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

In today’s briefing:

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

Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
Overall, net outflow over the past week was ~US$1.4bn, split between Shanghai (-US$0.8bn) and Shenzhen (-US$0.6bn).
The largest inflows were into Tianqi Lithium (002466 CH) and Midea Group (000333 CH). The largest outflows were in East Money Information (300059 CH) and Kweichow Moutai (600519 CH).

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.

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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