Consumer: Li Auto, Lucid Group, Farfetch, JD.com Inc (ADR), Butterfly Gandhimathi Appliances, Easy Trip Planners Ltd, Crompton Greaves Consumer Electricals, SJM Holdings, TVS Motor and more

• The March rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
• The largest inflows will be on Alibaba Group (9988 HK), JD.com Inc. (9618 HK), Meituan (3690 HK), Nongfu Spring (9633 HK), Li Auto (2015 HK) and Lenovo (992 HK). 
• The largest outflows will be on HSBC Holdings (5 HK), Kuaishou Technology (1024 HK), China Construction Bank H (939 HK) and Tongcheng-Elong Holdings Ltd (780 HK).

• Big valuation and multiples despite on delivering its first care in 4Q21 (no revenues and burning free cash flow)
• Lofty delivery goals provided for 2022 and 2023….already disappointing investors
• Optimistic market share and ASP assumptions have been made by management

• This model seeks short-sale candidates among companies that use aggressive accounting and/or exhibit deteriorating quality of earnings.  
• They are typically highly idiosyncratic shorts and require thoughtful analyses of upcoming catalysts.  When the company’s issues become well-known, there is often multiple compression as well as a rerating.
• These shorts can have high or low betas, valuations based on artificial earnings and exhibit good short responses to subsequently disappointing earnings.

• We believe revenue will grow by 23% YoY in 4Q21 and by 18% in 2022.
• We believe JD is the most promising direct-sales e-commerce company in China.
• However, short video apps have been taking advertising market share from e-commerce apps.

• 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.

• 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

• Acquisition of Butterfly Gandhimathi Appliances Ltd.

SJM Holdings’ FY 2021 results remained weak, in a continuation from the soft H1 numbers. The company continued to report sizeable negative EBITDA in contrast to peers (which are all likely to report small positive EBITDA for the year). Moreover, operating cash burn has persisted in the two months YTD.

Liquidity is weak, given SJM’s low cash balance and lack of RCF availability. Moreover, the company would need to refinance its loans due February 2023. SJM’s delay in obtaining new long-term facilities is disappointing in our view, and reflects negatively on management’s execution. Still, we believe the company would not face issues seeking extensions or an eventual refinancing of its loan facilities, especially since the loans are secured against SJM’s assets.

• 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.