Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>The <a href="https://www.smartkarma.com/entities/nifty-index" target="_blank" data-smartkarma-citation="entities:23617:1" rel="noopener">NIFTY Index (NIFTY INDEX)</a> is the flagship index of the National Stock Exchange of India (NSE). The index has 50 stocks and is a free float weighted market cap index. The next rebalance will be effective after the close of trading on 25 March and the announcement of the changes will be done four weeks prior to the effective date.</p><p>We are now almost at the end of the review period. There are 3 stocks that meet the criteria for inclusion in the <a href="https://www.smartkarma.com/entities/nifty-index" target="_blank" data-smartkarma-citation="entities:23617:1" rel="noopener">NIFTY Index (NIFTY INDEX)</a>: <a href="https://www.smartkarma.com/entities/tata-consumer-products" target="_blank" data-smartkarma-citation="entities:258:1" rel="noopener">Tata Consumer Products (TATACONS IN)</a>, <a href="https://www.smartkarma.com/entities/icici-lombard-general-insura" target="_blank" data-smartkarma-citation="entities:25882:1" rel="noopener">Icici Lombard General Insurance Company (ICICIGI IN)</a> and <a href="https://www.smartkarma.com/entities/info-edge-india-ltd" target="_blank" data-smartkarma-citation="entities:14461:1" rel="noopener">Info Edge India (INFOE IN)</a>. The three lowest ranked stocks in the index are <a href="https://www.smartkarma.com/entities/gail-india-ltd" target="_blank" data-smartkarma-citation="entities:15263:1" rel="noopener">Gail India Ltd (GAIL IN)</a>, <a href="https://www.smartkarma.com/entities/indian-oil-corp-ltd" target="_blank" data-smartkarma-citation="entities:7781:1" rel="noopener">Indian Oil Corp (IOCL IN)</a> and <a href="https://www.smartkarma.com/entities/upl-ltd" target="_blank" data-smartkarma-citation="entities:20776:1" rel="noopener">UPL Ltd (UPLL IN)</a>.</p><p>We see a high probability of <a href="https://www.smartkarma.com/entities/tata-consumer-products" target="_blank" data-smartkarma-citation="entities:258:1" rel="noopener">Tata Consumer Products (TATACONS IN)</a> being included and <a href="https://www.smartkarma.com/entities/gail-india-ltd" target="_blank" data-smartkarma-citation="entities:15263:1" rel="noopener">Gail India Ltd (GAIL IN)</a> being excluded, and a lower probability of <a href="https://www.smartkarma.com/entities/icici-lombard-general-insura" target="_blank" data-smartkarma-citation="entities:25882:1" rel="noopener">Icici Lombard General Insurance Company (ICICIGI IN)</a> being included and <a href="https://www.smartkarma.com/entities/indian-oil-corp-ltd" target="_blank" data-smartkarma-citation="entities:7781:1" rel="noopener">Indian Oil Corp (IOCL IN)</a> being excluded.</p><p><a href="https://www.smartkarma.com/entities/info-edge-india-ltd" target="_blank" data-smartkarma-citation="entities:14461:1" rel="noopener">Info Edge India (INFOE IN)</a>'s average free float market cap is less than 1% lower than <a href="https://www.smartkarma.com/entities/icici-lombard-general-insura" target="_blank" data-smartkarma-citation="entities:25882:1" rel="noopener">Icici Lombard General Insurance Company (ICICIGI IN)</a> - can get close going into the tail end of the review period.</p><p>The index committee has a wide berth when choosing the number of changes to be made and it is highly unlikely that there will be more than 2 changes, especially since a maximum of 5 changes can be made in a year.</p><p><a href="https://www.smartkarma.com/entities/dmart" target="_blank" data-smartkarma-citation="entities:23656:1" rel="noopener">Avenue Supermarts (DMART IN)</a> has the highest market cap among non index constituents but is not eligible for index inclusion since there are no listed Futures and Options on the stock, a prerequisite for index inclusion.</p>

The NIFTY Index (NIFTY INDEX) is the flagship index of the National Stock Exchange of India (NSE). The index has 50 stocks and is a free float weighted market cap index. The next rebalance will be effective after the close of trading on 25 March and the announcement of the changes will be done four weeks prior to the effective date.We are now almost at the end of the review period. There are 3 stocks that meet the criteria for inclusion in the NIFTY Index (NIFTY INDEX): Tata Consumer Products (TATACONS IN), Icici Lombard General Insurance Company (ICICIGI IN) and Info Edge India (INFOE IN). The three lowest ranked stocks in the index are Gail India Ltd (GAIL IN), Indian Oil Corp (IOCL IN) and UPL Ltd (UPLL IN).We see a high probability of Tata Consumer Products (TATACONS IN) being included and Gail India Ltd (GAIL IN) being excluded, and a lower probability of Icici Lombard General Insurance Company (ICICIGI IN) being included and Indian Oil Corp (IOCL IN) being excluded.Info Edge India (INFOE IN)'s average free float market cap is less than 1% lower than Icici Lombard General Insurance Company (ICICIGI IN) - can get close going into the tail end of the review period.The index committee has a wide berth when choosing the number of changes to be made and it is highly unlikely that there will be more than 2 changes, especially since a maximum of 5 changes can be made in a year.Avenue Supermarts (DMART IN) has the highest market cap among non index constituents but is not eligible for index inclusion since there are no listed Futures and Options on the stock, a prerequisite for index inclusion.

NIFTY50 Index Rebalance Preview - Nearing The End of the Review Period

Asia Consumer Sector Research, Investory

Devi Subhakesan

Asia Consumer Sector Research

ASIA CONSUMER: INSIGHTS AND INVESTMENT IDEAS

Investory

Investory is a Singapore-based boutique independent equity research firm founded in January 2017 with a primary focus on consumption themes across Asia-Pacific.

We aim to generate investible ideas based on consumption trends and outlook. We screen our ideas on several parameters - product potential, long-term growth and management commitment being the most critical.  We follow a fundamental analysis approach in our stock selection process and are not restricted by market cap.

We aspire to grow into a leading source of unbiased research, free of conflict of interest, for investors yearning for independent and disciplined analysis. 

We also undertake bespoke research mandates to support our Institutional clients’ investment needs.

Our team comprises of professionals with extensive experience in the Asian equity markets, in areas ranging from research, servicing institutional clients and investment management.

Thematic (Sector/Industry)

<p> In this Smartkarma Original Series report, we scan the Asia Direct-to-Consumer (D2C) channel space for Consumer Packaged Goods to identify the verticals that have gained wider consumer acceptance and witnessed steady growth in each of the key geographies - China, South East Asia, and India. We look into the factors that enabled notable D2C brands in the Beauty, Fashion, and Food verticals to make steady inroads and disrupt the sector within a short period. We discuss the D2C ecosystem, brand journey and key challenges. 2020 has been the year that fast-tracked online retail penetration in most parts of Asia. In this context, we profile D2C brands with either a dominant segment presence or unique business model to gain a deeper understanding of the Asia D2C landscape.</p>
<p><strong>What is original about this report?</strong> Insights and takeaways for Investors in Asia D2C branded players in consumer space based on our comparative study of the segment across three key geographies - China, SE Asia, and India. China's early march in digital transformation and D2C market space offers valuable lessons to players/investors in early-stage digital markets like India which is witnessing aggressive traction in this space. Insights discussed in the report have mostly been weaned from the startup experiences shared by founders of reputed D2C brands. The report also analyses investment outlook for select digitally native D2C brands with lead segment presence and/or unique business models.</p>

 In this Smartkarma Original Series report, we scan the Asia Direct-to-Consumer (D2C) channel space for Consumer Packaged Goods to identify the verticals that have gained wider consumer acceptance and witnessed steady growth in each of the key geographies - China, South East Asia, and India. We look into the factors that enabled notable D2C brands in the Beauty, Fashion, and Food verticals to make steady inroads and disrupt the sector within a short period. We discuss the D2C ecosystem, brand journey and key challenges. 2020 has been the year that fast-tracked online retail penetration in most parts of Asia. In this context, we profile D2C brands with either a dominant segment presence or unique business model to gain a deeper understanding of the Asia D2C landscape.
What is original about this report? Insights and takeaways for Investors in Asia D2C branded players in consumer space based on our comparative study of the segment across three key geographies - China, SE Asia, and India. China's early march in digital transformation and D2C market space offers valuable lessons to players/investors in early-stage digital markets like India which is witnessing aggressive traction in this space. Insights discussed in the report have mostly been weaned from the startup experiences shared by founders of reputed D2C brands. The report also analyses investment outlook for select digitally native D2C brands with lead segment presence and/or unique business models.

D2C Brands in Asia: Disruption Potential in Consumer Space

Consumer Analyst / Channel Surveillance Specialist, Trudence Capital Advisors

Pranav Bhavsar

Consumer Analyst / Channel Surveillance Specialist

ASA Capital Management

ASA Capital Management is a boutique Research and Investment Advisory firm focusing on primary research in India. ASA provides bespoke research services to Institutional Clients with a focus on due diligence backed with primary research, Field Trips & Channel Checks.

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<p>This insight aims to track data related to discretionary spends on consumer goods. It covers a range of aspects - from the adoption of new payment methods, consumer income growth and savings data, freight and travel, rural development and agriculture to the availability of finance and liquidity. </p>
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<p>The Indicators for the month of July indicate a further recovery in most aspects of the economy. The rural economy still continues to be the main engine and is expected to remain so.</p>
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<p>The data tracker is a joint initiative done along with insight provider <a href="https://www.smartkarma.com/profiles/nitin-mangal" target="_blank" data-smartkarma-citation="accounts:1988" rel="noopener">Nitin Mangal.</a></p>
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This insight aims to track data related to discretionary spends on consumer goods. It covers a range of aspects - from the adoption of new payment methods, consumer income growth and savings data, freight and travel, rural development and agriculture to the availability of finance and liquidity. 


The Indicators for the month of July indicate a further recovery in most aspects of the economy. The rural economy still continues to be the main engine and is expected to remain so.





The data tracker is a joint initiative done along with insight provider Nitin Mangal.








Alternative Data | India Consumer Tracker - Recovery Continues

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

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<a href="https://www.smartkarma.com/profiles/devi-subhakesan" target="_blank" data-smartkarma-citation="accounts:1913" rel="noopener">Devi Subhakesan</a> mentioned in her report in <a href="https://www.smartkarma.com/insights/indofood-cbp-icbp-ij-us-3bn-acqsn-of-affiliate-dizzy-valuation-earnings-dilution" target="_blank" data-smartkarma-citation="insights:39793" rel="noopener">Indofood CBP (ICBP IJ): US$ 3Bn Acqsn. Of Affiliate - Dizzy Valuation, Earnings Dilution</a> that the deal is not exactly value-accretive for the shareholders due to the expensive multiples that the company pays and the overleveraged in the balance sheet that further burden the net income. The flip side is that as <a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" data-smartkarma-citation="accounts:937" rel="noopener">Angus Mackintosh</a> mentioned in <a href="https://www.smartkarma.com/insights/indofood-cbp-sukses-icbp-ij-going-global-with-instant-noodles" target="_blank" data-smartkarma-citation="insights:41873" rel="noopener">Indofood CBP Sukses (ICBP IJ) - Going Global with Instant Noodles</a> is that it has expanded its horizon to outside Indonesia and becomes an Emerging Market Consumer Staple play. </div>
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<div>Compared to other Asian noodle makers, Indofood is the second cheapest in PER (after Ottogi), second-highest gross margin (after Nissin Foods), highest EBITDA, and Net income margin. While</div>
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<p>compared to the EM consumer stocks, Indofood CBP is 48% cheaper in PER, 60% cheaper in EV/EBITDA, 72% cheaper in PBR, 4% higher in gross margin, 23% higher in EBITDA margin although net income margin is 3% lower. </p>
<p>The fact that Indofood CBP will be on the radar for Global EM consumer fund managers and potentially some ETFs at a cheaper valuation to the peers could bring some inflow, driving the multiples higher. </p>
<p>Indofood CBP is still trading at lower share price to pre-COVID-19 and still undervalued versus the other noodle makers and global EM staple peers by a wide margin. Buy. </p>
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Devi Subhakesan mentioned in her report in Indofood CBP (ICBP IJ): US$ 3Bn Acqsn. Of Affiliate - Dizzy Valuation, Earnings Dilution that the deal is not exactly value-accretive for the shareholders due to the expensive multiples that the company pays and the overleveraged in the balance sheet that further burden the net income. The flip side is that as Angus Mackintosh mentioned in Indofood CBP Sukses (ICBP IJ) - Going Global with Instant Noodles is that it has expanded its horizon to outside Indonesia and becomes an Emerging Market Consumer Staple play. 

Compared to other Asian noodle makers, Indofood is the second cheapest in PER (after Ottogi), second-highest gross margin (after Nissin Foods), highest EBITDA, and Net income margin. While

compared to the EM consumer stocks, Indofood CBP is 48% cheaper in PER, 60% cheaper in EV/EBITDA, 72% cheaper in PBR, 4% higher in gross margin, 23% higher in EBITDA margin although net income margin is 3% lower. 
The fact that Indofood CBP will be on the radar for Global EM consumer fund managers and potentially some ETFs at a cheaper valuation to the peers could bring some inflow, driving the multiples higher. 
Indofood CBP is still trading at lower share price to pre-COVID-19 and still undervalued versus the other noodle makers and global EM staple peers by a wide margin. Buy. 


Indofood (ICBP): Undervalued and Will Attract New Types of Investors

<p>With a young population and a median of USD 1670 income per capita (according to Worldbank), India is the perfect market for affordable smartphones and this is exactly why Xiaomi invested in India. Xiaomi has been the market leader in India, even ahead of Samsung. With an affordable price range from INR 12,000 to 17,000, Xiaomi has been the popular choice in India. It has recently reached the highest market share (30%) in the country since Q1 2019.</p>
<p>The ban from the Ministry of Electronics and Information Technology of India includes two apps from <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> namely <strong>Mi Community App</strong> and <strong>Mi Video Call</strong>. Mi Community is an official community forum and an app for Mi users. One of the key points is that users get rewards for daily visiting the application and as mentioned above, Xiaomi's business model in India is relatively unique where they don't rely on heavy marketing campaigns through TV commercials but through word-of-mouth and referrals including Mi Community that gives points as rewards. </p>
<p>Thus if Xiaomi's business in China is to remain intact, the weakening of India's business will wipe out the group's gross profit.</p>
<table class="table table-striped">
<colgroup> <col> <col> <col> <col> </colgroup>
<tbody>
<tr>
<td style="width: 128pt;">Smartphone - AIoT split GP/India Rev Cont to ROW</td>
<td style="text-align: right; width: 75pt;">50%</td>
<td style="text-align: right; width: 107pt;">60%</td>
<td style="text-align: right; width: 75pt;">70%</td>
</tr>
<tr>
<td>60-40</td>
<td style="text-align: right;">-10%</td>
<td style="text-align: right;">-12%</td>
<td style="text-align: right;">-14%</td>
</tr>
<tr>
<td>70-30</td>
<td style="text-align: right;">-12%</td>
<td style="text-align: right;">-15%</td>
<td style="text-align: right;">-17%</td>
</tr>
</tbody>
</table>
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<p>source: analyst</p>
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<p>The app banning in India essentially causes the company's enough damage to its bottom although the projected revenue from India will only be weaker by 20% while if the company tries to reverse that damage, the extra amount of advertisement campaign they must do will also lower their net margin to almost zero.</p>
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<p>This is clearly not a win-win solution for <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> that makes shorting Xiaomi is a very compelling case. However, the risk is that the animal spirit in Hong Kong's stock market is very strong this day that has caused Xiaomi's share price to rally. </p>
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With a young population and a median of USD 1670 income per capita (according to Worldbank), India is the perfect market for affordable smartphones and this is exactly why Xiaomi invested in India. Xiaomi has been the market leader in India, even ahead of Samsung. With an affordable price range from INR 12,000 to 17,000, Xiaomi has been the popular choice in India. It has recently reached the highest market share (30%) in the country since Q1 2019.
The ban from the Ministry of Electronics and Information Technology of India includes two apps from Xiaomi Corp (1810 HK) namely Mi Community App and Mi Video Call. Mi Community is an official community forum and an app for Mi users. One of the key points is that users get rewards for daily visiting the application and as mentioned above, Xiaomi's business model in India is relatively unique where they don't rely on heavy marketing campaigns through TV commercials but through word-of-mouth and referrals including Mi Community that gives points as rewards. 
Thus if Xiaomi's business in China is to remain intact, the weakening of India's business will wipe out the group's gross profit.

     


Smartphone - AIoT split GP/India Rev Cont to ROW
50%
60%
70%


60-40
-10%
-12%
-14%


70-30
-12%
-15%
-17%




source: analyst

The app banning in India essentially causes the company's enough damage to its bottom although the projected revenue from India will only be weaker by 20% while if the company tries to reverse that damage, the extra amount of advertisement campaign they must do will also lower their net margin to almost zero.

This is clearly not a win-win solution for Xiaomi Corp (1810 HK) that makes shorting Xiaomi is a very compelling case. However, the risk is that the animal spirit in Hong Kong's stock market is very strong this day that has caused Xiaomi's share price to rally. 


Xiaomi (1848): India and Its Impact to Bottom Line

India

Nestle India Ltd. manufactures brand name milk products and other food products. The Company's products include Everyday dairy whitener, milk powder and ghee, Milkmaid sweetened condensed milk and Cerelac weaning foods. Nestle's beverages include Nescafe and Sunrise coffee and Nesfit enriched glucose powder. Nestle also manufactures Maggi noodles, soups and sauces.

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Nestle India (NEST IN)

NIFTY50 Index Rebalance Preview - Nearing The End of the Review Period

There is just over a week remaining in the review period. We expect TATACONS to replace GAIL, and see a low probability of ICICIGI replacing IOCL....

Brian Freitas

D2C Brands in Asia: Disruption Potential in Consumer Space

Insights for investors based on comparative study of Asia D2C landscape across India, SE Asia & China.Analysis of relative segment attractiveness....

Devi Subhakesan

Alternative Data | India Consumer Tracker - Recovery Continues

This insight aims to track data related to discretionary spends on consumer goods. It covers a range of aspects - from the adoption of new payment...

Pranav Bhavsar

Indofood (ICBP): Undervalued and Will Attract New Types of Investors

Devi Subhakesan mentioned in her report in Indofood CBP (ICBP IJ): US$ 3Bn Acqsn. Of Affiliate - Dizzy Valuation, Earnings Dilution that the deal...

Henry Soediarko

Xiaomi (1848): India and Its Impact to Bottom Line

With a young population and a median of USD 1670 income per capita (according to Worldbank), India is the perfect market for affordable smartphones...

Henry Soediarko

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