India

• HDFCB’s stock has seen significant volatility over the past one month. The Street seems to have four major concerns, which we think are either unfounded or too myopic.
• A recent concern has been around the compression in NIMs, where the Street is missing the point that this is well offset by lower operating/credit costs per the shifting product-mix.
• HDFC Bank has been gaining market share and with its distribution expansion, the growth is only going to accelerate further. Overall, the current valuations offer an attractive entry point. 

• Broad global MSCI equity indexes (ACWI, ACWI ex-US, EAFE, and EM) remain bearish, as do indexes in Japan, Hong Kong, China, Europe, and Germany.
• Until we see these indexes break above downtrends and key resistance levels, we cannot be bullish.
• Remain overweight Energy and Materials with the secular commodity bull market intact. Defensive Sectors are also hitting 1-2-year RS highs; we recommend overweights to Health Care, Utilities, and Consumer Staples.

• Cyient reported robust Q4FY22 results with revenue for the quarter at Rs 1,181 Cr, declined by 0.2 % QoQ and improved by 8.1% YoY. Operating Margins improved by 60bps QoQ to 14.5%.
• Services operating margins de-grew by 20bps QoQ to 15.4% while the DLM margins stood at 9.8% the quarter before being aided by strong execution
• We recommend a BUY on the stock and assign a 17x P/E multiple to the company’s FY24E earnings of Rs 60.0/share to arrive at A TP of Rs 1,000/share, implying an upside of 20% from CMP.

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• HCL Technologies Ltd (HCL Tech) Q4FY22 performance stood in line with our expectations.
• The company reported revenues of Rs 22,597 Cr, up 1.1% QoQ and 15.1% YoY.
• We recommend a BUY rating on the stock and assign a 20x P/E multiple to its FY24E earnings of Rs 67.4/share to arrive at a TP of Rs 1,345/share, indicating an upside of 22% from the CMP.

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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. Guangzhou R&F Properties
3. Sunac China Holdings
4. Greenland Hong Kong Holdings
5. Evergrande

and more…

• Nestle India (NEST) revenue reported in Q1CY22beat our estimates. However, the company’s EBITDA and PAT were a miss with clear signs of pressures noted on Gross Margins owing to inflationary RM in edible oil, milk & derivatives, and packing materials.
• Reported revenue grew 9.7% YoYto Rs 3,951Cr (~4% above our estimate of Rs 3,800Cr in Q1CY22)
• We maintain HOLD with revised TP of Rs 18,300 (60x Mar-24E) vs earlier TP of Rs 18,600 (60x CY23E).

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• Campus Activewear Ltd (1535013D IN) is looking to raise about US$184m in its India IPO, via a 100% secondary selldown.
• While there are other domestically listed footwear makers, Campus’ competitors generally market a broader product offering, ranging from casual, formal or outdoor shoes etc.. 
• Campus’ performance was amongst the most resilient during the pandemic, but its margins continues to trail peers. 

• Campus Activewear Ltd (1535013D IN) is looking to raise about US$200m in its India IPO, via a 100% secondary selldown.
• Campus Activewear is a lifestyle-oriented sports and athleisure footwear firm based in India. 
• Operating under the “CAMPUS” brand, the firm offers a diverse portfolio of styles, color palettes, and price points.

• LTI reported a growth of 3.6% QoQ CC on a high base, below our estimate of 4.2%.
• Growth was broad-based across verticals and service lines.
• EBIT margin moderated by 60bp QoQ to 17.3% in 4QFY22 (inline) due to lower working days and revenue mix

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• Q1CY22 EBITDA declined 26% YoY/increased 14% QoQ to Rs6.3bn, marginally ahead of our estimates, led by better-than-expected realization.
• Blended EBITDA/ton fell 25% YoY/rose 12% QoQ to Rs812 (Emkay est.: Rs780).
• Ongoing expansion projects (2.7mt clinker and 3.2mt cement grinding) are delayed by a quarter.

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• ACC’s Q1CY22 EBITDA of Rs6.35bn (down 26% YoY) was broadly in-line with our / consensus estimates.
• Total cost/te continued its upward trajectory as it rose 1.6% QoQ and 13% YoY primarily due to higher fuel prices, while blended realisations were up 2.7% QoQ and 5.0% YoY, resulting in blended EBITDA/te increasing 12% QoQ but declining 24% YoY to Rs812/te (I-Sec: Rs779/te).
• Volumes including clinker sales were down 2% YoY and up 2% QoQ at 7.8mnte.

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• GLAND has 11 injectable products in the USFDA shortage list, which have combined sales of ~USD400m over the past 12-months.
• The overall number of drugs under shortage in the US has declined to a 15-year low at present.
• However, the number of injectables facing a shortage is at its 20-year average, but is at a record high as a percentage of total drug shortages.

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• ICICI Securities Ltd. (ISEC) reported numbers stood below our and consensus estimates, mainly owing to lower brokerage income driven by weak market sentiments arising from the geopolitical tensions.
• While the momentum on the client addition has been strong YoY, it has moderated on a sequential basis
• We maintain our BUY recommendation on the stock with a revised target price of Rs 865/share (17x FY24E EPS), implying an upside of 38% from CMP.

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• ISEC witnessed a 6% YoY and 7% QoQ decline in revenue from the Retail Broking segment.
• We have lowered our FY23/FY24 EPS estimate by 10% each, to factor in weaker-than-expected traction in the Broking segment, a slowdown in the Issuer Services segment, the impact of a run-down in the ESOP funding book, and higher costs.
• Revenue from Retail Broking declines; momentum in client addition slows down

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• Results largely in line; Power & Fuel costs controlled ACC reported numbers largely in-line with our estimates with reported EBITDA coming in at Rs6.34bn, only 1.8% below our estimate.
• While volume and realisation were lower than our estimates, operating costs were also down, resulting in reduced impact on EBITDA.
• In fact, we were surprised that ACC did not show a bump up in Power & Fuel costs, which were largely controlled…(continued).

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• Rainbow Children’s Hospital (RCH) aims to raise around US$250m via issuing a mix of primary and secondary shares in its India IPO.
• RCH is a multi-specialty pediatric and obstetrics and gynecology hospital chain in India, operating 14 hospitals and three clinics in six cities, with a total bed capacity of 1,500 beds.
• In this note, we will talk about the company’s past performance.

• This channel insight focuses on private unicorns backed by Blackrock Inc (BLK US), Tencent (700 HK), Alibaba Group (9988 HK).
• There are indications of organic growth slowing down. Cash burn is probably the only possible way to cross the high operating performance seen during COVID.  
• Investor pressure is mounting, leading to mass hiring or firing in the Industry. 

• MTCL reported a revenue of USD384m (+5.2% QoQ CC) in 4QFY22.
• Reported revenue grew 4.8% (inline), driven by broad-based growth across verticals and regions.
• Deal TCV rose 9% QoQ to USD390m in 4QFY22.

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• Mindtree’s (MTCL) 4QFY22 revenue at US$383.8mn, grew by 5.2% QoQ in CC terms, marking 6th consecutive quarter of 5%+ growth, but was tad lower than our estimate of 6%.
• EBIT margin of ~18.9% was in line, contracting by 30bps QoQ.
• TCV of ~US$390mn (US$375mn in 4QFY21) reflects the need for pick-up in order inflow…(continued).

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• ACC reported revenue growth of 3% YoY and Volume/EBITDA/APAT de-growth of 3%/26%/30% respectively YoY, attributable to lower volume growth and higher cost during the quarter.
• The company recorded an EBITDA Margin of 14.3% against 20% YoY, which was below our expectation of 17.6%, primarily owing to the elevated input costs
• We value ACC at 10x its CY23E EV/EBITDA to arrive at a TP of Rs 2,300/share, implying an upside of 12% from the CMP

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• DALBHARA is a dominant player in East India with a clinker/grinding capacity share of 18%/17%.
• The company will be a beneficiary of: 1) improved consolidation in the region, which should aid an improvement in Cement prices and 2) recent increase in Cement prices in East India.
• The management has set yet another aggressive capacity addition target to emerge a pan-India player and achieve a grinding capacity of 110-130mtpa by CY31 (at a 14-15% CAGR)

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• PB Fintech (PBF) is among the leading insurance and lending intermediaries in India.
• It operates principally through its platforms PolicyBazaar/PaisaBazaar, and has also entered into newer businesses.
• PBF is well placed to benefit from the rising insurance penetration in India, especially through digital distribution.

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• We visited NHPC’s Subansiri Lower hydroelectric project, India’s largest hydro plant under construction with a generation capacity of 2,000MW situated at the Arunachal Pradesh – Assam border in the North-East.
• With both the states completely on board and strict monitoring with monthly visits by board level officials of NHPC and senior power ministry officials, the project is progressing at a rapid pace.
• Another positive outcome of the progress at Subansiri is that GoI is now working to fast-track other large hydro projects including Dibang (2,880MW), and revive Upper Subansiri (2,000MW) and Middle Subansiri (1,800MW).

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• Tata Power (TPWR) has concluded the long-awaited divestment of stake in its renewables (RE) businesses.
• It has consolidated all its RE businesses under one holdco – TPREL – and will be raising Rs40bn by offloading 10.53% stake in the same to GreenForest New Energies Bidco Limited (UK), a consortium of BlackRock and Mubadala, all of which will be used as growth capital for TPREL.
• As per our calculations, the transaction will be at an EV of ~Rs520bn-530bn, with pre-money equity valuation of Rs340bn.

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• We maintain our earnings estimates on Aurobindo Pharma Limited (APL) and reiterate our Buy rating on the stock with a target price (TP) of Rs864, valuing it at 16x March EPS.
• APL may be on a rerating journey over the next two years, led by multiple events.
• Potential demerger/divestment of Injectables business Approval and ramp-up of biosimilar drugs in the US and Europe Gradual ramp-up of domestic formulations business…(continued).

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• On Monday, Bloomberg reported that Larsen & Toubro (LT IN) was planning a merger between its public-listed subsidiaries Mindtree Ltd (MTCL IN) and Larsen & Toubro Infotech (LTI IN). 
• The companies have responded by saying that the news reports of a merger between MINDTREE and LTI are “speculative in nature“.
• Below is a closer look at the likelihood of this Deal and the valuations of the two companies involved in this event.

The Asia HY Trade Book for the month of April includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds in the Lucror Asia HY index.

• ITC Limited (ITC) has a diversified presence in FMCG, Hotels, Packaging, Paperboards, Agri Business, and Information Technology.
• The FMCG segment includes Cigarettes and Others which include branded packaged foods businesses, education and stationery products, personal care products, safety matches and agarbattis, and apparel.
• We recommend a BUY on the stock with a target price of Rs 295/share, implying an upside of 10% from the CMP.

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• Growth impacted by strong base and 3rd wave; VNB guidance retained ICICI Pru Life reported subdued APE growth of ~4% YoY on account of a strong base and impact of 3rd covid wave in Jan22.
• Company’s growth outlook is positive given the strong contribution from new product launches over the last two years and turnaround in the retail protection segment
• VNB growth in FY22 was mainly led by the non-linked savings segment, which contributed 91% to incremental profit…(continued).

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• We remain enthused with IPRU Life’s product and channel diversification strides, which has made the business considerably more robust than before.
• This is illustrated by the fact that the Rs21.6bn FY22 VNB mix is split between 16% by ULIPs, 43% by protection and 41% by non-linked savings.
• Current valuation at 2.2x/1.9x FY23E/FY24E P/EV is attractive. Maintain BUY.

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• Mindtree reported strong revenue growth of 5.4% QoQ and stood at Rs 2,897 Cr in Q4FY22, reporting revenue growth of 49.1% YoY.
• The company posted operating profits of Rs 608 Cr, registering a growth of 2.7% QoQ, demonstrating the company’s superior execution and better service mix
• We recommend a BUY on the stock and assign 35x P/E multiple to its FY24E earnings of Rs 135.8/share to arrive at a TP of Rs 4,830/share, implying an upside potential of 22% from CMP.

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• HDFC Bank’s (HDFCB) Q4FY22 earnings performance stood below our and consensus estimates with NII growth disappointing despite a healthy loan growth.
• Loan growth was robust at 21/9% YoY/QoQ supported by healthy growth in the Commercial & Rural Banking (+31% YoY) and Corporate Book (+17% YoY)
• We maintain our BUY recommendation on the stock with a revised target price of Rs 1,960/share derived using the SOTP method (core bank at 3.4xFY24E ABV + Subsidiaries value Rs 75/-), implying an upside of 34% from the CMP

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• HDFC Bank reported earnings growth of ~23% YoY, mainly driven by lower provisions.
• Operating profit growth was subdued at 5.3% YoY on account of multiple factors: (1) lower NII growth due to NIM compression (2) treasury losses (vs. gains in previous periods) due to increase in yields (3) investments in branches, human capital and technology.
• Loan book growth was strong at ~21% YoY, driven by commercial/rural and wholesale banking…(continued).

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• Infosys 4Q disappoints; Downgrade cycle upon us sooner than expected (INFY) reported US$4,280mn revenue for 4QFY22 (below our estimate of US$4,407mn) reflects ~1.2% growth QoQ in CC terms against our estimate of 4.3%.
• EBIT margin at ~21.5% (our estimate: ~23%) declined by 200bps QoQ.
• INFY attributed this weakness in revenue to seasonality (fewer working days), Covid impact and a one-off issue connected with a certain client (~100bps)…(continued).

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• Infosys Ltd (Infy) reported Q4FY22 revenue of Rs 32,276 Cr, up 1.3% QoQ and 0.8% QoQ (in CC terms) which was below our expectations.
• The company’s operating profit stood at Rs 6,956 Cr, reporting a de-growth of 7.3% on a QoQ basis.
• We recommend a BUY rating on the stock and assign a 29x P/E multiple to its FY24E earnings of Rs 71/share to arrive at a TP of Rs 2,060/share, implying an upside of 18% from the CMP.

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• Q4FY22 operating performance missed our expectations.
• Revenues grew by a mere 1.2% QoQ CC, while EBITM declined 190bps to 21.6%.
• Operating performance remained weak due to seasonality, a Covid-related impact in the early part of the quarter and a clientrelated contractual provision (likely to be recovered in FY23).

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• INFO reported a weak growth of 1.2% QoQ CC, below our estimate of 2.8%, on account of seasonality, the impact from the COVID-19 pandemic, and client provisions.
• Large deal TCV of USD2.3b was a tad soft (net new at 48%).
• However, the management indicated good traction in its large deal pipeline and reiterated that the demand remains strong

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• Post announcement of the acquisition of Citibank India’s consumer finance unit, Axis Bank has outperformed the market
• However, Axis Bank shareholders need to be more cautious about whether the acquisition will deliver the returns that the market is expecting.
• Competitors who either did not bid or lost out in the acquisition are focusing on poaching Citibank’s premier customers.

• Legal casino gaming is limited to only three of India’s states, including Goa, Sikkim and Daman. But nationally US$60b is wagered legally and in grey area sites.
• Delta’s gambling ships and casinos lie within a roughly 2.5 hour flight from population centers like Mumbai and Delhi.
• Latest operating results indicate strong gains despite lingering Omicron spurts positioning the stock for a strong upside ahead.

• IIFLWAM is on the verge of transitioning to earning majority of its revenue from a trail-based model as compared to a transaction-based one.
• It embarked on this journey from FY20 and had targeted to complete the same in three-to-four years.
• With a supportive market and conscious efforts, the transition is expected to be completed ahead of schedule, with benefits reaped from FY23 onwards.

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• After posting the highest ever annual production of iron ore (at 42mt) in FY22, NMDC has raised the bar and is now aiming at 46mt for FY23E and even higher for FY24E.
• The growth will be driven by both Chhattisgarh and Karnataka sectors.
• Our FY23 iron ore fines assumption is at a 10% discount to the CMP. Maintain BUY.

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•  TCS’ performance highlight was its strong deal bookings of USD 11.3bn, supported by mega deals of ~USD 1.8bn TCV (~0.5/0.8% revenue impact for FY23/24E)
• Medium term drivers such as prioritization of tech budgets, strong execution framework (including high retention) and services breadth including industry platforms remain intact.
• Our target price of INR 4,210 is based on 32x FY24E EPS with EPS CAGR at 12% over FY22-24E and we maintain ADD on TCS

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• TCS delivered US$6,696mn in revenue in 4QFY22, broadly in line with our estimate of US$6,725m although EBIT margin at 25% came in 50bps above our estimate.
• The margin beat was largely due to higher-than-expected operating efficiencies (though no details were given, we believe it is because of pyramid reshaping, automation and possibly higher offshoring).
• TCS indicated strong demand on the back of highest-ever order inflow of US$11.3bn, which included two mega deals (~US$1bn each)…(continued).

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• TCS reported a revenue of USD6.7b in 4QFY22, up 3.2%/2.6% QoQ in constant currency (CC)/USD terms, but slightly below our estimate of 3.1% QoQ growth.
• Revenue in 4QFY22 was driven by Retail and Manufacturing, while regional markets and others remained weak.
• EBIT margin was flat QoQ at 25% in 4QFY22 (in line).

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• Tata Consultancy Services (TCS) reported revenue growth of 2.6% QoQ USD terms (3.2%QoQ CC) and margins of 25% in line with our estimates.
• Revenue growth was broad-based across verticals with communications, BFSI and retail leading the growth.
• TCV was strong at US$11.3bn (all-time high) growing 49% QoQ and 23% YoY- partly aided by two mega-deals of ~US$1 bn each.

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• Meghmani Organics (MEGH IN) group was reconstructed lately; the NCLT approved the demerger post F21, as Meghmani Finechem was listed as new entity, while MOL got demerged with its subsidiary.
• MOL continues with the flagship Agrochemicals and Pigments business while MFL takes care of ChlorAlkali products and derivatives. 
• However, even post the restructuring of the group, MOL continues to have several setbacks in its balance sheet, as highlighted in the insight.

• A first look at the merger suggests that the value proposition is tilted towards HDFC Ltd (“HDFC”) vs HDFC Bank (“HDFCB”), given the declining regulatory arbitrage between large-NBFCs and banks
• However, given HDFCB’s intense focus on growing its distribution prowess, HDFCB stands to benefit immensely from the merger and is thus a win-win deal.
• With the expanded distribution network and cross-sell synergies, HDFCB, despite the larger base, will benefit from an accelerated growth post-merger.

• Solar Industries (SOIL) surprised with an investment (undisclosed amount) in an unarmed aerial solutions (UAS) company ZMotion Autonomous (ZM) incorporated in CY18.
• This is the second announced start-up investment by SOIL after a strategic stake (Rs175mn) into Skyroot – a space start-up helping ISRO with propulsion systems (SOIL incidentally also received ToT on 7th Apr’22 (propellant casting for Dual Pulse propulsion system).
• The rationale for the strategic investment has been shown as “will strengthen SOIL’s initiative to introduce weaponised unmanned aerial vehicle (UAVs) for offensive and counter drone system for defensive roles”.

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• In Q4FY22, Tata Consultancy Services Ltd (TCS) reported revenue growth of 3.4% QoQ in Rupee terms, beating our expectations.
• The company’s revenues stood at Rs 50,591 Cr, up 15.8% YoY.
• We recommend a BUY rating on the stock and assign a 31x P/E multiple to its FY24E earnings of Rs 135.2/share to arrive at a TP of Rs 4,200/share, implying an upside of 14% from the CMP.

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