India

• 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.

• In an unprecedent step, MSCI will reassess the float and likely lower the FIF of the Adani Group companies at the February QCIR. There will be BIG passive selling.
• The affected securities will be further reviewed as part of the scheduled Full Country Float Review during the May QCIR. There could be some index deletions and BIGGER passive selling.
• Expect active selling before the passive selling and the rally in the Adani Group stocks over the last couple of days should come to a grinding halt today.

Adani Ports and Special Economic Zone’s 9M/22-23 results were broadly stable. The main takeaway was management’s commitment to reduce debt by INR 50 bn using FCF in FY 2023-24, supported by lower capex and limiting new acquisitions. This would cover the INR 16 bn in repayments for onshore bonds maturing in H1/23-24, as well as the prepayment of certain bank debt. Management expects the company to generate the same amount of FCF in FY 2024-25, which would be channelled to repay the USD 650 mn ADSEZ 3.375 24 due in July 2024.

• Syngene International Ltd (SYNG IN) provides integrated services from early discovery to commercial supply across all major therapeutic areas and modalities. The company has 400+ active clients.
• To capitalize on the secular industry tailwind, the company has been investing to enhance capacity and capability, which has led to extension of existing client relations and engaging new clients.
• For FY23, the company expects high-teens revenue growth and EBITDA margin of ~30%. Operating leverage is expected to improve from next year onwards, and that should improve the overall profitability.

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
• Lippo Karawaci

• IndiaFirst Life Insurance (1083896D IN) is looking to raise about US$250m in its upcoming India IPO. 
• IndiaFirst Life Insurance (IFLI) is a private life insurer in India with a product portfolio of retail and group products, ranging across different segments. 
• Its GWP and AUM have grown over the track record period. However, bottomline growth has on the other hand, declined further. 

Tata Steel has reported significantly weaker than expected Q3/22-23 results. This was driven by a material loss in the European business. Meanwhile, the Indian operations remained reasonable. The consolidated financial risk profile deteriorated significantly, albeit Net Debt/EBITDA remained within the company’s long-term target. Liquidity is adequate.

The next few quarters are likely to be weaker for Tata Steel in Europe, as markets remain subdued. Steel prices are projected to weaken in Q4/22-23, with the drop likely to be steeper than the decline in coking coal and iron ore prices.

• Mankind Pharma is looking to raise about 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.
• In this note, we will undertake a peer comparison with some of the India listed and domestically focussed pharmaceutical firms.

• Cement sector is witnessing a margin recovery and valuations are reasonable. 
• Ambuja Cements, the second largest in the sector provides a tactical opportunity for a valuation pop. 
• Avoid | as any inclusion amounts to adding to the risk rather than to the return of the portfolio. 

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
• China Hongqiao

• Our Indian bank profitability and credit quality screens, in terms of credit quality metrics to end-December 2022, continued in a constructive trend
• This is reflected in NPA ratios and cost of risk trends; but Indian banks have to face increased NPA headwinds, especially if funding and liquidity tightens around Adani Group companies
• We remain negative on State Bank of India, especially given the concerns around the Adani Group, and also ICICI Bank; we remain positive on higher quality HDFC Bank

• Stay away from Adani Enterprises (ADE IN). It has wrapped itself in a cloak of nationalistic righteous indignation. Do not buy the dip. Or even a larger one. 
• The timing of a Bendigo And Adelaide Bank (BEN AU) and Bank Of Queensland (BOQ AU) merger makes a lot of sense right now.
• This Renault SA (RNO FP) / Nissan Motor (7201 JP)‘s press release and “agreement”, as-is, is a Nothingburger. 

• Era of the value stocks! Inflation feeds interest rates, raises cost of capital and risks equity multiples. Headwinds to earnings growth – risks sustenance of pricey valuations.  
• Key risks: Stocks face material headwinds on cost pressure, competition, valuations 
• Stocks covered: Crompton Greaves, Stove Kraft, Lemon Tree, Jubilant Ingrevia

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. China Jinmao Holdings
2. Lifestyle International Holdings
3. Geely Auto
4. First Pacific Co
5. Tata Motors Ltd

and more…

• Robust medium-term earnings growth, softness in commodities to ease margin pressure.
• Beneficiary of new energy capex, likely blending of Compressed Biogas with CNG furthers capex outlook.
• Stock has corrected 45% from peak, valuations turn more reasonable.

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.

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