India

• Voltas Ltd (VOLT IN) had a brutal Q4FY24 especially for its UPC segment where it lost market share to rival Havells India (HAVL IN).  
• There is a possibility of regaining some of the lost market share with some pricing interventions and high brand equity, however, it will be at cost of margins. 
• The sector view remains bearish, however, relative to HAVL, the downside would be limited with market share gains in Air-Conditioners (ACs) as key monitorable. 

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. Evergrande
2. Logan Property Holdings
3. Times China
4. Ronshine China Holdings
5. China Jinmao Holdings

and more…

• After a tough 3Y since the IL&FS crisis, Edelweiss’ credit business is now getting back on track. Asset quality has normalized to <2% Net NPA.
• Edelweiss’ other businesses continue to post robust growth. ARC, Asset Management and Insurance businesses are scaling up well. Wealth Management business is on track for listing by Feb 2023.
• At a market cap of INR 5200cr, Edelweiss is trading cheap even if one ascribes zero valuation to its Credit business.

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• Sundaram Finance’s (SUF) management indicated an overall improvement in the economic activity with demand regaining strength across segments and geographies in the first 2 months of FY23.
• However, rising oil prices and high inflationary pressure coupled with rising interest rates, may lead to some downward pressure on demand in the near-term
• We upgrade our rating from HOLD to BUY with a target price of Rs 2,195/share (based on SOTP valuation), implying an upside of 20% from the CMP.

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This month, we provide an update on developments related to the Indonesian bankruptcy regime since November 2017.

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.

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• India is a market (like Taiwan) that faces a shakeout into summer turbulence after holding the top end of the range since late 2021 albeit amid a drifting decline.
• Nifty met the gap resistance to test the short side with a higher conviction sell zone closer to that 17k of support (now pivotal resistance).
• USD/INR bull triangle maturing and did not blink during the USD pullback in Asia. 76.50/70 buy support if we do get a dip.

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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.

• Bharat Petroleum Corp
• Central China Securities
• Tata Motors ADR

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• The overall Air Condition (AC) season has been good, with volumes up by more than +20% compared to the last two years.
• Daikin Industries (6367 JP) & Voltas Ltd (VOLT IN) have performed below expectations with stiff pricing and poor dealer support. 
• Havells India (HAVL IN) (Lloyd) market share gain is on the back of lower prices. The focus has moved from premiumizing brand & expanding margins to gaining market share. 

• For better or for worse, the Life Insurance Corporation of India (LICI IN) IPO is done. Maybe we should start thinking about LIC’s Scope 3 “financed emissions” (aka “portfolio emissions”).
• Financed emissions are investors’ “shares” of investees’ Scopes 1 and 2. A bit like someone else pulling the trigger, but being sent to the gallows for selling them the gun.
• Portfolio emissions are major source of climate-related financial risks, often “hidden” because  financed emissions are grossly under-reported (or, quite commonly, un-reported).

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• GR Infraprojects Ltd (GRIL) reported a decent set of numbers in Q4FY22. The company reported revenue of Rs 2,268 Cr, better than our estimate of Rs 2,103 Cr, down 13.7% YoY
• It registered EBITDA Margins of 17.8% in Q4FY22 (our estimate: 14.9%) as against 15.6% in Q4FY21
• We maintain a BUY on GRIL and value the EPC business at 15x FY24E EPS and HAM portfolio at 1x Book Value to arrive at a target price of Rs 1,765/share, implying an upside of 26% from the CMP.

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• United Spirits (UNSP IN) Q4F22 results have shown some good improvement.
• There is all round progress witnessed, including debt reduction, focus on gaining market share, better scope of working capital management. There is an intent of supporting premiumization as well.
• The results and strategic decision making reinforces our bullish stance on United Spirits; the cherry on top is that there is further room for improvement in the short-mid term.

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• Kolte Patil reported a strong FY22 and guided for even a stronger FY23. FY22 closed with highest ever sales value and collections.
• FY23 is set to fire on all cylinders – new launches, business development aka new project acquisitions and delivery of under-construction projects.
• FY23 sales value is expected to be 2200cr, implying PAT potential of 220cr.  At current market cap of 1800cr, Kolte Patil is trading cheap at 8x P/E per FY23E PAT.

• HCG’s continued focus on consolidation is leading to improving profitability.  Furthermore, with the normalization of post-COVID environment, elective surgeries and international footfalls are inching back to pre-COVID levels.
• Since the onboarding of CVC Capital as the majority shareholder, HCG’s capex discipline has been noteworthy. Capex is focused now on driving growth in existing centers vs opening new centers.
• We project HCG’s PAT to grow to INR 170cr+ by FY25. Valuing HCG at FY25 exit P/E of 47x suggests an IRR potential of 27% over the next 3Y.

In our view, JSW Steel’s Q4 and FY 2021-22 results were robust, with strong growth in production volumes, revenues and earnings. The financial risk profile has improved and is healthy. Liquidity is sound.

However, we believe that JSW has experienced the peak of the cycle and profitability will likely reduce from current levels, driven by multiple factors including the Russia-Ukraine war which drove up key raw material prices (coking coal and iron ore). In addition, the recent export duty will likely also hurt India’s domestic steel players (particularly JSW), whose exports as a percentage of sales volumes were roughly double that of the industry. Hence, we foresee significantly lower earnings despite healthy growth in volumes and revenues in FY 2022-23. We expect a double-digit increase in volumes, driven by the capacity expansion programmes at Dolvi and Vijayanagar. We also project double-digit growth in revenues (c. 20%) in FY 2022-23, on account of the volume expansion and prices.

• Bata India (BATA) reported Q4FY22 revenue at Rs 665 Cr as against Rs 590 Cr in Q4FY21, registering a growth of 12.8% despite Omicron disruptions. 
• We remain positive on the stock from a long-term perspective given its immense growth potential
• Maintain BUY with revised TP of Rs 2,200/share and assign a PE of 43x FY24E EPS.

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• Lumax Industries (Lumax Inds) reported a stellar set of results which was ahead of our estimates.
• The revenue for the quarter stood at Rs 549 Cr (our estimate – Rs 496 Cr), reporting a 9% YoY growth
• We maintain a BUY rating on the stock with a revised target price of Rs 1,450/share (Rs 1,350 earlier) valuing it at 13x of FY24E P/E, implying an upside of 25% from the CMP.

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• CCL Products (CCLP) delivered a decent performance in Q4FY22 with consolidated revenue of Rs 376 Cr (Our est: Rs 381 Cr), up 13% YoY on account of ~7% volume growth and higher realizations.
• However, the company’s GPM came in at 51.2% and declined by 642bps YoY mainly on account of the deferment of large consignments (500-600 tonnes) to Russia on account of the war
• CCL Products is one of our high conviction BUY with a revised TP of Rs 560/share (Rs 585/share earlier), as we continue to value it at a target P/E multiple of 23x its FY24E EPS.

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• The NIFTY Index Family has a series of broad equity indices that represents large, mid and small market capitalisation segments of the Indian public equity market.
• The review of broad market indices will be done on a semi-annual basis and the changes will be implemented at the end of March and September every year.
• Below is a look at the names leading the race to become Adds and Deletes for NIFTY 50, NIFTY 100, and NIFTY 500 in September 2022.

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• Dabur India Ltd (DABUR IN) is over-exposed to rural India where the recovery is uncertain and slow. 
• Channel feedback with regards to relationships with distributors and the company’s strategic direction has been poor. 
• A weak operating environment coupled with a weak on-ground execution suggests underperformance may continue. 

• ITD Cementation India (ITCE IN) is one of the players engaged in the construction sector, especially for projects like Metros and Marines.
• Upon analysing the annual reports it was found that the company faces a plethora of forensic alarms.
• This includes re-statement of key line items, high growth of unbilled revenues, cash generation issues among others as highlighted in the insight.

• Oyo (1698548D IN) is looking to raise around US$700m in its upcoming India IPO. The IPO will consist of both a primary and secondary portion.
• Oyo runs a digital platform that serves as a hotel and home aggregator between patrons, which include owners and lessors, and customers, such as travelers and guests booking for accommodation.
• The firm’s business remains far from being profitable and is running on a cash-burning model. Also, it’s listing is muddied by a host of controversies in the past and present. 

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. Adani Ports & Special Economic Zone
2. Yanzhou Coal Mining Company Limited H
3. Vedanta Resources
4. Indika Energy
5. Pakuwon Jati

and more…

• The NIFTY Index Family has a series of broad equity indices that represents large, mid and small market capitalisation segments of the Indian public equity market.
• The review of broad market indices will be done on a semi-annual basis and the changes will be implemented at the end of March and September every year.
• In this insight, we take a look at the selection criteria and the historical price performance of past Rebalance Events.

• Oyo (1698548D IN) is looking to raise around US$700m in its upcoming India IPO. The IPO will consist of both a primary and secondary portion.
• Oyo runs a digital platform that serves as a hotel and home aggregator between patrons, which include owners and lessors, and customers, such as travelers and guests booking for accommodation.
• As of Mar 2021, Oyo had 157,344 storefronts across more than 35 countries listed on its platform.

• ITC Ltd (ITC IN) ‘s core cigarette portfolio is relatively inelastic to the current commodity inflation. With the reopening of offices and social events, volumes are likely to trend higher. 
• A renewed focus on FMCG is likely to aid volumes for the non-cigarette segment. 
• Valuations are in favor and we see limited scope for de-rating if not re-rating.

We view Bharti Airtel as “Low Risk” on our LARA scale, mainly driven by its strong market position as the second-largest player in India’s telco industry. It owns robust network infrastructure across India, with a broad customer base. We also like the improving industry outlook with rationalising competition, industry consolidation to Airtel’s advantage, and improving regulatory conditions. Airtel is also committed to prudent balance-sheet management and stable leverage. However, the company will likely face continued significant capex requirements with respect to its 5G rollout, with the associated risks being higher than expected capex.

Our Credit Bias is “Stable”, given Airtel’s robust business risk profile and stable financial metrics.

• Paradeep Phosphates raised around US$194m in its India IPO. The IPO consisted of a mix of primary and secondary shares.
• Subscription for PP’s IPO had been tepid and previous deals with similar subscription rates had produced mixed performances upon debut.
• Were the firm to trade towards its closer peers’ average, there is a 5% upside potential and -18.6% downside potential on the FY23E and FY24E EV/EBITDA front, respectively. 

• Hindustan Unilever (HUVR IN) is focusing on protecting its business model and market share, which is the key in such an operating environment. 
• Presence across multiple price points and playing a targeted game in target geographies will aid in maintaining steady-state growth. 
• Current valuations, lack of trigger for driving exponential volume growth and expected slowing pace of premiumisation warrant caution. 

• Dr Lal PathLabs Ltd (DLPL IN) reported 35% y/y revenue growth in its non-COVID business in FY22. Non-COVID realization per patient is also back to pre-COVID levels.  
• The company has acquired Suburban Diagnostics last year, which will further widen its geographical footprint, with western region contributing 24% of revenue from 10% earlier.
• There is a lot of noise regarding competition in the industry. Thus far, DLPL has not seen much pricing pressure and underpenetrated Indian diagnostic segment can accommodate more players.

• LIC Housing Finance (LICHF IN) reported stellar results, in line with the expectation from our last note. NIM expanded while provisions declined leading to Q4FY22 PAT of INR 1100cr+.
• Asset quality improved with Stage 3 assets at 4.64% vs 5.04% QoQ and Stage 2 assets at 3.08% vs 3.75% QoQ. LICHF also recovered 350cr of NPAs during Q4FY22.
• Adjusted for one-off tax benefits and assuming FY23 NIM at 2.4%, LICHF’s normalized PAT potential is INR 3600cr+ suggesting that LICHF is trading at <6x P/E on FY23E PAT.

• RITES Ltd. (RITES) reported a good set of Q4FY22 numbers with revenues of Rs 766 Cr (up 20% YoY), supported by the higher export sales, EBIDTA of Rs 204 Cr (up 10% YoY), and APAT of Rs 141 Cr (down 1% YoY).
• The company registered EBITDA Margins of 26.7% in Q4FY22 (our estimate: 26.8%) as against 29.2% in Q4FY21
• We roll over our estimate to FY24 and retain a BUY rating on the stock, valuing the company at 11.5x FY24E EPS to arrive at a target price of Rs 275/share (Rs 305/share earlier), implying an upside of 10% from the CMP.

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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
• Bharti Airtel
• Lenovo
• Vedanta Resources

• Aggression in adjacencies, market share gains and under indexed rural exposure presents an opportunity. 
• COGS Inflation, Risk of downgrading in case of a further hike loom and is a potential risk. 
• YTD Britannia Industries (BRIT IN) is an outperformer and could remain so.

• SAIL Q4FY22 results were largely in line with our estimates. The company delivered a strong sales volume of 4.706 Million Tonnes (MT), up 8% YoY and 23% QoQ, marginally ahead of our estimate of 4.6 MT.
• Topline stood at Rs 30,759 Cr, a slight beat vs our estimate of Rs 29,236 Cr and up 32% YoY and 22% QoQ, led by higher steel prices and sales volumes
• We downgrade the rating on SAIL to HOLD from BUY and value it at 4.0x FY24E EBITDA to arrive at a target price of Rs 75/share (Rs 125/share earlier), against the CMP of Rs74/share.

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• SAIL reported an inline revenue at INR308b (up 32 % YoY and 22 % QoQ) in 4QFY22, driven by an improved mix of higher ASP and sales volume.
• Recently, the government announced various measures to cool down prices (refer Exhibit 1).
• Coking coal has been hovering above USD 500 for the last four months, The La-Nina phenomenon in Australia is over.

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