Toyota Yaris’s launch with an aggressive pricing will surely disturb the status quo in Mid-size Sedan segment in India.
In this study, we will be analyzing who will be getting impacted most by Toyota’s new arrival. We will be taking top 3 players from mid-size sedan segment as these names occupy close to 85% market share in a relatively less crowded segment. The top 3 models include Honda City, Maruti Suzuki Ciaz, and Hyundai Verna.
Honda City is by far the largest selling model of Honda in India, constituting 31% of company’s total sales (1Q-18). Hyundai Verna, launched in 3Q-17, has been the largest gainer in the segment. Its market share has picked to 29% in 1Q-18 from 6% in 1Q-17. Unlike Honda’s City, Hyundai’s reliance on the model is much less and Verna constituted just 9% of Hyundai’s total sales in India in 1Q-18.
Maruti Suzuki’s Ciaz was launched in 4Q-14. Given MSIL’s diverse small car portfolio, its reliance on Ciaz is minimal. We believe that any disruption by a new arrival will have little impact on it. A Ciaz facelift is also expected in August this year and this should help the model in capturing some lost ground. Ciaz’s market stood at 32% in Mid-size sedan segment in 1Q-18, down 560 bps vs. 1Q-17.
[Compare screen: PV Unit sales for top 3 models]
Given Honda’s reliance on City and time gap from now for its next-generation launch (2020), we suspect City to be the most vulnerable of the lot from Yaris aggressive launch. We understand that City has a loyal customer base. However, recent onslaught of the launches dented its market share.
Heckyl’s alternative data platform, FiND collects and organizes macro, micro, and financial data to provide unique insights into automobile sector.
To know more about FiND, email us at email@example.com
77% of companies with “below industry average news sentiment” witnessed a deterioration in financials
FiND Credit Risk Early Warning System (EWS) captures company related red-flags through analysis of millions of data points and news. Unstructured data sets such as “news” are an important piece of information that can be consumed in the risk assessment of corporate borrowers.
Our hypothesis is that the news sentiment acts as a lead indicator to the deterioration in the company’s financial performance. To test this hypothesis, we back-tested news data of 2,250+ companies for the year 2016 on the following business rule:
Company’s news sentiment average stays below the industry average for all 4-quarters in CY16
We identified 924 such companies. Then, we checked if there is any deterioration in the quarterly financial performance (measured by the score of financial business rules) for these companies in the next 4-quarters (CY17).
For 77% of companies (714/924), we found that A. The number of red flags on quarterly financials outpaced the number of green flags in CY17 and B. The net score of red flags was lower than minus 10 for all 4-quarters in CY17.
We have highlighted 3 such companies whose news sentiment remained below the industry average for all 4-quarters in CY16.
We have also listed quarterly result charts for these 3 companies which highlight a deterioration in their financial performance in the subsequent quarters.
Low base likely to push growth further in coming months
The Commercial Vehicle (CV) sector, which is considered to be the barometer of an economy, recorded a surge of 19.9% in unit sales during FY18. The remarkable feature of this growth has been recovery post GST implementation (Image 1). Overall sales of CVs increased by 34% and 31% respectively in Q4CY17 and Q1CY18 after a decline of 9% in Q2CY17.
[Image 1: India CV quarterly unit sales and y-o-y change]
At the same time, the 12-month moving sum of CV sales witnessed sharp northwards movement post July-17 (Image 2). We assign this surge to fleet owners’ bulk buying post GST implementation. Moreover, this trend is expected to continue in coming months given improved macro-conditions at ground level, huge pent-up demand, the higher average age of the fleet and lower comparable (Q2CY17 was down 9% y-o-y).
[Image 2: India CV unit sales 12-month moving sum] Read the rest of this entry »
FiND media coverage study for BSE 100 index companies showed a significant deterioration in the long-term news sentiment for Glenmark Pharmaceuticals, Vakrangee and fraud-hit Punjab National Bank (PNB).
These 3 companies have been receiving negative press coverage for quite some time. As a result, news sentiment 200-day moving average (DMA) for these 3 companies dipped to a 2-year low on Apr. 17, 2018.
[Image 1: Compare screen shows Sentiment 200-DMA] Read the rest of this entry »
Publically available data from Employees’ Provident Fund Organization (EPFO) is an important piece of information that can be consumed in risk assessment of corporate borrowers. In our view, deep-dive analytics on EPFO data can offer unique insights into the company’s functioning.
Through analysis of EPFO data, the banks can find out whether the companies in their loan portfolio are depositing employees’ provident fund (PF) on time or not; and whether there is any significant drop in the PF amount deposited by the company. At the same time, lenders can also identify companies which are downsizing the workforce.
FiND Credit Risk Early Warning System (EWS) consists of 25+ business rules that analyze the EPFO data for the companies every month. One of the key business rules is a delay in PF payment for a given month. In our view, a delay in PF payment may imply liquidity crunch for the company and hence it is a red flag for the banks.
Our hypothesis is that red flags related to PF payment can act as a leading indicator to the deterioration in the company’s financial performance. To test this hypothesis, we back-tested our engine on EPFO data for three months (Jan-17, Feb-17, and Mar-17) on the below-mentioned business rule:
Delay in monthly payment of PF by more than 10 days for more than 50 employees
From our EPFO data universe of 1,250+ companies, FiND EWS identified 35 companies who have delayed PF payment for all 3 months.
Then, we checked if there is any deterioration in the financial performance (captured by FiND Financial Risk score) for these companies post-March 2017 quarter.
We found that: 86% of companies (30/35) witnessed a deterioration in Financial Risk score in the subsequent quarters.
We highlight 10 such companies below:
[Image 1: Financial Risk Score for 10 Companies with PF red flags] Read the rest of this entry »
With a clear focus on reduction of the information arbitrage, Heckyl has developed a strategy based on FiND News Sentiment Indicator for identifying bullish/ bearish patterns for the benchmark index, sector as well as individual stocks.
FiND News Sentiment Indicator reflects the underlying sentiment of news coverage on the companies. The strategy based on this indicator signals the potential impact of the news sentiment on the value of underlying index or stock.
We have constructed our strategy by taking moving averages of FiND News Sentiment Indicator. Our system generates bullish/ bearish signals based on the crossover of shorter-term (20-days) and longer-term (60-days) moving averages of FiND News Sentiment Indicator.
Bullish: When short-term 20-DMA of FiND News Sentiment Indicator is above long-term 60-DMA, underlying index or stock tends to rise. It reflects an improvement in news sentiment in recent time when compared with the past 2-months.
Bearish: When short-term 20-DMA of FiND News Sentiment Indicator is below long-term 60-DMA, underlying index or stock tends to fall. It shows a deterioration in news sentiment in recent time when compared with the past 2-months.
For simplicity, we have defined sentiment intensity as a difference between 20-DMA and 60-DMA of FiND News Sentiment Indicator to showcase bullish and bearish phases.
When the value of sentiment intensity is above 0 (20-DMA > 60-DMA), then it is a sign of bullish trend ahead. On the other hand, fall in sentiment intensity value below 0 level (20-DMA < 60-DMA) reflects bearish trend ahead.
Our back-testing proved the application of FiND News Sentiment Strategy for trading/ investment in the market. FiND News Sentiment strategy has outperformed benchmark index, sector and stock returns across time periods.
Here, we are presenting the case study on the Nifty index, Nifty Pharma and Sun Pharma to showcase how bullish/bearish signals defined by News Sentiment Strategy can help trader/ investor for beating the index/ stock returns.
We analyzed over 1.56 lakh news items for 50 companies within the Nifty index for the past 3-years. Out the total, 1,19,162 news items were positive, while 37,175 news items were negative.
As can be seen in below chart (Image 1), bullish/bearish signals based on news sentiment strategy can give an early indication of upward/downward movement for the 50-share index.
[Image 1: Nifty Index and Bullish/ Bearish Period defined by Sentiment Intensity]
If a trader/ investor was to buy/sell Nifty as per the bullish/bearish signal and hold the position for the period till the signal reverses versus an investment in Nifty, the returns would be significantly higher.
[Image 2: Returns based on Sentiment Signal and Nifty Index performance] Read the rest of this entry »