition over the last 5-10 years (Exhibit 5), which is reflected in its better quality TBR and PCR tyres.
- Demand outlook remains positive: The domestic replacement tyre market is witnessing signs of recovery, led by the PCR and T&B segments.
- Margin headwinds to persist with elevated crude prices and depreciated INR: Crude derivatives account for ~40% of the RM basket for APTY.
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Shriram Transport Finance – FY22 – Annual Report Analysis
- Focus on digital initiatives for loan disbursement and collection. During FY22, digital collection of loan EMIs and fixed deposits (FD) stood at 27.09% and 11.02%, respectively.
- Change in policies for NPA tagging and repossession of financial instruments affected profit before tax by Rs4.41bn in FY22.
- Improvement in funding from banks and higher deposit collections.
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Morning Views Asia: Fosun International, Sands China Ltd, SJM Holdings, Vedanta Resources
Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.
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