Consumer

• Markets expect Popmart to deliver fast growth for years to come, yet we are skeptical because the pop toy business, by definition, is a niche market.
• Blaming COVID for Popmart’s weak results risks focusing too much on near-term cyclical recovery but overlooking structural bottlenecks to growth.
• While we are cautious for long term, continued improvement in business and news flow leading to 1H results will likely result in share price rebound and provide tactical trading opportunity.

• ZJLD Group (ZJLD HK) is looking to raise up to US$500m in its upcoming Hong Kong IPO.
• ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu.
• In this note, we discuss our earnings assumptions and share our thoughts on ZJLD’s valuation.

• ROE has not risen at the pace expected, but dividends have begun to increase, and in FY2021 DOE rose to the 3% range for the first time.
• While ROE alone will not surpass the record high of FY2017, ROE plus DOE (ROE+DOE) is expected to slightly surpass the record high of FY2017 in FY2022.
• Even in FY2021, when DOE increased, Equity Ratio increased (and total assets also increased), so there is still room to increase shareholder returns, given that cash on hand increased.

• Keurig Dr Pepper share price has been under pressure over the recent months due to higher than expected drop in profitability.
• Beverage segments, however, continue to perform well and would most likely offset weaknesses in coffee.
• Investors should not expect a quick rebound in the company’s free cash flow.

• We expect Miniso to report C1Q23 revenue, operating profit, and net income 3.6%, 18.3% and 16.7% higher than consensus. 
• We think the strong foot traffic to offline stores post CNY bodes well for Miniso’s domestic store sales in 2023;
• We maintain the Buy rating, and raise TP by US$1 to US$25 to factor in the sales recovery from higher foot traffic and ARPU.

• PT Surya Citra Media Tbk (SCMA IJ) had an exciting 2022, with a ramp-up in new audience share-winning original content along with the boost from the Word Cup rights. 
• Both SCTV and IVM gained significant audience share in 2022, and Vidio led the charge on OTT driven by killer content, finishing the year with 5m paying subscribers. 
• Profitability was hit by a sharp rise in production costs and investment in Vidio but we expect significant improvement in 2023. Valuations are attractive with SCMA on 12x FY2023E PER. 

• Step One Clothing (ASX:STP) is a Direct to Consumer (DTC), 100%-own-brand underwear retailer specialising in anti-chafe bamboo underwear across men’s and women’s wear, with a core colour range supplemented by regular limited-edition releases, all with FSC (Forest Stewardship Council) certification throughout the supply chain.
• The company has operations in Australia (67% of sales), UK, (30% of sales) and the US (3% of sales). A H1 FY23 sales decline of 5.7% was better than our industry average estimate of-19% cycling lockdown, while lower sales and marketing spend saw EBITDA in-line with the pcp at $7.6m, the highest of any industry peer.
• H2 FY23 should see similar trends and deliver EBITDA well above consensus.

• Nayuki reported C2H22 top line 0.9% below our estimate but 18% below consensus，due to deteriorating cost ratios; 
• Company chose to drastically expand store count by ~600 in 2023. Our concern is that Nayuki stores now are drastically different from its past.
• The company is abandoning its premium teahouse position, which begets unknown consequences in our opinion; We keep the TP unchanged at HK 3.1 and maintain SELL.

• Step One Clothing (ASX:STP) is a Direct to Consumer (DTC), 100%-own-brand underwear retailer specialising in anti-chafe bamboo underwear across men’s and women’s wear.,
• A H1 FY23 sales decline of 5.7% was better than our industry average estimate of -19%, while  EBITDA was in-line with the pcp, the highest of any industry peer.
• On our estimates this superior business model currently trades at a PER of 1.0x ex-cash. Inventory is the key risk, currently representing ~two years’ sales, but is low fashion risk.leared.

• For Japanese companies that take time to take action while watching their surroundings, it’s skeptical of the expectation that individual managers will initiate measures in response to a “TSE request.
• The shift from deflation to inflation won’t only affect company’s profit structure and balance-sheet, but will also force Japanese companies to change as it resets the mindset of all managers.
• Since there’s little economic rationale for holding cash under inflation, all companies, rather than individual management decisions, will be forced to use cash for investment in growth and shareholder returns.

• Jardine Cycle & Carriage (JCNC SP)‘s implied stub value is around its highest-ever level, dating back to 2004. 
• The simple ratio of JCNC/ Astra International (ASII IJ) is also the highest level outside the brief spikes post-Covid and during the 2008 GFC.
• There is no apparent justification for the current valuation. And a takeover from Jardine Matheson Holdings (JM SP) at these levels appears unrealistic. 

• PT Metrodata Electronics had a strong finish to the year with FY2022 net profit growth of +14.1% YoY driven by both its ICT distribution and Solutions & Consulting (S&C) businesses.
• The S&C business continues to thrive on Indonesia’s ongoing digitalisation, especially in the financial sector with the advent of digital banking but also in the telecom and oil&gas sectors. 
• PT Metrodata sees a slower outlook for the consumer outlook but strong momentum behind commercial sales and S&C as digitalisation continues, and new growth from the Public Sector. Valuations attractive.

• This is our first report on a global media and entertainment player, Formula One Group.
• Its fourth quarter result was mixed and the company surpassed the revenue expectations of Wall Street but missed out on meeting earnings expectations.
• The company introduced a new brand campaign in the quarter to demonstrate F1’s position in the sporting and entertainment worlds.

• Formula One Group is major global media and entertainment company with decent fundamentals.
• The management anticipates Ford’s contribution as a technical engine supplier will be valuable for the sport and Red Bull.
• Baptista Research looks to evaluate the different credit strengths and credit risks of the company as well as a line-by-line analysis of the financial statements of the company for the past four years.

• Nagacorp’s 1Q23 and full year 2022 results confirm our prior call that Nagacorp revenues would ramp faster back to baseline 2019 than the market anticipates.
• Trading at HKD$5.97 with a forward P/E of 13.18 makes the stock attractive early in the recovery cycle and headed higher as 1Q23 results indicate.
• Superior management has always been a strength of Nagacorp. It has been recognized by Institutional Investor as Asia’s #1 most honored company for investor relations and returns.

• Not because TSE requires it, but because management should provide shareholders with a concrete plan and outlook for cash allocation based on the company’s growth stage and the external environment.
• For companies that disclosed improvement measures before TSE requested them and saw their stock price rise significantly, the sustainability of the stock price depends on the feasibility of the plan.
• The stock market jumped the gun and rallied in anticipation of the company’s announcement of feasible plan as expected, even though the company has yet to disclose any improvement plan.

• ZJLD Group (ZJLD HK) is looking to raise up to US$500m in its upcoming Hong Kong IPO.
• ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu.
• In this note, we discuss the industry dynamics and undertake a peer comparison.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• This week’s decline is deemed counter-trend and is in stark conflict with the bullish MT and LT triggers detailed in our bullish publication on 29 March 2023.
• Key support levels often combine a number of important moving averages.  92.00/94.50 combines the 20/50 week MA’s / 12/26 week EMA’s. High risk MT bottom at 92.00/94.50. Target 118.50.

• Lalatech Holdings Co Ltd (LALA HK) is looking to raise about US$1bn in its upcoming HK IPO. The deal will be run by BofA, JP Morgan and Goldman Sachs.
• Lalatech operates via a marketplace model serving merchants and carriers. Its platform facilitates closed-loop transactions from online shipping order booking to intelligent order matching, and automated dispatching to after-sale services. 
• In 2022, Lalatech facilitated over 427.5m fulfilled orders with a global freight GTV of US$6.7bn, with approximately 50.4m merchants served and business brought to approximately 2.3m carriers. 

• JD Health’s 2022 results were more optimistic than expected. We think the past three-year pandemic as well as the broadening of service scenarios are main drivers for rapid performance/user growth.
• If turning losses into profits is “a phased victory”,striving for higher profit margins and healthier revenue structure is the key task in next stage,but JD Health may fail this transformation. 
• After China reopens, JD Health’s user scale could be difficult to maintain such rapid growth in 2023 and onwards. Without breakthrough in service revenue, its valuation expansion potential could be limited. 

• GTX updated its annual outlook by forecasting results would be towards the high end of the previous guidance range.
• GTX also highlighted the opportunity to force the conversion of the Series A Preferred stock by the middle of the year.
• GTX had previously issued a sales outlook of $3.55 billion to $3.85 billion and adjusted EBITDA of $555 million to $615 million

• Last week, Filipino food manufacturer Monde Nissin Corp (MONDE PM) announced FY22 top-line growth of 6.7%. 
• However, the bottom line spilled red ink after booking impairment losses relating to its Quorn meat alternative ops. 
• The thrust of Quorn/Impossible/Beyond alternatives was that meat eaters would sacrifice their burgers without having to sacrifice anything at all. Yet the Big Meat appetite is not so easily swayed. 

• Monde Nissin Corp (MONDE PM) shares are down 18% on the back of FY22 results which revealed a net loss of PHP13 billion mainly due to a large impairment charge.
• While softening demand in meat alternatives is a headwind, Monde should benefit from the tailwinds of market share gains (in APAC BFB) and margin improvement (easing cost inflation).
• The valuation is undemanding (SOTP valuation of PHP10.21 per share) and will prove attractive to investors with a longer-term investment horizon.

• ZJLD Group (ZJLD HK), a baijiu company in China, is pre-marketing an HKEx IPO to raise up to US$400 million, according to press reports.
• In ZJLD Group IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The key elements of the bear case rest on the sharpest revenue slowdown, lowest operating margin and FCF margin vs peers along with a deterioration in lead growth indicators.

• This is our first report on global food processing giant, Archer-Daniels-Midland.
• Low water conditions limited North American export volumes, which were largely offset by a strong performance by the South American business.
• The North American business produced excellent volumes and margins in both starches and sweeteners, slightly offsetting decreased ethanol margins.

• Archer-Daniels-Midland is one of the largest food processing companies in the world.
• Low water conditions limited North American export volumes, which were largely offset by a strong performance by the South American business.
• Baptista Research looks to evaluate the different credit strengths and credit risks of the company as well as a line-by-line analysis of the financial statements of the company for the past four years.

• ZJLD Group (ZJLD HK), a baijiu company in China, is pre-marketing an HKEx IPO to raise upto US$400 million, according to press reports.
• ZJLD is the fourth largest privately-owned baijiu company and ranked third among all baijiu companies with three or more aroma types, in terms of revenue in 2021.
• The key elements of the bull case rest on market share gains, competitive production capacity, premiumization, rising gross margin and inventory days in good shape vs peers.

• Tesla managed the late hour surge it needed to “beat” rapidly falling market estimates
• But results were still shy of management’s target for more than 37% y/y growth (much less its abandoned goal for more than 50% growth y/y)
• Drastic measures to meet expectations likely came at the cost of already waning revenue quality and shrinking profit margins.

• Lalatech Holdings, one of the largest Asia-based providers of on-demand delivery platform, filed for Hong Kong IPO, with Goldman Sachs, BofA Securities and J.P. Morgan leading the offering.
• I like profitable growth at tremendous scale, hybrid monetization model and leadership position in Mainland China with a 40%+ share, well ahead of its major peers.
• Lalatech Holdings was backed by top-tier VC investors, including Hillhouse Capital Group, Sequoia Capital, Shunwei Capital, MindWorks Capital and Vitruvian Partners, among others. 

• Even though OP Margin has been stagnant, NP Margin has improved due to the corporate tax rate cut, and the increased free cash flow has been less directed to investments.
• The fact that OP Margin didn’t rise much while personnel and R&D costs were curbed and there wasn’t much investment simply implies a lower gross margin in the core business.
• With ROE growth sluggish and cash accumulating, it’s reasonable that investors demand further shareholder returns. If asset turnover declines while OP Margin slows, there’s little reason to hold cross-held shares.

• It’s skeptical that managers before the bubble economy really took risks. They no longer are protected by regulations  as they were before, and must take risks on their own initiative.
• The Stewardship Code and Corporate Governance Code were introduced in the hope that they would provide a boost to standstill managers to improve profitability to increase corporate value.
• Exit from the market is an important factor, but it can decelerate the speed at which exits are facilitated, such as maintaining listing through transitional measures or changing TOB rules.

• Burlington Stores is one of the major off-price retailer chains in the U.S.
• The company has strong fundamentals and has seen sizable, consecutive improvement in its sales trends in recent times.
• The management interprets this increase in traffic as a sign that the macro headwinds may be beginning to weaken.

• This is our first report on Burlington Stores, Inc., one of the major off-price retailer chains in the U.S.
• The company delivered a strong quarter, with sizable, consecutive improvement in its sales trends.
• Comparable store sales increased by 6% and the the result was an all-around beat.

• Two days ago, media reported Alibaba Group (9988 HK) / Alibaba (ADR) (BABA US) would split and possibly list several businesses. Last night Cainiao was reported as starting listing preparations.
• Last night, JD.com Inc. (9618 HK) made two announcements it was proposing to spin off and list its JD Property and JD Industrial arms. This is NOT a spinoff war.
• JD raised Series A and B for both companies. These were always going to be spins, like Health, Digits, and Logistics. JD Properties will be biggish.

• RH is the only luxury lifestyle brand at scale on this planet;
• Both qualitative and quantitative evidence point to the emerging and probably widening economic moat around the business;
• We see rich optionality regarding RH’s growth trajectory moving forward;

• The company’s financial statements reveal a few critical concerns relating to a receivables build-up, increasing credit allowances, and high short-term borrowing.
• The firm’s misfortunes were due to non-core events such as impairments, marketable security losses, and abnormal inflation.
• The economy is on a knife’s edge, and cyclical stocks such as Ford Motor Company (NYSE:F) look like 50:50 bets.

• The MSCI ACWI (ACWI-US), ACWI ex-US (ACWX-US), EAFE (EFA-US), and EM (EEM-US) are all reversing topside their 2-month downtrends.
• Despite this being a bullish short-term development, we still expect $93 to cap upside on the ACWI-US, leaving about 4-5% upside from here (at time of writing)
• As a result, we would use any further strength as an opportunity to get more defensive. Actionable Themes: REA-AU, GFL-CA, GFL-US, Consumer Staples, Health Care, and Gold Miners

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Odigeo’s ESG as “Strong”, in line with its Environmental and Social scores, while Governance is “Adequate”. Controversies are “Immaterial” and Disclosure is “Adequate”.

• Alibaba Group (9988 HK)‘s shares rallied after announcing the business split, with investors believing that the sum of parts could be worth more than the current valuation.
• Our analysis shows that NAV is only 12% higher than the current valuation, contrary to the idea of a significantly higher sum of parts value.
• Therefore, we would be looking to short Alibaba (ADR) (BABA US) yet again once this initial excitement settles.

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
• Stocks mentioned include Tian An China Investment (28 HK), CSPC Pharmaceutical Group (1093 HK), and Li Auto (2015 HK).

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• XPeng Inc (9868 HK) has this week broken above the falling wedge pattern that captured its Dec/Mar correction. The bullish trend breakout in the weekly RSI confirms the uptrend bias. 
• Wedge patterns are commonly referred to as “Half Mast” patterns. They typically occur in the middle of trends, making textbook targets easy to calculate. Target 56.10 (+29%) in Q2 2023.

• Lalatech Holdings Co. Ltd., the operator of on-demand delivery services known as Lalamove in Hong Kong and other global markets and as Huolala on the Chinese mainland, filed for an initial public offering Tuesday on the Hong Kong Stock Exchange.
• The company didn’t disclose a fundraising target or a timeline.
• The startup originally filed an IPO application confidentially in U.S. in June 2021 with an aim to raise at least $1 billion, but it later pulled out of the plan after Beijing’s crackdown on overseas share sales.

• Cisarua Mountain Dairy (CMRY IJ) is one of the most interesting consumer staples players in Indonesia, with a leading position in dairy and specifically yoghurt, and increasingly premium consumer foods.
• 4Q2022 saw a slowdown in sales growth as consumers returned to the mall due to inflationary pressure but December saw a sharp recovery and 2023 should see continued recovery.
• Flavoured UHT Milk and a new Yoghurt stick aimed at the mass market will help to fuel growth and raw material cost pressures have started to alleviate. Valuations are attractive. 

• Mitra Adiperkasa continus to execute on its unified retail model that utilises multiple channels to serve customers but offline activity has picked up most, driving a very strong 4Q2022. 
• The company continues to see improving margins across the board as sales growth has picked up across all segments. Online sales also remained relevant at 9% of sales in 2022.
• Mitra Adiperkasa continues to recover, utilising its MAPCLUB members to drive sales through more effective targeted promotions and efficiencies. Valuations are attractive versus historical levels.

• Since listed companies have abundant cash reserves even if interest rates rise, they will use their cash to pay down debt but they are unlikely to use it for investments.
• Cash is piling up on balance-sheet resulting from the inability to invest in growth and get out of the game of sharing the pie of the existing stable domestic market.
• In order to raise profit margins significantly, a manager may find growth and invest in non-existing businesses or introduce game-changing products that disrupt the stability of the market.

• United Malt Group Ltd (UMG AU) has granted privately-held Fench rival Malteries Soufflet due diligence on an exclusive basis after receiving an indicative Offer by way of a Scheme.
• Malteries Soufflet’s non-binding proposal for the Graincorp Ltd A (GNC AU)-spin-off of $5.00/share is a 45.3% premium to undisturbed.
• The Offer will be subject to FIRB approval. Malteries Soufflet and United Malt are the second and fourth-largest maltsters in the world.

• Trial Holdings (5882 JP) is looking to raise up to US$393m in its Japan IPO.
• TH operates a network of retail stores that offer one-stop shopping under its everyday low price model, across a variety of daily necessities, food items and other products.
• In this note, we talk about implied valuations in the IPO price range

• Loyalty points offer a significant incentive for consumers when deciding where to buy and many surveys confirm that points are a key factor in selection of online store.  
• With inflation biting, the big loyalty programmes are promoting points as a way to save on future purchases.
• Rakuten is by far the largest provider (10 pts above anyone else) and is enjoying strong growth – which could help adoption of its mobile store.

• Chinese restaurant sector could see 15% YoY revenue growth in Q1 2023, as Total Retail Sales of Meals in China rose 16.4% YoY during Jan-Feb 2023.
• Yum China Holdings Inc (9987 HK)‘s 1Q23 OP may reach a record high of $350m, and annual profitability is expected to double as restaurant footfall recovers.
• We suggest buying Yum China for potential multiple expansion due to rapid profitability growth.

• The company declared bonus shares of 40% during the annual results announcement in Mar, with shareholders issued 4 shares for every 10 shares by way of conversion of capital reserve.
• The stock went ex-dividend on 1 June 2018.
• Primarily as a result, we have adjusted our target price for the stock to HKD11.3 (from HKD16.3).

• Chinese outbound and domestic air traffic activity improved sharply Y/Y in the January-February LNY travel period, but activity remains far below pre-Covid levels
• Given constrained outbound air capacity, we’re surprised to see relatively low (65-66%) passenger load factors reported by the leading Chinese airlines during LNY
• If planes don’t begin to fill up with Chinese tourists soon, we believe some investors may become disappointed in the pace of China’s travel recovery 

The MISSION Group’s FY22 results are in line with the year-end trading update at the operating income level and a little ahead at the headline PBT and EPS level. Organic revenue growth of 6% was boosted to +10% by acquisition, with a headline operating margin of 10.9%, a shade behind the prior year figure of 11.1% reflecting well-documented cost pressures. The group has been extending its offering through acquisition and organic growth, with a particular focus on data, digital and social media. Management aspires to reach £100m of operating income by FY25, with margin improvements as it reaps the benefits of scale. FY23 has reportedly started well, with further new client wins. The shares continue to trade at a substantial discount to peers, which we regard as overstated.