In today’s briefing:
- China Beverage: Baijiu – The Most Addictive & Profitable Alcoholic Beverage in This Planet?
- MonotaRO (3064) | Another Decade of Secular Growth
- Japan Tobacco High Conviction Update: 50% Upside Potential as Investors Move on From Russia Fears
- M3: Revenue and OP Beat Consensus but Don’t Rush to Make an Entry
- CyberAgent 3Q: Revenue and OP Miss Consensus as Game Titles Struggle
- India Channel Insight #43 | Bandhan Bank – One More Quarter of Pain?
- Unilever Indonesia (UNVR IJ) – Back to the Boil Through Consumer Discretion
- Facebook 2Q22: Network Effects Are Yesterday’s News, AI Is the Future
- Teladoc Health Inc (TDOC US): Q2 Revenue Beat Expectations; Here Is Why the Stock Toppled
- Microsoft: Growth Bulls Versus Value Bears
China Beverage: Baijiu – The Most Addictive & Profitable Alcoholic Beverage in This Planet?
- Baijiu, the most popular liquor in China, is perhaps one of the most addictive and profitable alcoholic beverages in this planet.
- The focus of this insight is a pair trade (go long on Luzhou Laojiao and go short on Jiangsu Yanghe Brewery).
- The major reasons for this pair trade include higher sales growth rate and ROE for Luzhou Laojiao as well as capitalize on the recent share weakness of Luzhou vs Jiangsu.
MonotaRO (3064) | Another Decade of Secular Growth
- MonotaRo is well placed to monetise the shift of enterprise MRO spending as it moves increasingly online
- The company’s new distribution centre will enable the company to increase capacity, speed up deliveries, and offer improved services to enterprise clients
- Structural growth stories are few and far between in Japan. MonotaRo is one of them and appears expensive on most valuation metrics. Our LT DCF model suggests 30% upside
Japan Tobacco High Conviction Update: 50% Upside Potential as Investors Move on From Russia Fears
- We expect a strong 2Q22 and an upgrade to annual guidance from Japan Tobacco (2914 JP) through strong Domestic and International Tobacco performance.
- It also seems that investors are starting to move on from JT’s Russia exposure-related fears.
- Based on Japan Tobacco’s earnings potential, we think that there’s around 50% further upside to shares in the short term.
M3: Revenue and OP Beat Consensus but Don’t Rush to Make an Entry
- M3 Inc (2413 JP) reported 1QFY03/2023 results yesterday. Revenue grew 22.8% YoY to JPY57.0bn (vs consensus JPY50.8bn) while OP decreased 24.2% YoY to JPY19.0bn (vs consensus JPY16.3bn).
- The decline in OP was due to decrease in profit from overseas business where 1QFY03/2022 benefited from the Medlive IPO.
- Though m3’s earnings have beaten consensus and the company’s core Medical Platform has seen some recovery in earnings, we would not be rushing to make an entry.
CyberAgent 3Q: Revenue and OP Miss Consensus as Game Titles Struggle
- CyberAgent Inc (4751 JP) reported 3QFY09/22 financial results after the market closed on 27th. Revenue for the quarter decreased 10.4% YoY to JPY 172.2bn vs consensus revenue of JPY 173.2bn.
- OP declined 76.7% YoY to JPY 10.4bn vs consensus JPY 16.0bn (miss of 35%) due to decline in profits from gaming. OPM declined to 6.0% from 23.2% in 3QFY09/21.
- Though CA has proven in the past that it can turn around its business with just one hit title, it has not yet been able to launch another hit title
India Channel Insight #43 | Bandhan Bank – One More Quarter of Pain?
- The situation in West Bengal is improving/stable. While Assam is showing no signs of improvement
- Recent floods have impacted collections, however, as highlighted earlier they are not likely to slip into NPA.
- The asset quality downcycle could be on the verge of ending. Additional provisioning requirements should be sharply lower from Q3.
Unilever Indonesia (UNVR IJ) – Back to the Boil Through Consumer Discretion
- Unilever Indonesia booked a strong rebound in 1H2022 profits despite rising commodity prices with aggressive cost savings and an improving product mix.
- The company suffered during the pandemic given that personal care does have a discretionary element but that is now being reversed with great mobility and reflected in new product launches.
- Unilever Indonesia has the potential for a re-rating as growth momentum returns, helped by a new management team. Valuations are still well-below its 5-year average of 40x forward PER.
Facebook 2Q22: Network Effects Are Yesterday’s News, AI Is the Future
- Optically weak earnings and guidance due to FX and macro headwinds aren’t as bad as it seems… Meta’s ad business grew faster QoQ than Google’s Search.
- Zuckerberg downplayed the social graph as core to Meta’s LT competitive advantage. AI is the future.
- At $160, we think Meta is preposterously undervalued. 2023 revenue acceleration and margin expansion means the stock is trading 9x forward P/E ex-cash.
Teladoc Health Inc (TDOC US): Q2 Revenue Beat Expectations; Here Is Why the Stock Toppled
- Teladoc Health, Inc. (TDOC US) reported mixed Q2 results, with revenue and adjusted EBITDA coming in above the midpoint of guidance range. However, EPS came significantly below consensus and guidance.
- Teladoc has already took $9.8 billion hit from impairment charge in H1 2022. Moreover, the company now expects results to be toward the lower end of already reduced guidance range.
- Since publishing Q1 results in April, the stock plummeted 23% in three months. From its peak in February 2021, the stock is now down 85%. No immediate recovery is expected.
Microsoft: Growth Bulls Versus Value Bears
- Microsoft Corporation is the most widely held stock among active US equity investors. Of the 297 active strategies in our analysis, 80.1% own Microsoft at an average weight of 5.10%
- There is a growing dispersion between Value and Growth managers in MSFT. Growth managers are at record levels of ownership, whereas Value managers are running their largest underweight on record.
- US Growth managers are relying on Microsoft to deliver an increasing proportion of the Growth within their portfolios. The cost of that growth is coming under scrutiny by Value managers
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
