India

• Demand recovery across segments to propel earnings Godrej Agrovet (GOAGRO) is likely to witness better demand across its segments of Palm Oil, Animal Feed (AF) and Crop Protection (CP).
• Conversely, the palm oil business is likely to be a beneficiary of rising prices.
• The palm oil prices rallied 42% YoY to USD1,383/t as of Jan’22..

• We have seen CEO changes for various other consumer companies in the past, and most changes have been value accretive.
• However, we remain cautious until the new CEO showcases his execution capability.
• His exit (along with past exits of many members of senior management) is certainly adding several risks.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. CIFI Holdings
2. China Jinmao Holdings
3. Kaisa Group Holdings
4. Guangzhou R&F Properties
5. Sunac China Holdings

and more…

• AU Small Finance Bank (AU) has always remained ahead in pre-empting future business trends and building capabilities to serve the evolving needs of customers.
• We derive this view from AU’s past initiatives.
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• According to our channel checks, the new smaller compact feature stores (of 20k-25k sqft) enjoy significantly better revenue/sqft (of ~1.5x) v/s the existing bigger stores (of 40k-50k sqft).
• Management targets to double revenue over the next 3-4 years backed by: its strategy of adding 10-12% new stores annually, its initiative to revive SSSG to high single or double digit on improved new store productivity and focus on private labels, strong growth in the Beauty segment and ecommerce initiatives.
• However, our revenue estimates are nearly 40% below the management.

• Event: The Maharashtra government has proposed to reduce VAT on natural gas.
• MGL is expected to benefit from the proposal (reduction of VAT from 13.5% to 3%).
• In a likely scenario of the company passing on partial benefit to its customers (Rs 2-2.5/scm), we expect a revision in our volume growth estimates

• We initiate coverage on CIPLA Ltd (CIPLA) with a BUY rating and a target price of Rs 1,200 (PE 24x for FY24E EPS), implying an upside of 15.5% from the current levels.
• CIPLA continuous to focus on the demand levers in the chronic and acute therapies and complex products in its existing as well as pipeline portfolio
• The company’s active advancement of innovative consumer-centric products is expected to accelerate the augmentation of the global consumer wellness franchise

• Resurfaced chip availability concerns amid geopolitical issues Russia is the largest producer (~40% share in global production) of rare earth metal palladium, which is used in manufacturing of semiconductor.
• Further Ukraine is the largest producer of neon gas, which is another important component for semiconductor (chip) manufacturing.
• Therefore, any supply chain disruption of these critical raw materials in this space would impact the availability of chips, resulting in an adverse impact on OEM volumes and associated productivity.

• We assign 45x to the company’s FY24E earnings of Rs 150 to arrive at the target price of Rs 6,800/share, implying an upside of 52% from the CMP.
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• The company is setting up plant to manufacture decorative paint with a total capital investment of Rs 600 Cr to be invested over a period of 5 years
• Entire capital investment for the paint business would be funded through equity infusion and redeemable preference capital by the parent JK Cement.
• We maintain our BUY rating on the stock and value it at 13x FY24E EV/EBITDA to arrive at a target price of Rs 3,100/share, implying an upside of 35% from the current levels.

• We have seen CEO changes for various other consumer companies in the past, and most changes have been value accretive.
• However, we remain cautious until the new CEO showcases his execution capability.
• His exit (along with past exits of many members of senior management) is certainly adding several risks.

• We recommend a BUY rating on the stock with a target price of Rs 1941, implying an upside of 10% from the CMP.
• Kotak Mahindra Bank (KMB) offers diversified banking and financial products/services to customers in India and oversea
• Incorporated in 1985 as Kotak Capital Management Finance Ltd, the company has since ventured successfully into various branches of the financial services segment through its various subsidiaries

• Jubilant Foodworks (JUBI IN) announced the departure of its CEO Mr Pratik Pota. 
• The timing of departure coupled with recent disappointment around disclosures is making the market nervous. 
• As the “sea” gets stormy thanks to high food inflation and pressured “Dine-Ins”, who would be JUBI’s new captain is the key. 

• The Russia Ukraine conflict has provided traction to global metal prices.
• During YTD CY22, a healthy rally has been witnessed in both ferrous and non-ferrous metals.
• During YTD CY22 (January 1-March 10, 2022), aluminium prices on the LME increased by ~21% to US$3409/tonne.

• Our interaction with the management of IndusInd Bank (IIB) suggests that the macro uncertainties / volatility amidst current geopolitical situation and prolonged supply disruption may pose some risk to financing demand in gems/jewellery (Russia accounts for ~30% of global diamond output) and vehicle financing (due to rise in fuel prices).
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• We believe, it would be tough for Asahi India Glass (AIG) to sustain its present elevated profitability levels amidst steep rise in energy costs.
• We expect it to surge a further ~400bps by Q1FY23E, assuming present natural gas and crude oil prices.
• Also, logistics cost to sales is ~5-6%, and ~20% increase in fuel costs would add a further 100bps pressure on margins.

• Interaction with senior management of HDFC Bank suggests the bank is well geared to sustain high-teen growth in loans and advances.
• Visibility continues to be high on its consistent earnings delivery and >2% RoA / >18% RoE for FY23E/FY24E.
• Nonetheless, the stock has corrected >10% in past one year and underperformed Nifty by ~20% and Bank Nifty by ~7%.

• RBI has directed Paytm Payments Bank (PPBL), an associate of One 97 Communications (OCL or Paytm), to temporarily halt onboarding of new customers, via a letter dated 11th Mar’22. The embargo will have an adverse impact on signing up users for new PPBL wallets or savings / current accounts, until further notice.
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• Star Health Insurance (STAR) is the leading health insurance player in India with 14%/32% market share in total/retail health insurance segment as of 10MFY22. A strong network of 0.53mn agents, >12,000 hospitals and 737 branches as of 9MFY22 makes STAR a dominant franchise in Indian health insurance with significant entry barriers.
• This is further complemented by healthy financials.
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• Ajanta Pharma (AJP IN)  together with its subsidiaries, develops, manufactures, and markets finished dosages and markets it both domestic and internationally.
• Although the company has been profitable, it does exhibit several concerns on the balance sheet side and few on the governance end.
• Major setbacks include elongated cash conversion cycle, declining returns and efficiency ratios, doubts on effectiveness of R&D, and capital allocation woes.

• Dr. Reddy’s Laboratories (DRRD IN) is outperforming the domestic pharma industry and aims to expand its market share. Currently, India business contributes 19% of revenue. 
• The company’s largest revenue segment, the U.S. generic business continues to see pricing pressure. It plans to launch new products, including complex generics to combat the impact of price erosion.
• Dr. Reddy also has around 13% revenue exposure to Russia and other CIS countries. Sharp depreciation of Russian currency will negatively impact revenue from the region.

• Amongst numerous cases of mis-selling of ICICI Prudential Life ULIP policies we highlight 2 cases of N Yadav and Ramvati Yadav in Raigarh district of Chhattisgarh by ICICI Bank staff 
• Fraudulent documentation by ICICI Bank staff which could have been easily exposed has instead been approved by ICICI Prudential Life’s underwriting
• Although highlighted only 2 cases there may be many more hidden cases which should be a major concern for investors in  ICICI Prudential Life on the abysmal state of underwriting.

• CFS manufactures hydroquinone and catechol from phenol by using oxidation reaction.
• Further, the reaction of hydroquinone with methanol produces mono methyl ether of hydroquinone (MEHQ).
• Depressed prices of catechol, another product formed by the reaction, poses an economical challenge to the company’s MEHQ synthesis process through the hydroquinone route.

• The process of commissioning of the steel plant has already started and hot metal production is likely to start in 1HFY23. We believe the demerger of the Nagarnar Iron and Steel Company (NISP) will be the key trigger for the stock.
• Thereafter, the government is likely to call for bids from potential suitor, which should likely culminate into sale of the government’s holding in the steel plant to the new owner.
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• Established in 1908 by Maharaja Sayajirao Gaekwad of Baroda, BoB was one of the 14 banks that were nationalised in 1969
• The bank has merged with Dena and Vijaya Bank and is now the second largest PSU bank in the country
• It has been one of the early players to have identified the potential and importance of international presence

• Retail loan growth revives; expect strong traction to sustain HDFCB exhibited robust traction in corporate and commercial banking segments until FY21, which offset the softness in retail lending.
• However, the bank has witnessed a healthy pick-up in retail loans recently, which grew at an average of 5% QoQ over the past two quarters.
• The growth in auto financing business continued to remain tepid due to softer trends in passenger vehicle financing while the twowheeler segment continued to report sequential decline.

• Hindustan Aeronautics (HAL) procures Rs40-42bn worth of spares and parts (used in ROH) from Russia, for which it has maintained inventory to cater to the requirement for at least next 8-9 months.
• The company is also focusing on indigenous production of Russian supplies to reduce the import dependence.
• Management mentioned that Russia has confirmed to supply critical raw material to the company, but the payment mechanism is yet to be established.

• Fabindia is a consumer lifestyle platform with a 62-year legacy focused on authentic, sustainable and Indian traditional lifestyle products. It is looking to raise around US$500m in its India IPO.
• Fabindia offers a diverse portfolio of lifestyle products to its customers across Apparel and Accessories, Home and Lifestyle, Personal Care and Organic Food categories. 
• In this note, we will talk about the positive aspects of the deal.

• After MNC Pharma and pure-play companies like ERIS, ALKEM has minimal exposure to the international business.
• It has multiple growth drivers over the next 12-18 months, despite a high base in the past 12 months, due to: a revival in Non-COVID therapies and better MR productivity (14% net addition over the past two years), sustained outperformance in Chronic.
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• Fabindia is a consumer lifestyle platform with a 62-year legacy focused on authentic, sustainable and Indian traditional lifestyle products. It is looking to raise around US$500m in its India IPO.
• Fabindia offers a diverse portfolio of lifestyle products to its customers across Apparel and Accessories, Home and Lifestyle, Personal Care and Organic Food categories. 
• In this note, we talk about the not so positive aspects of the deal.

• We visit dealers of Honda Motor (7267 JP) , Hero Motocorp (HMCL IN) and TVS Motor (TVSL IN) to understand the current demand environment for Electric Vehicles(EV).
• High fuel prices and a very low base lead to high growth for EV OEMs
• Customers are waiting for launches from legacy players and a reduction in battery cost to decide the best alternative, but this is costing the overall 2W industry lower volumes. 

• We reiterate our Buy rating with a revised TP of INR2,130, implying a potential upside of 25%. 
• TCIE is a well-established player in the Express Logistics segment, with a pan India presence and catering to 95% of pin codes.
• With a lease-based model for most of its required assets, TCIE enjoys greater operational flexibilities and generates a better return on assets

• Infosys is India’s second largest IT services exporter and has strong global presence. 
• It provides industry wide solutions including next gen services like Cloud computing, digital transformations, IoT, Machine learning etc
• We recommend a Buy the stock for a target price of Rs 1895 implying an upside of 10% from CMP.

• Will continue to stand tall despite the many challengers Muthoot Finance (MUTH’) is our top pick for CY22 in the NBFC Lending space.
• Our investment idea is premised on our thesis of a structural opportunity in Gold lending as the market pie expands with customers evolving, taboo around Gold loans fading away, and apprehensions regarding Gold loans addressed through customer education.
• In this report, we list MUTH’s competitive strengths vis–vis its peers and some of the challengers like Fintech Gold loan NBFCs.

• VBL has a diversified growth strategy, with multiple levers in place to drive its long-term growth.
• We expect volume growth momentum to continue, with: a gradual gain in market share on increasing penetration in underpenetrated markets, higher acceptance of recently launched products, and ramp-up of.
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