India

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.

• Adani Ports & Special Economic Zone
• Lippo Malls Indonesia Retail Trust
• Vedanta Resources

• Honasa Consumer (HC) is looking to raise about US$350m in its upcoming India IPO.
• HC’s product portfolio includes products in the baby care, face care, body care, hair care, color cosmetics and fragrances segments. 
• In this note, we will talk about the positive aspects of the deal.

• The March 2023 Rebalance results for the NIFTY broad market Indices were announced after the close on Friday 17th February 2023.
• In my previous insights, I highlighted Pidilite Industries (PIDI IN) as a potential ADD for NIFTY 50 but it will not be added in March 2023. There are no changes.
• However, for NIFTY 100 (& NIFTY Next 50), 4/5 Expected ADDs and 5/5 Expected DELs were predicted correctly.

• On 8 February, MSCI announced special treatment for the Adani names in its indices, discussed in Adani Group – MSCI Will Treat Very Adani Funds as a Very Special Case. 
• Late on 15 February they came out with a revision of their implementation – which was problematic because some stocks had gone limit down many days in a row. 
• The stocks responded. But it clearly isn’t an easy implementation, and it clearly isn’t over. 

• ABB India Ltd (ABB IN), Adani Wilmar (AWLTD IN), Canara Bank (CBK IN), Page Industries (PAG IN) and Varun Beverages Ltd (VBL IN) will be added to the index.
• Bandhan Bank Ltd (BANDHAN IN), Biocon Ltd (BIOS IN), Gland Pharma Ltd (GLAND IN), Mphasis Ltd (MPHL IN) and Paytm (PAYTM IN) will be deleted from the index.
• Given the large drop in the stock prices of the Adani Group companies, capping changes will result in buying on all non-F&O stocks in the index.

• Kolte Patil reported weaker than expected Q3FY23 accounting earnings due to slight delay in arrival of OC for some projects. However, sales velocity and business development activity was robust.
• Reported Q3FY23 earnings had weak margins due to revenue contribution from two low-margin projects.
• Q4FY23 is on track to be strong both in terms of reported earnings (which depends on the timing of OC) and sales velocity.

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. Alam Sutera Realty
2. China SCE
3. China Jinmao Holdings
4. Lifestyle International Holdings
5. Geely Auto

and more…

• BEC revenues continue to match the pre-COVID level suggesting that the business has now normalized fully post-COVID. COVID led shift in working habits has had no structural impact.
• IT Office Leasing revenues grew 6%+ QoQ, led by the improvement in occupancy rates. Profitability also improved led by operating efficiencies. 
• BEC’s EBIT margin came in significantly lower than expected due to one-off expense of INR 15cr for demolition of a factory shed to build a new exhibition hall.

• Q3FY23 tends to be the weakest quarter seasonally. Volume de-growth was -10% QoQ, in line with the expectation as per historical seasonality trend.
• Q4FY23 is all set to be a strong quarter. Management is confident of closing FY23 as per the previously stated revenue and margin guidance.
• The new value-added segment, Barrier Packaging, has started to contribute meaningfully to the revenue. Tube Laminates, another value-added segment, will also start to contribute soon.

• Indigo’s co-founder Rakesh Gangwal aims to raise around US$375m via selling around 4.0% of the company.
• He had earlier stated his intention to pare down his stake after a long drawn, and very public battle, with the other co-founder. He last sold in Sep 2022.
• In this note, we will talk about the placement and run the deal through our ECM framework.

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.

• Vedanta Resources

• Rescinding of Rs 200 bn FPO deprives the company of much needed long-term funds
• Company has a liquidity issue as this analyst estimates its short term borrowing exceeds its short term borrowing limit and it requires long term funds to bridge the gap
• With foreign and private sector banks unwilling to increase exposure, the company needs to inject funds from founder entities, divest assets, reduce capex and improve working capital to infuse liquidity.

• A decrease in FIF on Adani Enterprises (ADE IN), Adani Transmission (ADANIT IN) and Adani Total Gas (ATGL IN) will result in selling from passive MSCI trackers on 28 February.
• At the last close, Adani Power (ADANI IN), Adani Total Gas (ATGL IN) and Adani Transmission (ADANIT IN) are at risk of being deleted from the MSCI India in May.
• We believe it is unlikely that MSCI will add the Additional Surveillance Measures companies to the list of Ineligible Boards for India, though we cannot rule it out completely.

• In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the June 2023 Rebalance.
• The sharp price drops experienced by the Adani Group companies have resulted in a negative change in index flow expectations for some names.
• However, some Adani Group companies could be experiencing positive index flows in the June 2023 rebalance due to some peculiar derivative-linkage requirements in the index methodology.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• The 2020/2023 uptrend has delivered unbelievable gains. With the uptrend at historic new highs, it is difficult to identify targets and key resistance levels (using regular charts).
• Today we turn to the quarterly LOG chart and identify 400/410 as the next major resistance level and H1 2023 target (+20%).

• Berger Paints India (BRGR IN) / Pidilite Industries (PIDI IN) are exposed to similar customers but different demand dynamics offering an opportunity to build an L/S trade.
• The valuation premium commanded by PIDI over BRGR is not justified in spite of having a similar customer base, similar growth and capital allocation profile.
• The Price ratio of the pair BRGR/PIDI has been trading in a tight range since September 2022 and is now showing signs of breaking out of the sideway trend.

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.

• Adani Green Energy
• Adani Ports & Special Economic Zone
• Adani Transmission
• Lippo Malls Indonesia Retail Trust
• NagaCorp Ltd
• Sunny Optical

• Bajaj Finance Ltd (BAF IN) reported decent profitability. Growth was somewhat muted due to competition, however, this seems temporary.
• The immediate focus of BAF to drive the next leg of growth is to deepen its product penetration across its existing branches. Currently, only 3% branches have 80%+ products.
• BAF revealed its long-term strategic plan wherein it plans to enter into newer categories like Auto, Agri, and CV which comprise 28% of the Indian retail credit market.

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. Wynn Macau Ltd
2. Vedanta Resources
3. Softbank Group
4. Country Garden Holdings Co
5. China Hongqiao

and more…

• Shortly after the Hindenburg Report came out, MSCI said it was seeking feedback from clients. They got it, and last night announced they would conduct a special review. 
• They concluded some holders heretofore in the float might not be float. They announce results tonight. That can only be bad news for Adani Group companies. 
• We don’t know numbers yet, but passive inclusion was one reason why stocks skyrocketed. Few of the companies will be unaffected. Some could be heavily affected.

• Mankind Pharma is looking to raise around US$1bn in its upcoming India IPO.
• MP is a pharmaceutical company engaged in developing, manufacturing and marketing a range of pharmaceutical formulations across various acute and chronic therapeutic areas, as well as several consumer healthcare products.
• We have looked at the company background and undertaken a peer comparison in our previous notes. In this note, we will talk about valuations.

• HDFC Bank (HDFCB IN) continues to focus on growing its offline distribution network and added 684 new branches in Q3FY23, taking the total to 7183.
• It is also focusing on niche under-penetrated segments like Gold Loans and Wealth Management. Its Payment Acceptance Points network has also seen rapid growth.
• QoQ loan growth was somewhat muted, largely due to underwhelming growth on the corporate side as pricing in the marketplace is not as remunerative due to elevated competition.

• KPIT reported strong Q3FY23 earnings with organic revenue growth of 24.6% YoY and 4.9% QoQ. Including Technica acquisition, revenue growth was 17.3% QoQ and 31.9% YoY in $ terms.
• EBITDA margin stayed steady QoQ at 18.5%. Deal wins were strong with Q3FY23 TCV of $272mm. KPIT is on track to beat its prior FY23 growth outlook.
• Despite caution in the IT services sector, KPIT is seeing robust demand as automotive OEMs continue to spend on new automotive tech R&D. 

• LICHF reported Q3FY23 earnings that was lower than expected due to the increase in provisioning. LICHF reported annualized credit cost of 1.2% vs expected run-rate of <0.5%.
• The higher provisioning was done purely from a management overlay perspective for extra caution. It led the PCR to rise to 51% vs 43%+ earlier. 
• The higher provisioning was not due to asset quality deterioration. In fact, asset quality improved slightly with GNPA at 4.75% vs 4.90% QoQ.