India

• YTD Sapphire Foods (SAPPHIRE IN) has delivered 10.5% vs Devyani International (DEVYANI IN) which has delivered 7.9% and Jubilant Foodworks (JUBI IN) which has delivered -16.43%  (Relative to NIFTY).
• On an NTM basis, SAPPHIRE at 58x trades 30% cheaper compared to DEVYANI, and only 16% cheaper than JUBI.
• The business performance is poor, the worst capital allocation among peers is not expected to change materially in the near term warranting attention to YTD outperformance. 

• Dixon Technologies India Ltd (DIXON IN) is a manufacturer of various electric goods such as washing machines, mobiles, etc.
• Dixon’s annual report and forensic analysis revealed several setbacks from related party transactions to questionable setting off of liabilities.
• Other aspects which requires attention include heavy off-balance sheet liabilities, cash allocation woes, risks arising from debtor concentration and forex exposure, etc.

• Based on current consensus estimates, Escorts Kubota Limited (ESCORTS IN) is expected to deliver implied domestic volume growth of 6.5% for FY23 and 10% for FY24.
• Our earlier checks have indicated a challenging environment for gaining market share or growing ahead of the Industry for ESCORTS. 
• Even if we assume market share gains and volume recovery leading to above industry growth, at CMP it is already priced in. 

• Nesco’s Bombay Exhibition Center (BEC) business where revenues declined to almost negligible during the last couple of years due to COVID, is now recovering as COVID restrictions have receded.
• During Q1FY23, BEC business did INR 16.8cr in revenues (annualized INR 65cr+) and is on track to normalize to pre-COVID levels of INR 150cr+.
• Nesco’s IT Park business continues to remain strong with 90%+ occupancy in Tower 4 and 80% occupancy in Tower 3.

• RPSG Ventures Limited (RPSGVENT IN) [“RPSGV”] is scaling up its FMCG and Sports business via Its Too Yumm! and Naturali brands in FMCG and IPL franchise in Sports.
• Within Too Yumm!, RPSGV is now entering into the Indian Namkeens category – the largest category in salty snacks in India.
• Within Sports, RPSGV’s IPL franchise representing Lucknow, capital city of the India’s largest state, Uttar Pradesh that comprises 15%+ of India’s population, holds lot of promise to scale up. 

• In this insight, we take a look at the names leading the race to become ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the December 2022 Rebalance.
• Based on the latest data, I expect one ADD/DEL for SENSEX, one ADD/DEL for BSE 100, and 3 ADDs/DELs for BSE 200. 
• The potential ADDs/DELs for SENSEX could see index flows of US$100mn or more but the other index changes are both small in size and volume impact (days-to-trade).

• Antony Waste Handling Cell Limited (AWHCL IN) is one of the key players operating in the Municipal Solid Waste (MSW) industry.
• Key takeaways that warrant attention overlooked include disparity between accounting and management commentary on margins and reimbursements and stained auditor qualifications since F13
• Other forensic checks consist of poor quality of debtors, subsidiary stress and few eye-brow raising related party transactions.

• We are starting to see early signs of a potential bottom on MSCI EM (EEM-US).
• Specifically, the EEM-US has reversed topside its 6-month downtrend. If MSCI EM has indeed bottomed, we want to be buying the leaders; that is where this report comes in.
• Specific themes include attractive opportunities in India and Thailand, and also many in Taiwan and South Korea. Attractive Sectors include Energy, Financials, Materials, and Industrials.

• Marvell Technologies continued to drive operating leverage and delivered an earnings beat in the recent result while its revenues were on par with market expectations.
• In spite of the choppy supply environment, the strong end market demand and the successful adoption of its new products have enabled the company to grow revenue significantly.
• We provide the stock of Marvell Technologies with a ‘Buy’ rating with a revision in the target price.

• We are two-thirds of the way through the review period for the December review of the S&P BSE SENSEX Index (SENSEX INDEX). Changes become effective at the close 16 December.  
• We see Adani Green Energy (ADANIGR IN) as the highest ranked non-constituent in inclusion zone, while Dr. Reddy’s Laboratories (DRRD IN) is the lowest ranked constituent in deletion zone.
• Passive trackers will need to trade over 10 days of delivery volume on Adani Green Energy (ADANIGR IN) and Dr. Reddy’s Laboratories (DRRD IN), so the impact will be significant.

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.

• Azure Power Global Ltd

• Q1FY23 earnings came in strong for RPPL led by robust demand and margin expansion. Volumes grew by 23.6% YoY and 24.5% QoQ.
• Operational EBITDA per kg grew by 25%+ YoY and 36%+ QoQ to INR 37.5+ per kg as the price rise in raw materials was passed on.
• RPPL has guided for a strong FY23. It can clock a volume of 10500+ MT and EBITDA of INR 35+ per kg, barring any adverse volatility in raw material prices.

• Escorts Kubota (ESCORTS IN) ‘s domestic market share as of FY22 stood at 10.3 % vs 12% in FY20 against the aspiration of 15% for FY22. 
• Our interactions with various dealers across key northern and eastern states suggest caution and structural inability to regain market share loss.
• Post equity infusion, Kubota Corp (6326 JP) is probably in for more surprises than what it might have initially hoped for. 

• Edelweiss’ credit business is now normalizing with GNPA at 2.5% and NNPA at 1.8%. Credit costs came in negative as asset quality is improving and excess provisioning is being normalized. 
• Rest of the businesses continue to scale up well. Edelweiss is among the fastest grower in the mutual fund and insurance businesses. Wealth Management business continues to do well.
• At current valuation, Edelweiss is available cheap and as per our estimates, an investment in it has potential to more than quadruple by the end of FY25.

• Balaji Speciality Chemicals (1742663D IN) is looking to raise about US$126m in its upcoming India IPO. The deal will be run by JM Financial and HDFC Bank. 
• Balaji Speciality Chemicals (BSC) is the sole manufacturer in India of niche chemicals such as Ethylenediamine, Piperazine (Anhydrous), Diethylenetriamine, Amino Ethyl Ethanol Amines and Amino Ethyl Piperazine, according to CRISIL.
• The chemicals it manufactures are import substitutes and are used in end-use industries such as speciality chemicals. Its customer base grew from 45 in FY20 to 182 in FY22.

• Campus Activewear (CAMPUS IN) has received the court’s approval for amalgamation of Campus AI Pvt Ltd into the standalone entity.
• Amidst the plethora of positive rationale for the amalgamation, the one that stands out from the rest is the cleaning up of the books of campus activewear. 
• With the amalgamation scheme, the company also gets rid of the negative capital reserve balance. Is this the only adjustment, or are there more things to clean?

• Our profitability and credit quality screens, in terms of credit quality metrics to end-June 2022, continued in a constructive vein, although pre-provision profitability trends were mixed
• The key positive trend to end-June was the declining cost of risk, boosting post-provision profitability; nonetheless, the prospect of worsening delinquency could drive a reversal in NPA provision charges
• We believe HDFC Bank can best face credit quality deterioration; optically cheap State Bank of India is exposed to higher provisioning needs, as is ICICI Bank

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 SCE
2. Azure Power Global Ltd
3. China Jinmao Holdings
4. Guangzhou R&F Properties
5. Sunac China Holdings

and more…

• Home First Finance (HOMEFIRS IN) is growing fast and has a low operating cost, there is a reason why. 
• Aavas Financiers Ltd (AAVAS IN) operates in its own specific domain taking only risks that it is comfortable with.  
• Competitive feedback is positive for IIFL Holdings (IIFL IN) ‘s HF subsidiary. Capri Global Capital (CGCL IN) seems to be following AU Bank’s footsteps, but hopefully only in underwriting.

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.

• Bharti Airtel
• Country Garden Holdings Co
• Fantasia Holdings Group Co
• Meituan
• China Datang Corp Renewable Power
• Road King Infrastructure

• Kayak Investments Holding, an affiliate of KKR & Co Inc (KKR US), is planning to raise US$1.18bn from trimming the majority of its stake in Max Healthcare Institute (MAXHEALT IN).
• The deal is a large one and assuming the upsized option is exercised, the offer size would represent 26.83% of outstanding shares and 414.9 days of three month ADV.
• The firm’s financial prospects are decent with analysts in general bullish on the stock. However, the large deal is offered at a tight 0-3.3% discount to last close.

• A news report has indicated that SEBI is looking to tighten criteria used for inclusion and continued availability of stocks in the Futures & Options (F&O) segment of the market.
• Our analysis shows 30 stocks could be deleted from the F&O segment while another 12 are close to deletion zone. If applied objectively, 22 stocks could be added to F&O.
• Deletion from the F&O segment could see two stocks dropped from the Nifty Next 50 Index while inclusion in F&O could see two stocks added to the NIFTY Index.

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.

• Azure Power Global Ltd
• Olam Group