In today’s briefing:
- Nidec (6594) | Down but Not Out
- Tencent (700.HK): Valuing Wechat Channels
- Comfortdelgro (CD): Now or Never
- Baycurrent Consulting: High Value-Added Projects and New Consulting Areas Drive New Phase of Growth
- Asian Paints (APNT IN) | Masking Growth Concerns
- Hutchmed China Ltd (13.HK/HCM.US) – The $1.13B Eye-Catching Deal with Takeda and the New Outlook
- PolyNovo (PNV AU): 1H23 Result- Growth Trajectory Continues; Fund Raising Strengthens Balance Sheet
- Bayer: Focusing On Fundamentals – What The Market Isn’t Picking Up!
- Teladoc Inc: New Integrated Healthcare Experience & Other Developments
- ON Semiconductor Corp: Major Drivers
Nidec (6594) | Down but Not Out
- Nidec slashed its full year operating profit guidance by 48% to 110 billion yen
- For Q3, Nidec reported an operating profit of 28 billion yen (-37% YoY), significantly below street expectations (51 billion)
- We remain bullish, expecting cost cutting efforts to ignite a profit recovery next year
Tencent (700.HK): Valuing Wechat Channels
- Recent developments highlighted the strategic significance of Wechat Channels (微信视频号) that Tencent’s management attached to the company’s future.
- Counter-Intuitively, while backing of the social giant saves Wechat Channels’ efforts for traffic acquisition, it also limits the product’s potential to develop into a content ecosystem rivaling Douyin.
- Our base case values the product at $29 billion, or 6% of Tencent’s market cap as of January 20th.
Comfortdelgro (CD): Now or Never
- New leadership with expertise in Australia could lead to value unlocking for Australian assets.
- Q3 22 ridership has gone up to 85% and 83% of pre-COVID level for NEL and DTL while in Q3 21 was only 49% for NEL and 43% for DTL.
- The reopening has brought tourists back and increased ridership level while China’s reopening has just started and is not yet priced in.
Baycurrent Consulting: High Value-Added Projects and New Consulting Areas Drive New Phase of Growth
- Baycurrent’s share price has moved up 41.3% YTD with the company reporting strong earnings for 3QFY02/2023 which beat consensus estimates by a huge margin.
- With pandemic conditions fading off, share price began to fall with top-line growth declining slightly. However, growth rates have bounced back, and margins have seen strong improvement reaching new highs.
- Though share priced has rallied significantly over the last few months, we think there is further upside driven by value-added projects and expansion into new consulting areas.
Asian Paints (APNT IN) | Masking Growth Concerns
- Asian Paints (APNT IN) reported flat year-over-year volumes and flat sales in domestic decorative paints in 3Q FY23. The company’s gross margin recovery is aligned with easing raw material prices.
- The company attributed the rough quarter to a heavy base from last year’s price increases and a prolonged monsoon, which impacted October volumes.
- We believe that the volumes are lower than what has been reported. Increasing competition could challenge APNT’s premium valuation.
Hutchmed China Ltd (13.HK/HCM.US) – The $1.13B Eye-Catching Deal with Takeda and the New Outlook
- HUTCHMED entered into an exclusive license agreement with Takeda- HUTCHMED will receive up to US$1.13 billion including US$400 million upfront, the third highest upfront among China’s TOP 10 license-out deals.
- Even if fruquintinib may probably not become a blockbuster product in the future, HUTCHMED still gets a decent upfront to relieve its cash flow pressure and an internationalization admission ticket.
- Hutchmed China Ltd (13 HK) is undervalued based on our sales forecast. After savolitinib has been included in the updated NRDL, this year’s performance growth is worth looking forward to.
PolyNovo (PNV AU): 1H23 Result- Growth Trajectory Continues; Fund Raising Strengthens Balance Sheet
- PolyNovo Ltd (PNV AU) reported record high sales of A$27.3 million, up 67.5% YoY during H1FY23, mainly driven by the strong momentum in the U.S.
- The company has continued to increase the sales team, particularly in the U.S. which has driven sales growth and customer account acquisition, entailing long-term visibility.
- Recently, PolyNovo has raised A$53 million to fund its global growth aspirations. The company is entering new markets, enhancing portfolio, and expanding manufacturing facility to support 5x sales.
Bayer: Focusing On Fundamentals – What The Market Isn’t Picking Up!
- The equity story expands across all of Bayer’s three segments. Positive signs in Pharma, Crops Sciences, and Consumer Health are showing, which we believe are misunderstood by the investment community
- Bayer has seen a material share price decline driven by litigation issues, while earnings showed solid progress.
- Positive news from the Pharma pipeline and progress in the high value seed business as well as the litigation cases removed from the spotlight should help the stock rerate.
Teladoc Inc: New Integrated Healthcare Experience & Other Developments
- Teladoc Health delivered a decent result for the last quarter and managed to exceed the revenue expectations as well as the earnings expectations of Wall Street.
- Teladoc concluded the quarter with a total US paid membership of 57.8 million members, an increase of 1.2 million members over the second quarter, driven by a combination of new virtual care client onboardings and population expansions within current clients.
- The management conducted their client advisory panel with representatives from 30 health plans, sizable employers, and health systems in attendance.
ON Semiconductor Corp: Major Drivers
- ON Semiconductor Corporation delivered another all-around beat in its last result.
- The company is a well-known provider of intelligent sensing and power solutions and has established a good market position within its niche in the semiconductor market.
- More and more companies are considering ON Semiconductors as their long-term strategic partners as the company walks according to an amazing foresight.
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