India

• Varun will start contract manufacturing for Pepsi’s snack brand Kurkure Puffcorn and we believe it is a step in right direction.
• Depending on the Varun’s progress in Kurkure Puffcorn business, we expect Pepsi to offer more products and regions to Varun.
• As of now Varun will set up a plant in Uttar Pradesh for Rs200-250mn and will produce Kurkure Puffcorn.

• India’s Nifty has held up but is now showing signs of significant support cracks that will open the way lower as the USD/INR tests key resistance at 76.40.
• Trading below the 50 and 200 dma is a trend negative and represents resistance that gels with the 17k price pivot barrier/break (200 dma). Risk of a downtrend has increased. 
• USD/INR above 76.40 will trigger USD bull momentum with major new chart highs targeted. This has been a high conviction USD long cross.

• In my monthly recap note, I provide a performance update of my trade recommendations in emerging markets FX and rates.
• Of the total of 35 trade recommendations made so far, I have recommended closing 25 of which 18 were in the money.
• I also update my views on the open trade recommendations and go over the rationale behind those that I closed recently.

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. Logan Property Holdings
2. Shimao Property Holdings
3. Ronshine China Holdings
4. Lenovo
5. Seazen (Formerly Future Land)

and more…

• Will continue to stand tall despite the many challengers Muthoot Finance (MUTH’) is our top pick for CY22 in the NBFC Lending space.
• Our investment idea is premised on our thesis of a structural opportunity in Gold lending as the market pie expands with customers evolving, taboo around Gold loans fading away, and apprehensions regarding Gold loans addressed through customer education.
• In this report, we list MUTH’s competitive strengths vis–vis its peers and some of the challengers like Fintech Gold loan NBFCs.

• HDFC Bank continues to make steady efforts on the digitization front as it gears up to be a digitally savvy bank. It has been revamping its apps, PayZapp and Smartbuy.
• HDFC Bank (HDFCB) posted steady growth and improvement in asset quality in Q3FY22. The growth focus and risk-on stance is back in the retail book with normalization of the environment.
• While HDFCB’s stock has been under pressure over the past 1Y, we believe apprehensions around its restructuring book and the impact on its payments led fee business are overdone.

• RPPL reported decent Q3FY22 earnings as gross margins expanded to 36.9% vs 33.7% QoQ and EBITDA margins expanded to 13.7% vs 13.5% QoQ.
• The margin expansion seems to have been led by higher utilization of finished goods and WIP inventory which helped in curtailing adverse impact of volatility in raw material pricing.
• The material decline in depreciation and amortization expenses by 13% QoQ is likely due to consolidation of the Unit 1 and Unit 3 facilities.

• Aurobindo Pharma (ARBP IN) shares have corrected more than 40% from peak and are trading at discount to peers. The company’s U.S. business is under pressure, resulting in deteriorating profitability.
• We are not seeing any immediate respite in the U.S. formulation business. Hence, investors can avoid Aurobindo Pharma shares.  
• However, value unlocking through stake sale in injectable business can be a near-term catalyst, resulting in relief rally in the stock.

• Nesco reported decent Q3FY22 earnings led by improvement in occupancy in the IT Park business as well pick up in the exhibition business. 
• With environment normalizing, exhibitions are likely to resume which should help Bombay Exhibition Center (BEC) revenues to come back.
• The indabrator business also reported strong revenue growth of 30%+ QoQ and 55%+ YoY.

• RPSG Ventures reported strong Q3FY22 earnings, led by the BPO business where revenues grew 5% QoQ in INR terms and EBIT grew ~20% QoQ.
• The FMCG business however saw tepid performance with revenues declining to INR 95cr vs INR 100cr QoQ, due to temporary headwinds, however, the long-term prospects remain promising. 
• The sports business is in nascent stage currently but the newly acquired IPL Lucknow franchise holds good promise.

• Residential real estate sector continues to be on an upcycle in line with our thesis. Kolte Patil is benefitting from this trend and reported record quarterly pre-sales of INR 561cr.
• Kolte Patil continues to maintain its FY22 guidance at 2.5mm+ sq.ft. sales and FY23 projection at 3mm+ sq.ft. alongside continued improvement in realization as the contribution from Mumbai increases. 
• Given strong balance sheet, Kolte Patil has been also bidding for new projects and is confident that it may acquire a large new project in Mumbai in the near-term.

• BBL (a subsidiary of BIOS) will acquire Viatris’ Biosimilar business to create a vertically integrated company in the Biologics segment.
• With this acquisition, BBL will acquire the commercial infrastructure in developed/emerging markets, rights for all Biosimilar assets (including the in-licensed portfolio), and the option to acquire rights of bAflibercept.
• This also fills BBL’s gap in regulatory development and supply chain management of Biosimilars in the developed market.

• Huhtamaki India’s (HIL) Q4CY21 performance was severally hit by a sharp rise in raw material costs and delay in taking price hikes
• Gross margins declined ~683 bps YoY, mainly due to a sharp rise in raw material costs dragging down EBITDA margins by 473 bps YoY to 1.6%
• On the topline front, revenues increased ~19% YoY to ~| 662 crore helped by a lower base

• Varun will start contract manufacturing for Pepsi’s snack brand Kurkure Puffcorn and we believe it is a step in right direction.
• Depending on the Varun’s progress in Kurkure Puffcorn business, we expect Pepsi to offer more products and regions to Varun.
• As of now Varun will set up a plant in Uttar Pradesh for Rs200-250mn and will produce Kurkure Puffcorn.

• Mindtree has a focused strategy to capitalize on the demand scenario. The company intends to focus on five verticals
• The management also has a strong focus on developing expertise in four service lines including Customer Success, Data Intelligence, Cloud, and Enterprises IT
• We recommend a BUY on the stock and assign 38x P/E multiple to its FY24E earnings of Rs 140.2/share to arrive at a TP of Rs 5,310/share, implying an upside potential of 39% from the CMP

• The deal is fairly valued (already at acquisition premium, the stock has run up 2x in the last 6 months).
• Any valuation upside from this deal will be based on Crompton’s success on execution (growth with margin improvement).
• Crompton has announced the acquisition of Butterfly Gandhimathi Appliances (Butterfly) in order to extend its kitchen product line.

• We attended MTCL’s annual investor meet, where the management reiterated its strong demand outlook and detailed the six strategic levers for FY23. It sees scope for continued performance in their 4x4x4 strategy and investments required to boost long-term.
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• Easy Trip Planners or EaseMyTrip.com (EMT) is the fastest growing and only profitable company in the online travel portal in India
• The company offers a comprehensive range of travel-related products and services
• Airline tickets accounted for 94.0% of revenues (pre-Covid levels) while hotels and other services contributed 5.4% and 0.6% of revenues, respectively

• We initiate coverage with a BUY rating and value the company 10.5x FY24E EPS to arrive at a target price of Rs 620/share.
• We believe PSPPL is well-placed to take advantage of the government’s focus on infrastructure development
• Strong and diversified order book provides robust revenue growth visibility.

• TVS Motor Company Ltd. (TVSL) is the 3rd largest two-wheeler company in India with an annual sale of more than 30 Lc units
• It manufactures the largest range of 2W including mopeds, scooters, commuter motorcycles, and racing-inspired bikes
• We recommend a BUY on the stock with a target price of Rs 720/share, implying an upside of 14% from the CMP.

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.

• Indika Energy
• Jingrui Holdings
• Tata Motors ADR

• Acquisition of Butterfly Gandhimathi Appliances Ltd.

• Pine Labs is a leading merchant commerce platform. It provides a merchant platform and software for point of sales machines.
• Its Feb 22 round was said to have been done at a rumored valuation of over US$5bn.
• In Jan 2022, the company filed confidentially for an initial public offering worth $500m with the US Securities and Exchange Commission.

• Globus Spirits (GBSL IN) , incorporated in 1993, is engaged in manufacturing, marketing and sale of industrial alcohol comprising rectified spirit, ENA and IMFL.
• Over the years, GSL has successfully got transformed from a grain-based bulk alcohol manufacturer to a 360° alcohol beverage segment player.
• The story of GSL has had some setbacks, however there are also positives in the form of margin boost, debt reduction and better efficiency.

• Accuracy Shipping (ACCURACY IN)  is an entity that provides third party logistics solutions worldwide.
• The company offers logistics services, including transportation, distribution, freight forwarding, clearing and forwarding, custom house clearance, warehousing, and other value-added services.
• Although the company has recently shifted to the main board of NSE, it does however contain several balance sheet and accounting issues that need to be considered.

• Life Insurance Corporation of India’s (LIC) imminent IPO is momentous in many ways foremost of which is the sheer magnitude… poised to become the largest IPO in India’s history.
• Momentous from an ESG perspective too. LIC’s pursuit of pre-IPO ESG ratings is commendable, precedent-setting, and long-term positive for LIC as a company and India and a country.
• Near-Term, pursuing pre-IPO ratings could backfire. Nothing major, but LIC could simply tell its ESG story to investors without (for now) ratings; the desired benefits without the risks.

• Despite the geopolitical wrench Vlad just threw into the cogs of world financial markets, LIC’s IPO seems to be on track. So here is another ESG-related observation about the deal.
• In the Insight Life Insurance Corporation of India’s Pursuit of Pre-IPO ESG Ratings Is Positive, But With Some Risk, I mentioned th very generic ESG-related wording in the prospectus.
• There wasn’t much in the prospectus, and that lack of a substantive ESG narrative runs counter to LIC’s public push for pre-IPO ESG ratings and begs several related questions.

• Infosys is India’s second-largest provider of consulting and IT services to clients across the globe
• It is also among the fastest-growing IT services organization in the world and leader in the offshore services space having pioneered the Global Delivery Model
• The company provides business consulting, application development and maintenance, and engineering services to 1,738 active clients

• Market leader in the domestic fan industry with value market share of 27%.
• The company has enhanced focus on increasing market share in home appliances categories like (air coolers, water heater and kitchen appliances) Robust balance sheet with RoE & RoCE of 34% & 39% (three-year average),.
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• We analyze Q3 FY22 results for Escorts Ltd (ESC IN) & Mahindra & Mahindra (MM IN) with a primary focus on farm equipment (Tractor) divisions. 
• High base, price increases and a move to support dealers indicate muted volumes ahead for Escorts Ltd (ESC IN).  
• For Mahindra & Mahindra (MM IN), valuations are compelling, auto volumes are good, but recovery in farm equipment remains the key catalyst for outperformance. 

• Acquisition of Butterfly Gandhimathi Appliances Ltd.

• We interact with channels of Mahindra & Mahindra (MM IN) , Bajaj Electricals (BJE IN) & Havells India (HAVL IN) with an objective to understand sources of stress in rural India. 
• Price increases, lack of savings and irregular rural cash flows are taking a toll on Tractor Sales. 
• In durables, there are no signs of recovery, with lower prices being the only catalyst that would bring back volumes. 

• Barbeque Nation Hospitality (0823884D IN) is among the largest casual dining chains in the country, and its been a year since it got listed on the bourses. 
• In our earlier insight Barbeque Nation IPO: Not Grilling Fine , we had highlighted the business, financial and governance discomforts seen in the IPO document.
• A year later, these setbacks still continue to be visible in the balance sheet. In this insight, we try to update our insights regarding the company.

• Mindtree has a focused strategy to capitalize on the demand scenario. The company intends to focus on five verticals
• The management also has a strong focus on developing expertise in four service lines including Customer Success, Data Intelligence, Cloud, and Enterprises IT
• We recommend a BUY on the stock and assign 38x P/E multiple to its FY24E earnings of Rs 140.2/share to arrive at a TP of Rs 5,310/share, implying an upside potential of 39% from the CMP.

• Ujjivan Financial Services (UJJIVAN IN) had announced a reverse merger back in October 2021 where the holding company (Ujjivan FS) will be merged with Ujjivan Small Finance Bank (UJJIVANS IN).
• The share swap ratio given in the scheme of amalgamation clearly showcases a significant merger arbitrage opportunity.
• However, there has been no major interest in this very visible opportunity. We try to justify the market behavior.

• New order wins in EVs/hybrids; Focus on energy cost pass on to customers MACA’s weak performance in 4QCY21 was reflection of high RM/energy cost and operating deleverage in both geographies.
• It is negotiating with customers to pass on hyper inflation in energy prices.
• We cut our CY22E EPS estimates by 3.5% to account for margin pressures across both geographies and maintain CY23E EPS estimates.

• The deal is fairly valued (already at acquisition premium, the stock has run up 2x in the last 6 months).
• Any valuation upside from this deal will be based on Crompton’s success on execution (growth with margin improvement).
• Crompton has announced the acquisition of Butterfly Gandhimathi Appliances (Butterfly) in order to extend its kitchen product line.

• We attended MTCL’s annual investor meet, where the management reiterated its strong demand outlook and detailed the six strategic levers for FY23. It sees scope for continued performance in their 4x4x4 strategy and investments required to boost long-term.
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• Butterfly Gandhimathi (BGAL) is one of the leading manufacturers of kitchen & electrical appliances in India and sells its products branded as ‘Butterfly’.
• The company is a market leader in India for SS LPG stoves & table top wet grinders and major supplier of mixer grinders & pressure cookers
• Over the last three years, BGAL has enhanced its focus on modern trade/online distribution channels to capture higher revenue growth

• As expected, Apollo Hospitals Enterprise (APHS IN) will replace Indian Oil Corp (IOCL IN) in the NIFTY Index (NIFTY INDEX) after the close of trading on 30 March.
• The index methodology has been changed to make new listings eligible for index inclusion if they complete one month by the review cutoff date, down from three months earlier.
• Estimated one-way turnover is 0.63% and will result in a one-way trade of around INR 14bn. Passive trackers will have a lot to trade on the stocks.

• Byju’s (Byju) is the largest edtech company in India. It offers online and offline courses.
• As per media reports, its latest funding round on Nov 21 was done at a valuation of US$21bn.
• Byju is rumored to be in talks with Churchill Capital VII SPAC to go public in the US.

• Swiggy is a leading food delivery platform in India. It along with its listed rival, Zomato, control nearly the entire food delivery market in India.
• Swiggy last raised another $700m investment led by Invesco US with a valuation of $10.7bn in Jan 2022. 
• Recent media reports have indicated that the company could look to raise around US$800m via an IPO in early 2023

• Inclusions are FSN E-Commerce Ventures (NYKAA), Mindtree Ltd (MTCL), Paytm (PAYTM), SRF Ltd (SRF) and Zomato (ZOMATO), while Indian Oil Corp (IOCL IN) moves lower from the NIFTY Index.
• Deletions are Aurobindo Pharma (ARBP), Hindustan Petroleum (HPCL), Indraprastha Gas (IGL), Jindal Steel & Power (JSP) and Yes Bank (YES), while Apollo Hospitals (APHS) moves up to the NIFTY Index.
• Estimated one-way turnover on the NIFTY NEXT50 Index is 10.24%, the one-way trade is INR 8,486bn and there is over 1 day of ADV to trade on a few stocks.

• Bank Of Baroda (BOB IN) will replace RBL Bank Ltd (RBK IN) in the Nifty Bank Index (NSEBANK INDEX) at the close of trading on 30 March.
• Index trackers will need to buy over 2 days of ADV on BOB while selling over 2 days of ADV on RBL. There will be capping changes too.
• Bank Of Baroda (BOB IN) trades cheaper than its peers on forward PE and price to book and could outperform over the near-term.

• Polycab India is a leading manufacturer of cables & wires with a diverse product range catering to industrial and household segments
• In 2009 the company diversified into EPC business to strategically cater to the Cables & Wires requirement of large infrastructure EPC projects
• We recommend a Buy the stock for a target price of Rs 2,640 implying an upside of 11% from CMP

• It also announced major Capex in the east, which along with its north expansion, will increase its capacity to 40mn MT over the next 3-4 years and firm up the volume growth visibility.
• Ambuja Cement: We maintain our ADD rating on Ambuja Cements (ACEM), with a lower TP of INR 380/share (SOTP-based).
• ACEM is working on various cost levers (reduce clinker factor, increase TSR factor and green power) to boost its margin.

• We initiate coverage with a BUY rating and value the company at 5.5x FY24 EBITDA and 0.5x book value of CWIP to arrive at the target price of Rs 150/share, implying an upside potential of 28% from the current levels.
• Nalco is the only pure equity play on Aluminium and Alumina commodities in India
• Aluminium is expected to remain in a deficit a second consecutive time in CY22 supporting higher prices

• Automotive Axles (AAL), established in 1981, is largest independent manufacturer of rear axle drive assemblies in India (primarily for CVs, M&HCV)
• As of FY20, rear drive axles comprise ~60% of its topline with brakes share at ~20% and other parts comprising the rest
• Target Price and Valuation: We introduce FY24E. We now value the company at a revised target price of Rs 1730 i.e. 20x P/E on FY24E EPS (earlier TP Rs 1260).

• One 97 Communications’ (OCL or Paytm used interchangeably in the report) two-sided digital ecosystem of 64.4mn average monthly transacting users (MTUs) (as at Dec’21) from >350mn consumer base and over 24.9mn merchants is core to its unit economics.
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