Smartkarma Daily Briefs

• In this insight we show drivers of LalaTech’s +US$1bn turnaround in OpInc
• We also evaluate which drivers are likely to generate future improvements
• Lalatech won’t repeat incredible 2021-23 CoR, OpEx performances, in our view

• Komatsu’s operating profits for FY3/24 of Y607 billion (+24% YoY) surpassed estimates on strong U.S. equipment sales
• Komatsu guides for FY3/25 operating profits of ¥557 billion (-8.3% YoY), assuming ¥140/US$
• We believe that the market remains too focused on the near-term growth slowdown, while we believe that Komatsu is attractively priced at under 10x EV/EBIT

• On 3 May, it was reported that Hankook Tire & Technology agreed to purchase a 25% in Hanon Systems for 1.37 trillion won from Hahn & Co private equity firm. 
• After this deal, Hankook Tire & Technology will own a controlling 50.5% stake in Hanon Systems.
• We have a negative view on Hankook Tire & Technology’s additional purchase of Hanon Systems, which has experienced a declining profit margins in the past several years.

• HD Hyundai Marine Solution (443060 KS) had raised around US$539m in its Korean IPO, after pricing the deal at the top end of KRW83,400/share.
• HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
• In this note, we will talk about the demand for the deal and other trading dynamics.

Adani Ports and Special Economic Zone (APSEZ) has released FY 2023-24 numbers that were slightly above expectations. The company’s strong revenue and EBITDA growth (of 28% and 24% y-o-y, respectively) exceeded management’s guidance, supported by higher than estimated growth in cargo volumes. APSEZ appears poised to achieve its target of 500 MMT cargo volumes in 2025, supported by organic growth and the contribution from its latest acquisition (Gopalpur Port). Net adjusted leverage improved to 2.9x (FY 2022-23: 4.0x). We expect leverage to be stable in FY 2024-25, in line with management’s guidance.

APSEZ appears to have a renewed appetite for expansion (particularly in overseas markets, amid its already strong domestic position), which may present event risks. In the meantime, the company may remain affected by negative headlines related to corporate governance issues at the broader Adani Group.

• TAL Education Group showcased a strong financial performance in the fiscal fourth quarter and full fiscal year of 2024.
• The group’s Learning Services and Content Solutions segments demonstrated growth, driven by focused product development and a broadening customer base.
• The Learning Services sector saw continuous growth, supported by the expansion of learning centers and increased enrollment.

• W.W. Grainger Inc. started 2024 positively, with Q1 sales up by 3.5% (or 4.9% on a daily organic constant currency basis), gaining contributions from both High-Touch Solutions and Endless Assortment business segments.
• One highlight was the successful Grainger Show in Orlando, which saw over 10,000 of their customers, suppliers, and team members gathering to showcase the company’s offering.
• The event was fruitful, yielding positive feedback due to the partnerships formed and customer problems solved.

• In the first quarter 2024 earnings, Dover Corporation showed promising results.
• The quarter’s results were consistent with expectations, despite initial concerns that it might be the most challenging quarter.
• Counter cyclical portfolios were offset by a strong performance in end markets along with improving order and shipment trends in biopharma components and growth platforms.

• L3Harris Technologies, a leading provider of national security solutions, reported strong key performance metrics in the Q1 2024 with an industry-leading margin expansion of 80 basis points to 15.1%.
• This has fueled an upbeat full-year 2024 margin, EPS, and revenue guidance.
• The operating income went up by $150 million, boosting EPS by 7% to $3.06 per share majorly because of segment operating margin performance.

• EMCOR Group has reported a strong start to 2024 in its recent first-quarter earnings call, driven by the performance in its Electrical and Mechanical Construction segments.
• Key figures include an 18.7% increase in revenues to $3.43 billion driven mainly by organic growth.
• The Remaining Performance Obligations (RPO) grew by 16.5% to $9.2 billion.

• In this insight we show drivers of LalaTech’s +US$1bn turnaround in OpInc
• We also evaluate which drivers are likely to generate future improvements
• Lalatech won’t repeat incredible 2021-23 CoR, OpEx performances, in our view

• Komatsu’s operating profits for FY3/24 of Y607 billion (+24% YoY) surpassed estimates on strong U.S. equipment sales
• Komatsu guides for FY3/25 operating profits of ¥557 billion (-8.3% YoY), assuming ¥140/US$
• We believe that the market remains too focused on the near-term growth slowdown, while we believe that Komatsu is attractively priced at under 10x EV/EBIT

• On 3 May, it was reported that Hankook Tire & Technology agreed to purchase a 25% in Hanon Systems for 1.37 trillion won from Hahn & Co private equity firm. 
• After this deal, Hankook Tire & Technology will own a controlling 50.5% stake in Hanon Systems.
• We have a negative view on Hankook Tire & Technology’s additional purchase of Hanon Systems, which has experienced a declining profit margins in the past several years.

• HD Hyundai Marine Solution (443060 KS) had raised around US$539m in its Korean IPO, after pricing the deal at the top end of KRW83,400/share.
• HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
• In this note, we will talk about the demand for the deal and other trading dynamics.

Adani Ports and Special Economic Zone (APSEZ) has released FY 2023-24 numbers that were slightly above expectations. The company’s strong revenue and EBITDA growth (of 28% and 24% y-o-y, respectively) exceeded management’s guidance, supported by higher than estimated growth in cargo volumes. APSEZ appears poised to achieve its target of 500 MMT cargo volumes in 2025, supported by organic growth and the contribution from its latest acquisition (Gopalpur Port). Net adjusted leverage improved to 2.9x (FY 2022-23: 4.0x). We expect leverage to be stable in FY 2024-25, in line with management’s guidance.

APSEZ appears to have a renewed appetite for expansion (particularly in overseas markets, amid its already strong domestic position), which may present event risks. In the meantime, the company may remain affected by negative headlines related to corporate governance issues at the broader Adani Group.

• TAL Education Group showcased a strong financial performance in the fiscal fourth quarter and full fiscal year of 2024.
• The group’s Learning Services and Content Solutions segments demonstrated growth, driven by focused product development and a broadening customer base.
• The Learning Services sector saw continuous growth, supported by the expansion of learning centers and increased enrollment.

• W.W. Grainger Inc. started 2024 positively, with Q1 sales up by 3.5% (or 4.9% on a daily organic constant currency basis), gaining contributions from both High-Touch Solutions and Endless Assortment business segments.
• One highlight was the successful Grainger Show in Orlando, which saw over 10,000 of their customers, suppliers, and team members gathering to showcase the company’s offering.
• The event was fruitful, yielding positive feedback due to the partnerships formed and customer problems solved.

• In the first quarter 2024 earnings, Dover Corporation showed promising results.
• The quarter’s results were consistent with expectations, despite initial concerns that it might be the most challenging quarter.
• Counter cyclical portfolios were offset by a strong performance in end markets along with improving order and shipment trends in biopharma components and growth platforms.

• L3Harris Technologies, a leading provider of national security solutions, reported strong key performance metrics in the Q1 2024 with an industry-leading margin expansion of 80 basis points to 15.1%.
• This has fueled an upbeat full-year 2024 margin, EPS, and revenue guidance.
• The operating income went up by $150 million, boosting EPS by 7% to $3.06 per share majorly because of segment operating margin performance.

• EMCOR Group has reported a strong start to 2024 in its recent first-quarter earnings call, driven by the performance in its Electrical and Mechanical Construction segments.
• Key figures include an 18.7% increase in revenues to $3.43 billion driven mainly by organic growth.
• The Remaining Performance Obligations (RPO) grew by 16.5% to $9.2 billion.