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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<div><p>The <a href="https://www.smartkarma.com/entities/s-p-bse-sensex-index" target="_blank" data-smartkarma-citation="entities:31494:1" rel="noopener">S&amp;P BSE SENSEX Index (SENSEX INDEX)</a> is the flagship index of the Bombay Stock Exchange (BSE). The index has 30 stocks and is a free float weighted market cap index. The next rebalance will be effective after the close of trading on 17 December.</p></div><div>
<p>The December review uses the market cap and turnover data from 1 May to 31 October to determine the stocks to be included and excluded from the index, and the announcement of the changes is done 4 weeks before the rebalance effective date.</p>
<p>With 6 days to go in the review period, we see <a href="https://www.smartkarma.com/entities/wipro-ltd" target="_blank" data-smartkarma-citation="entities:15360:1" rel="noopener">Wipro Ltd (WPRO IN)</a> as a high probability index addition. <a href="https://www.smartkarma.com/entities/bajaj-auto-ltd" target="_blank" data-smartkarma-citation="entities:3613:1" rel="noopener">Bajaj Auto Ltd (BJAUT IN)</a> is the lowest ranked index constituent and is a likely deletion from the index.</p>
<p>There is a (slim) possibility of <a href="https://www.smartkarma.com/entities/nestle-india-ltd" target="_blank" data-smartkarma-citation="entities:13101:1" rel="noopener">Nestle India (NEST IN)</a> being deleted from the index if it fails the annualised traded value test. As it stands, it is touch and go for the stock.</p>
<p>Passive trackers will need to buy over 2 days of ADV on <a href="https://www.smartkarma.com/entities/wipro-ltd" target="_blank" data-smartkarma-citation="entities:15360:1" rel="noopener">Wipro Ltd (WPRO IN)</a> and sell over 3.5 days of ADV on <a href="https://www.smartkarma.com/entities/bajaj-auto-ltd" target="_blank" data-smartkarma-citation="entities:3613:1" rel="noopener">Bajaj Auto Ltd (BJAUT IN)</a>. If <a href="https://www.smartkarma.com/entities/nestle-india-ltd" target="_blank" data-smartkarma-citation="entities:13101:1" rel="noopener">Nestle India (NEST IN)</a> is deleted instead, passive trackers will need to sell 7 days of ADV on the stock.</p>
<p>In terms of delivery volumes, the impact is much larger with passive trackers needing to buy 8.5 days on <a href="https://www.smartkarma.com/entities/wipro-ltd" target="_blank" data-smartkarma-citation="entities:15360:1" rel="noopener">Wipro Ltd (WPRO IN)</a>, while selling either 8.8 days on <a href="https://www.smartkarma.com/entities/bajaj-auto-ltd" target="_blank" data-smartkarma-citation="entities:3613:1" rel="noopener">Bajaj Auto Ltd (BJAUT IN)</a> or 13 days on <a href="https://www.smartkarma.com/entities/nestle-india-ltd" target="_blank" data-smartkarma-citation="entities:13101:1" rel="noopener">Nestle India (NEST IN)</a>.</p>
</div>

The S&amp;P BSE SENSEX Index (SENSEX INDEX) is the flagship index of the Bombay Stock Exchange (BSE). The index has 30 stocks and is a free float weighted market cap index. The next rebalance will be effective after the close of trading on 17 December.
The December review uses the market cap and turnover data from 1 May to 31 October to determine the stocks to be included and excluded from the index, and the announcement of the changes is done 4 weeks before the rebalance effective date.
With 6 days to go in the review period, we see Wipro Ltd (WPRO IN) as a high probability index addition. Bajaj Auto Ltd (BJAUT IN) is the lowest ranked index constituent and is a likely deletion from the index.
There is a (slim) possibility of Nestle India (NEST IN) being deleted from the index if it fails the annualised traded value test. As it stands, it is touch and go for the stock.
Passive trackers will need to buy over 2 days of ADV on Wipro Ltd (WPRO IN) and sell over 3.5 days of ADV on Bajaj Auto Ltd (BJAUT IN). If Nestle India (NEST IN) is deleted instead, passive trackers will need to sell 7 days of ADV on the stock.
In terms of delivery volumes, the impact is much larger with passive trackers needing to buy 8.5 days on Wipro Ltd (WPRO IN), while selling either 8.8 days on Bajaj Auto Ltd (BJAUT IN) or 13 days on Nestle India (NEST IN).


Sensex Dec 2021 Index Rebalance Preview: Wipro Should Be Added, Deletion Has An Interesting Option

External broker reports(aggregated public sources), Axis Direct

Axis Direct

External broker reports(aggregated public sources)

Equity Bottom-Up

<p>However, over the medium term we believe, HUVR has the right growth matrix like 1) broad based portfolio straddling across price-value matrix, 2) focus on cost savings 3) GSK-CH integration led tailwinds, 4) execution prowess vs peers and 5) strong data analytics capabilities. We maintain BUY rating</p><div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

However, over the medium term we believe, HUVR has the right growth matrix like 1) broad based portfolio straddling across price-value matrix, 2) focus on cost savings 3) GSK-CH integration led tailwinds, 4) execution prowess vs peers and 5) strong data analytics capabilities. We maintain BUY ratingContent is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Hindustan Unilever: Cautious Commentary On Rural Growth And Margins

External broker reports(aggregated public sources), HDFC Securities

HDFC Securities

<p>Hindustan Unilever: HUL’s headline numbers are broadly in line. However, weak internals (miss in volume) and cautious outlook on demand and margin are raising questions about the near-term performance. Revenue grew at 11% YoY (HSIE 10%) while UVG, at 4%, was below our estimates (6% HSIE). UVG on two-year CAGR was weak at 2.5% but improved sequentially (-0.4% in Q1FY22) after the second wave of COVID impacted Q1FY22. Health, hygiene, and nutrition portfolio (85% mix) sustained healthy growth at 7% YoY. Within the nutrition portfolio, health food drinks volume grew in double digits. Nutrition portfolio should sustain the momentum as 85% of GTM integration is completed. Gross margin pressure continued in Q2FY22 with 142bps YoY contraction due to elevated commodity costs (crude, CPO, tea, and plastic) and higher freight cost. EBITDA growth was at 9% (HSIE 7%). We expect margin to remain under pressure in the near term, owing to sustained inflation and calibrated price hikes. We cut our EPS estimates for FY22/FY23/FY24 by ~2%. We value HUL at 55x P/E on Sep-23E EPS to derive a TP of INR 2,482. Maintain REDUCE.</p>
<div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

Hindustan Unilever: HUL’s headline numbers are broadly in line. However, weak internals (miss in volume) and cautious outlook on demand and margin are raising questions about the near-term performance. Revenue grew at 11% YoY (HSIE 10%) while UVG, at 4%, was below our estimates (6% HSIE). UVG on two-year CAGR was weak at 2.5% but improved sequentially (-0.4% in Q1FY22) after the second wave of COVID impacted Q1FY22. Health, hygiene, and nutrition portfolio (85% mix) sustained healthy growth at 7% YoY. Within the nutrition portfolio, health food drinks volume grew in double digits. Nutrition portfolio should sustain the momentum as 85% of GTM integration is completed. Gross margin pressure continued in Q2FY22 with 142bps YoY contraction due to elevated commodity costs (crude, CPO, tea, and plastic) and higher freight cost. EBITDA growth was at 9% (HSIE 7%). We expect margin to remain under pressure in the near term, owing to sustained inflation and calibrated price hikes. We cut our EPS estimates for FY22/FY23/FY24 by ~2%. We value HUL at 55x P/E on Sep-23E EPS to derive a TP of INR 2,482. Maintain REDUCE.
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

HSIE Results Daily: Hindustan Unilever, Nestle India, L&T Technology Services, ACC

<p>We marginally revise our FY23E/24E and maintain BUY with a revised TP of Rs. 3,100 (earlier Rs. 2,670) as we raise our target PE to 56x FY24E EPS (earlier 50x FY24E EPS).</p><div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

We marginally revise our FY23E/24E and maintain BUY with a revised TP of Rs. 3,100 (earlier Rs. 2,670) as we raise our target PE to 56x FY24E EPS (earlier 50x FY24E EPS).Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Hindustan Unilever: Transforming To An Intelligent And Future Fit Organization

Indian Accounting Research Analyst, Trudence Capital Advisors

Nitin Mangal

Indian Accounting Research Analyst

Trudence Capital Advisors

Trudence Capital Advisors Private Limited is a SEBI-registered Research Analyst, holding SEBI registration number INH000015747. Our firm is dedicated to providing independent and unbiased research on Indian mid to large-cap companies. Trudence Capital is known for its counter-consensus views, with a focus on forensic research and on-ground primary investigations. Our research approach is thorough, involving detailed analysis of accounting practices and governance, alongside extensive channel checks.

Independent & Unbiased Research

Equity Capital Markets

FSN E-Commerce Ventures (Nykaa) / Equity Capital Markets

<p>We continue our focus on the coverage of IPO bound start-ups and next is none other than <a href="https://www.smartkarma.com/entities/fsn-e-commerce-ventures-nykaa" target="_blank" data-smartkarma-citation="entities:33796:1" rel="noopener">FSN E-Commerce Ventures (Nykaa) (1003622D IN)</a>. However, Nykaa stands apart from the rest since it is the one of those rare finds that have a positive profitability and this is why it looks promising in nature. Another differentiating aspect is that Nykaa operates as an omni-channel entity, having as many as 73 physical stores across the country. (However, most of the revenue is generated online).</p><p>Nykaa was founded only in 2012 and has gained a strong foothold in the beauty and personal care (BPC) space especially in the last few years. According to RedSeer, the company is the largest Specialty BPC platform in India in terms of value of products sold in F21. The company manages its BPC predominantly through inventory model, not to forget that it also has its own brands which it outsources the manufacturing. Nykaa has also started the ball rolling in the fashion territory in 2018, for which it mostly acts as a market place for its consumers and vendors.</p><p>Nykaa has a strong operational characteristics, there is hardly any doubt; however, one needs to look beyond it to get a more comprehensive view of the financials and governance. There are a few concerns on the accounting front that should not be overlooked. We also find stains on the governance, primarily related to remuneration of MD. Further, there were several small risk factors which were disclosed, that had acted as a resistance force in the past.</p>

We continue our focus on the coverage of IPO bound start-ups and next is none other than FSN E-Commerce Ventures (Nykaa) (1003622D IN). However, Nykaa stands apart from the rest since it is the one of those rare finds that have a positive profitability and this is why it looks promising in nature. Another differentiating aspect is that Nykaa operates as an omni-channel entity, having as many as 73 physical stores across the country. (However, most of the revenue is generated online).Nykaa was founded only in 2012 and has gained a strong foothold in the beauty and personal care (BPC) space especially in the last few years. According to RedSeer, the company is the largest Specialty BPC platform in India in terms of value of products sold in F21. The company manages its BPC predominantly through inventory model, not to forget that it also has its own brands which it outsources the manufacturing. Nykaa has also started the ball rolling in the fashion territory in 2018, for which it mostly acts as a market place for its consumers and vendors.Nykaa has a strong operational characteristics, there is hardly any doubt; however, one needs to look beyond it to get a more comprehensive view of the financials and governance. There are a few concerns on the accounting front that should not be overlooked. We also find stains on the governance, primarily related to remuneration of MD. Further, there were several small risk factors which were disclosed, that had acted as a resistance force in the past.

India

Hindustan Unilever Limited manufactures and distributes consumer products. The Company offers soap, detergent, personal care products and processed food, ice creams, cooking oils, and other related products. Hindustan Unilever serves customers worldwide.

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Hindustan Unilever (HUVR IN)

Sensex Dec 2021 Index Rebalance Preview: Wipro Should Be Added, Deletion Has An Interesting Option

Near the end of the review period, we see Wipro as a high probability add. Bajaj Auto could be deleted as the lowest ranked constituent, but Nestle...

Brian Freitas

Hindustan Unilever: Cautious Commentary On Rural Growth And Margins

However, over the medium term we believe, HUVR has the right growth matrix like 1) broad based portfolio straddling across price-value matrix, 2)...

Axis Direct

HSIE Results Daily: Hindustan Unilever, Nestle India, L&T Technology Services, ACC

HUL’s headline numbers are broadly in line. However, weak internals (miss in volume) and cautious outlook on demand and margin are raising questions

HDFC Securities

Hindustan Unilever: Transforming To An Intelligent And Future Fit Organization

We marginally revise our FY23E/24E and maintain BUY with a revised TP of Rs. 3,100 (earlier Rs. 2,670) as we raise our target PE to 56x FY24E EPS...

Axis Direct

Nykaa IPO: Not Perfectly Elegant

Nykaa has a strong operational characteristics, there is hardly any doubt, but concerns on the accounting front that should not be overlooked,...

Nitin Mangal

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