India: Reliance Industries, Oyo, ITC Ltd, Bharti Airtel, Paradeep Phosphates, Hindustan Unilever, Dr Lal PathLabs Ltd, LIC Housing Finance, RITES Ltd, Lenovo 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.

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