Equity Analyst, LightStream Research

Aqila Ali

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/nio-inc" target="_blank" data-smartkarma-citation="entities:27399:1" rel="noopener">NIO Inc (NIO US)</a> recently announced the launch of its battery subscription program, now providing a complete system of charging solutions for EVs. The company has developed its business model as planned during the time of its IPO. In this insight, we look at the company’s operations, specifically its new business venture: battery as a service (BaaS), which it will jointly operate with <a href="https://www.smartkarma.com/entities/contemporary-amperex-techn-a" target="_blank" data-smartkarma-citation="entities:24404:1" rel="noopener">CATL (A) (300750 CH)</a>. We will follow up with an insight that will then take a deep dive into financials to see if these operations reflect as expected on the financial performance.

NIO Inc (NIO US) recently announced the launch of its battery subscription program, now providing a complete system of charging solutions for EVs. The company has developed its business model as planned during the time of its IPO. In this insight, we look at the company’s operations, specifically its new business venture: battery as a service (BaaS), which it will jointly operate with CATL (A) (300750 CH). We will follow up with an insight that will then take a deep dive into financials to see if these operations reflect as expected on the financial performance.

A Look at Nio’s Operations: BaaS Is the Recent Addition

In September, <a href="https://www.smartkarma.com/entities/lg-chem-ltd" target="_blank" data-smartkarma-citation="entities:3583:1" rel="noopener">LG Chem Ltd (051910 KS)</a> announced that it would split its Battery business (around 42% of total revenue) into a separate business. The plan was approved by a majority of shareholders on October 30th. By December 1st, the new battery business, tentatively named “LG Energy Solutions” will be formed.The second-largest shareholder - National Pension Service (NPS), with around a 10% stake, was against the split in business, citing a loss in shareholder value as a concern. Following the news, LG Chem’s share price dropped by about 6% during the day, however, the share price has recovered since then and has increased by 17.8% compared to the close on the 30th of October. We agree that the possible dilution in equity value should concern current shareholders. However, for the battery business as a whole, we feel that this is advantageous. The battery business will now receive the focus and attention it deserves, and given the current EV momentum, this could be the best strategy LG Chem could adopt to grow its battery business. During the first eight months of 2020, LG Chem also led the battery market, beating <a href="https://www.smartkarma.com/entities/contemporary-amperex-techn-a" target="_blank" data-smartkarma-citation="entities:24404:1" rel="noopener">CATL (A) (300750 CH)</a>, which held the leading position until 2019. We believe that this a good time to split the battery business and that this should allow the new business to grow strongly and closely compete with pure EV battery leader CATL.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/170/199/original/image_70601135821604899855622.png?1604899857" class="editor-image img-responsive" data-smartkarma-image-id="170199"></figure>We go through the details below.

In September, LG Chem Ltd (051910 KS) announced that it would split its Battery business (around 42% of total revenue) into a separate business. The plan was approved by a majority of shareholders on October 30th. By December 1st, the new battery business, tentatively named “LG Energy Solutions” will be formed.The second-largest shareholder - National Pension Service (NPS), with around a 10% stake, was against the split in business, citing a loss in shareholder value as a concern. Following the news, LG Chem’s share price dropped by about 6% during the day, however, the share price has recovered since then and has increased by 17.8% compared to the close on the 30th of October. We agree that the possible dilution in equity value should concern current shareholders. However, for the battery business as a whole, we feel that this is advantageous. The battery business will now receive the focus and attention it deserves, and given the current EV momentum, this could be the best strategy LG Chem could adopt to grow its battery business. During the first eight months of 2020, LG Chem also led the battery market, beating CATL (A) (300750 CH), which held the leading position until 2019. We believe that this a good time to split the battery business and that this should allow the new business to grow strongly and closely compete with pure EV battery leader CATL.We go through the details below.

LG Chem Battery Business Becomes a Separate Entity

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

While a more cautious outlook is appropriate, as long as $77 holds (the September lows) we are constructive and would be buyers on a pullback. A move below $77 would start to get very concerning, and would leave $75 and the 200-day MA as last-ditch support. Considering the recent pullback we want to be sticking with areas that have continued to outperform in spite of recent broad market weakness. For that we look to the following leadership Sectors: Technology, Consumer Discretionary, Manufacturing, Materials, and Transportation

While a more cautious outlook is appropriate, as long as $77 holds (the September lows) we are constructive and would be buyers on a pullback. A move below $77 would start to get very concerning, and would leave $75 and the 200-day MA as last-ditch support. Considering the recent pullback we want to be sticking with areas that have continued to outperform in spite of recent broad market weakness. For that we look to the following leadership Sectors: Technology, Consumer Discretionary, Manufacturing, Materials, and Transportation

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Thematic (Sector/Industry)

<ul>
<li>China Industrials attract further inflows from dedicated active China funds.</li>
<li>Machinery and Electrical Equipment industry groups dominate holdings within the sector.</li>
<li>Buying seen in <a href="https://www.smartkarma.com/entities/contemporary-amperex-techn-a" target="_blank" data-smartkarma-citation="entities:24404:1" rel="noopener">CATL (A) (300750 CH)</a>, <a href="https://www.smartkarma.com/entities/sany-heavy-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:20183:1" rel="noopener">Sany Heavy Industry (600031 CH)</a> and <a href="https://www.smartkarma.com/entities/ever-sunshine-lifestyle-services-group-limited" target="_blank" data-smartkarma-citation="entities:28932:1" rel="noopener">Ever Sunshine Lifestyle Services (1995 HK)</a>.  Selling in <a href="https://www.smartkarma.com/entities/zhuzhou-csr-times-electric-co-ltd" target="_blank" data-smartkarma-citation="entities:18:1" rel="noopener">Zhuzhou Csr Times Electric Co, Ltd. (3898 HK)</a> and <a href="https://www.smartkarma.com/entities/beijing-new-building-materials-plc" target="_blank" data-smartkarma-citation="entities:13910:1" rel="noopener">Beijing New Building Materials (000786 CH)</a>
</li>
<li>Industrials move to top sector overweight among active China funds.</li>
</ul>


China Industrials attract further inflows from dedicated active China funds.
Machinery and Electrical Equipment industry groups dominate holdings within the sector.
Buying seen in CATL (A) (300750 CH), Sany Heavy Industry (600031 CH) and Ever Sunshine Lifestyle Services (1995 HK).  Selling in Zhuzhou Csr Times Electric Co, Ltd. (3898 HK) and Beijing New Building Materials (000786 CH)

Industrials move to top sector overweight among active China funds.


China Funds Increase Industrials Exposure, Moves to Top Overweight

Investment Advisors, JL Warren Capital

Junheng Li

Investment Advisors

JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

<div>With only 40+ days left before the Presidential Election in the U.S, China is wisely taking a laissez faire approach to the bilateral issues and conflicts, waiting Trump out until after November. However, Beijing understands the White House’s targeting at China enjoys bipartisan support at this moment, one of the few exceptions of today’s politics in the U.S.</div>

With only 40+ days left before the Presidential Election in the U.S, China is wisely taking a laissez faire approach to the bilateral issues and conflicts, waiting Trump out until after November. However, Beijing understands the White House’s targeting at China enjoys bipartisan support at this moment, one of the few exceptions of today’s politics in the U.S.

China

Contemporary Amperex Technology Co., Limited. operates as a battery products manufacturing company. The Company produces and sells power battery materials, energy storage batteries energy storage battery cells, systems, and other products. Contemporary Amperex Technology also provides batteries recycling services.

Contemporary Amperex Technology (CATL) (300750 CH)

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Contemporary Amperex Technology (CATL) (300750 CH)

A Look at Nio’s Operations: BaaS Is the Recent Addition

In this insight, we look at Nio's operations, specifically its new business venture: battery as a service (BaaS), which it will jointly operate...

Aqila Ali

LG Chem Battery Business Becomes a Separate Entity

LG Chem receives a majority of shareholder approval to split its battery business into a separate business. This insight takes a look at our...

Aqila Ali

Cautiously Optimistic on Global Equities

We are constructive on global equities and would be buyers on a pullback. A move below $77 would start to get very concerning, and would leave $75...

Vermilion Research

China Funds Increase Industrials Exposure, Moves to Top Overweight

Inflows in to Machinery and Electrical Equipment stocks push the Industrial sector to the top overweight among active China funds.

Steven Holden

China Macro and Geopolitical Briefing

With only 40+ days left before the Presidential Election in the U.S, China is wisely taking a laissez faire approach to the bilateral issues and...

JL Warren Capital

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)