In today’s briefing:
- VA Tech Wabag |a Meta Analysis
- Kaveri Seeds- Forensic Analysis
- China Banks – Stick with Quality at Attractive Valuations
- Screen Holdings (7735 JP): Weakness Not Necessarily Discounted
- Xerox Holdings Corporation: Initiation of Coverage – New Products Launches
- Fortinet Inc: Initiation of Coverage – Business Strategy
- Will Jana Partners Have Success In Pushing New Relic For A Sale?
- Box Inc.: Initiation of Coverage – Business Strategy
VA Tech Wabag |a Meta Analysis
- Leading water treatment company going through its crucible – negative sentiment, low expectation thus low valuation
- Mean reversion a high possibility, tailwinds for the sector getting strong
- Opportunities galore – new energy, general, PLI, non-PLI Capex, sewage water treatment, upgradation and desalination
Kaveri Seeds- Forensic Analysis
- In our previous insight on Kaveri Seed (KSCL IN) , Kaveri Seed: Wilting Sprouts we had predominantly highlighted the challenges faced by cotton seed players due to the external conditions.
- In this insight, we particularly dwell into the forensics checks of the company and present our takeaways.
- Key takeaways include concerns on investments, receivables, working capital cycle and some disclosures.
China Banks – Stick with Quality at Attractive Valuations
- Chinese banks are out of favour given the China GDP growth concerns and property sector headwinds; yet we see selective opportunities in the stronger, higher return banks
- Our core picks are unchanged, with the core holding being CCB, and also PSBC; both have healthy credit quality and coverage, double digit ROEs and are attractive on valuations
- We remain negative on China Minsheng due to its low ROE, poor delinquency and NPL coverage, and its relatively high exposures to real estate relative to its peers
Screen Holdings (7735 JP): Weakness Not Necessarily Discounted
- Orders, sales and profits increased substantially YoY in the three months to June (1Q), but new SPE orders declined sequentially (QoQ) for the first time in two years.
- Management has lowered 2Q sales and profit guidance in expectation of a weak 2Q. Full-year guidance remains unchanged. In our view, this reflects a wait-and-see attitude.
- Major customer Intel has cut capex. TSMC and memory makers see weak quarters ahead. The potential downside risk has probably not been fully discounted.
Xerox Holdings Corporation: Initiation of Coverage – New Products Launches
- This is our first report on legacy workspace technology major, Xerox Holdings Corporation.
- With increasing digitization in workplaces, the company is facing a challenging macro-economic landscape and has become a loss making company over the past few quarters.
- Among major acquisitions, Xerox has recently acquired Go Inspire for growing the presence of digital services in the UK.
Fortinet Inc: Initiation of Coverage – Business Strategy
- This is our first report on one of the leading players in integrated and automated cybersecurity solutions – Fortinet.
- The company has been performing well in 2022 so far with a reported increase in billing and product revenue growth.
- The company has also acquired a controlling stake in a Japan-based networking company ALAXALA Network for around $64 million.
Will Jana Partners Have Success In Pushing New Relic For A Sale?
- Activist hedge fund Jana Partners bought ~2.66M New Relic Inc (NEWR US) shares in 2Q22 and upped its stake in the tech company to 5.3%.
- According to Reuters, New Relic may explore a potential sale following interest from private equity firms. Mr. Galligan, a partner of Jana Partners, joined the New Relic Board in June.
- New Relic shares trade at ~4x EV/Rev on our FY23 revenue estimate, and we think Splunk may set a ceiling on the multiple at which New Relic may be acquired.
Box Inc.: Initiation of Coverage – Business Strategy
- This is our first report on cloud content management platform provider, Box Inc.
- The company operates on a SaaS model and has achieved accelerating revenue growth, RPO growth, and operating margin since the start of 2022.
- The strong customer matrices are the main indicators of the success of the platform strategy and product as customers are turning to Box for securing content management.
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