Category

Energy & Materials Sector

Daily Brief Energy/Materials: Hanwha Solutions, Growatt Technology and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • Hanwha Solutions: Biggest Restructuring Measures in 50 Years
  • Growatt Technology IPO: The Bear Case

Hanwha Solutions: Biggest Restructuring Measures in 50 Years

By Douglas Kim

  • On 23 September, Hanwha Solutions announced a set of restructuring measures which are probably the biggest ever moves by the company in the past 50 years.
  • The spin-off of the Hanwha Galleria is a good move. Clearly, having both the renewable energy and a luxury department store business under one roof does not make much sense.
  • We also like the company’s move expand its U.S. solar module production capacity. The total amount of potential benefit could be nearly US$2 billion over the next decade. 

Growatt Technology IPO: The Bear Case

By Arun George

  • Growatt Technology (1833969D CH), a leading PV inverters manufacturer, will seek a listing hearing for a US$1 billion HKEx IPO in October, according to press reports.
  • In Growatt Technology 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 rising customer concentration risk, high dependence on Brazil for growth, limited pricing power and a shift to FCF burn. 

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Daily Brief Energy/Materials: Tianqi Lithium, Hanwha Solutions, Hawkins Inc and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • Shanghai/​​​​​​​​​​​​​Shenzhen Northbound Connect: Weekly Moves (22 September 2022)
  • A Detailed Summary of Hanwha Solutions Demerger & Tender Offer
  • HWKN: Pricing the Expected

Shanghai/​​​​​​​​​​​​​Shenzhen Northbound Connect: Weekly Moves (22 September 2022)

By David Blennerhassett


A Detailed Summary of Hanwha Solutions Demerger & Tender Offer

By Sanghyun Park

  • There is no unlocking of treasury shares, so a flow betting on dramatic value accretion will not occur. For tendering, the proration risk appears to be relatively high.
  • Passive trackers will sell at the close on February 24 and repurchase (likely only for Solutions) at the close on March 31. The flow size would be around 5.5x ADTV.
  • ECO risk wouldn’t be a concern as the new rule will grant appraisal/preemptive rights to the existing shareholders. Also, Hanwha hinted at the possibility of choosing private placement over ECO.

HWKN: Pricing the Expected

By Hamed Khorsand

  • The seasonal strength of the water treatment business should lead to Hawkins (HWKN) offsetting the sales decline from industrial specialty chemicals declining in price in the September quarter
  • There is now evidence some specialty chemical prices are beginning to decline. When there has been no LIFO charge, HWKN has reported gross margin above 20 percent.
  • Summer months are seasonally the time when there is greater demand from HWKN’s water treatment customers. Over the course of the past year HWKN has grown the segment through acquisitions

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Daily Brief Energy/Materials: Chubu Steel Plate and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • Chubu Steel Plate (5461) – Unusual TOPIX Inclusion Possibility

Chubu Steel Plate (5461) – Unusual TOPIX Inclusion Possibility

By Travis Lundy

  • Today, Nagoya Premier-listed Chubu Steel Plate (5461 JP) announced that it had applied today to be listed in Tokyo. 
  • It is one of very few Japan names not listed in Tokyo. A TSE listing examination will be conducted, and there is a possibility it moves to TSE Prime.
  • There are 6 key segment transfer and listing requirements to gain a listing in TSE Prime. Chubu Steel Plate is really close.

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Daily Brief Energy/Materials: OZ Minerals Ltd, CPMC Holdings, Freeport Mcmoran, Southern Copper and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • OZ Minerals May Be Narrowing the Price Gap to a BHP Deal
  • CPMC Holdings (906 HK): Good Time to Re-Visit
  • Freeport-McMoran Inc: New Mining Technologies & Other Drivers
  • Southern Copper Corporation: Diamond Drilling Reconnaissance In San Lorenzo & Other Drivers

OZ Minerals May Be Narrowing the Price Gap to a BHP Deal

By Travis Lundy

  • Six+ weeks ago, BHP Group Ltd (BHP AU) approached OZ Minerals Ltd (OZL AU) with a bid of A$25/share. Oz very quickly rejected it and said it was worth more.
  • The back and forth immediately post-rejection was not conciliatory. My expectation was that if they came back quickly, they’d have to pay A$30. But coming back quickly was tough.
  • There are hints now that may be the price. But it may not be. It will take time. 

CPMC Holdings (906 HK): Good Time to Re-Visit

By Osbert Tang, CFA

  • Underpinned by higher ASP and sequentially lower input costs, CPMC Holdings (906 HK) should achieve better margin in 2H22. Its 17% fall in share price YTD makes it appealing.
  • Average aluminum price was down 14% so far in 2H22, vs. 1H21, good to its costs. Well-controlled selling and administrative costs will help to support profitability recovery.
  • New two-piece can capacity will grow by 54% over the next three years as 5 production lines are expected to be added. Most of them already have demand lined up.

Freeport-McMoran Inc: New Mining Technologies & Other Drivers

By Baptista Research

  • Freeport delivered a disappointing result and failed to meet Wall Street expectations on all counts but the future outlook remains optimistic.
  • The company is increasing production year over year, and controlling expenses in a difficult environment and benefits from a highly favorable macro for copper.
  • With an expected rise in demand for copper with respect to energy conservation especially in EVs, the company benefits from a positive future macro.

Southern Copper Corporation: Diamond Drilling Reconnaissance In San Lorenzo & Other Drivers

By Baptista Research

  • With an improving outlook for copper given its critical role in energy storage and transport, Southern Copper is expected to be a major beneficiary in the long run.
  • Southern Copper did have an interesting set of developments despite a rather disappointing result.
  • The company has signed an agreement with the Michiquillay copper project at the cost of $400 million in Cajamarca, Peru.

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Daily Brief Energy/Materials: OZ Minerals Ltd and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • OZ Minerals Could Get an Improved Offer from BHP

OZ Minerals Could Get an Improved Offer from BHP

By Arun George


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Daily Brief Energy/Materials: Hitachi Metals, Sherwin Williams Co and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • Hitachi Metals (5486) Gets SAMR Clearance, Finally. So Now We Can Sell.
  • 83: Initial Thoughts On Sherwin-Williams (SHW)

Hitachi Metals (5486) Gets SAMR Clearance, Finally. So Now We Can Sell.

By Travis Lundy

  • Today before the open, China’s State Administration for Market Regulation (SAMR) finally announced the approval of the takeover of Hitachi Metals (5486 JP). This was what delayed things. 
  • The approval had actually been issued on 7 September, and the collected approvals in the week to the 12th were announced today. Some media outlets had the info yesterday.
  • I expect it is likely that the Bain Tender Offer to buy Hitachi Metals will be announced today after the close, or at latest, early next week.

83: Initial Thoughts On Sherwin-Williams (SHW)

By Watchlist Investing

  • I’m currently working on the September issue of Watchlist Deep Dives, which features Sherwin-Williams.
  • My research process is primary-sources focused and that means reading lots of 10K’s, which include a report from the company’s auditors.
  • I was surprised to see that Ernst & Young had served as SHW’s auditor since 1908.

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Daily Brief Energy/Materials: Xinyi Solar Holdings and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • Xinyi Solar, BYD, and Bank of China

Xinyi Solar, BYD, and Bank of China

By Untying The Gordian Knot

  • The main drivers for Hong Kong stock rallies are short covering, buybacks, and China government real estate support measures announcements.
  • Hang Seng Index and most of its constituents continue to read like bear porn. Without a meaningful reversal/impulse rally, it is hard to call for a reversal.
  • I hear and agree the case is so bad that it must be a buy signal. The sentiment is precious, BUT it needs a price action supporting the exhaustion thesis.

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Daily Brief Energy/Materials: Vedanta Resources and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • Morning Views Asia: AAC Technologies Holdings, Vedanta Resources

Morning Views Asia: AAC Technologies Holdings, Vedanta Resources

By Charles Macgregor

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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Daily Brief Energy/Materials: Capricorn Energy and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • Tullow/Capricorn: Unsuitable on Current Terms

Tullow/Capricorn: Unsuitable on Current Terms

By Jesus Rodriguez Aguilar

  • On 9 September, Capricorn’s closing share price was at a c. 29% premium vs. merger terms (186.46p); scheme approval seems tricky. Capricorn has signaled it is open to explore other transactions.
  • To rebalance the exchange equation, Tullow should offer at least 4.904043 TLW LN x 1 CNE LN, which would change the balance of power (Capricorn 51.8%, Tullow 48.2%).
  • Cash makes up to 72% of Capricorn’s shares, whose latest price movements could either anticipate some statement from Tullow or other “potential outcomes”. I’d be long Capricorn, rather than the spread.

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Daily Brief Energy/Materials: Repsol SA and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • Repsol: Sale of 25% of E&P Division

Repsol: Sale of 25% of E&P Division

By Jesus Rodriguez Aguilar

  • The $19bn EV operation (vs. Repsol’s market cap of €19bn) allows Repsol to maintain the majority in a strategic area, crystallizes value (market assigns a higher valuation to the E&P division separately).
  • The implied valuation by the market is on average $3 billion lower. As usual with a minority stake sale, the market rarely values it at 100%. 
  • I estimate a moderate positive impact (the deal is similar to what was announced in July), value unlocking could theoretically reach €2.5-€3 per share, but I’d take a neutral stance.

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