Daily Brief Equity Bottom-Up: Indian Forensic Playbook: Guidelines to Identify and Avoid Storified Stocks and more

• Indian SMEs are new hot investment avenues selling stories to investors which might end to a case of pump and dump.
• SEBI in last few months have identified such cases in SMEs and microcaps.
• We delved into key guidelines on Indian Forensics to Identify and Avoid Storified Stocks

• Zen Technologies (ZEN IN) expands product range to drones, anti-drone systems, and medical simulators, enhancing opportunities beyond government contracts.
• Strong order book of Rs 1,401 crore, significant R&D investment, and government support for indigenous defence manufacturing drive growth.
• Zen Technologies (ZEN IN) diversified product portfolio and strategic government support position it well for significant growth in the defence and simulation markets.

• The key takeaway from this earning season on the topic of generative AI (GAI) is that in-house generated content has the greatest potential for cost savings;
• Taking a step further, mid-sized video platforms can also use AI to skip the curator layer, similar to Pinduoduo using algorithm to bypass small merchants to connect directly to factories;
• We also notice that general media platforms with ample advertising inventories tend to perform better with AI’s help, which is why ads of Tencent’s advertising performed better than Baidu’s.

• We turn positive on KakaoBank, for its increasingly secure competitive positioning in Korea, its attractive digital efficiency ratio, its low customer acquisition cost and for its high activity rate
• We switch our buy rating from PAN to Inter as the latter has improved operationally, it is sound on capital and attractive on valuations
• Nubank is executing well, but we remain cautious on Nubank shares as we continue to see potential capital constraints as a key risk, along with its stretched valuations

Dentsu’s Q1 results indicate a slow start to the year, with organic net revenue down by 3.7%. However, prospects are improving, buoyed by new business wins and weighted to H2, which leave full year expectations (and our forecasts) unchanged. The One dentsu initiative, bringing together skill sets in consulting, technology, media and creative, is supporting improved pitch win rates, and giving greater coherence and consistency to the group product and service offering. We expect this to be a central element of the new management medium-term strategy, set to be unveiled during H2. The rating remains at a substantial discount to global peers, which we anticipate will narrow as evidence of renewed growth builds.

Basilea Pharmaceutica has announced the triggering of a US$1.25m milestone payment from Pfizer, triggered by sustained strong sales of Cresemba in the Asia-Pacific region and China. This is the second FY24 milestone payment for the region and is incremental to the payment received in March. We note that, according to the latest available data, total in-market sales of Cresemba amounted to US$473m in the 12 months ending December 2023, representing a +26% year-on-year increase. Basilea is preparing to launch its Phase III programme for fosmanogepix, a broad-spectrum antifungal therapy, with the first of two Phase III trials expected to initiate in mid-2024. The company also made positive regulatory and operational strides with its lead antibiotic asset, Zevtera (following FDA approval in April 2024), and we eagerly await the announcement of a potential US commercial partner.