Daily Brief Industrials: MTR Corp, Keisei Electric Railway Co, Komatsu Ltd, Japan Elevator Service Holdings, J&T Express and more

• The share price of MTR Corp (66 HK) has not moved and lagged behind other transport operators in Asia.
• High-Frequency numbers from the company has shown improvement and signs that the Chinese tourists are gradually returning.
• The reopening of the checking in facility in downtown Hong Kong is another sign that more tourists are expected to come. 

• YTD performance of 61% has been stellar and index beating but the concern remains whether there will be more left. 
• Keisei Electric Railway Co (9009 JP) April 23 ridership and revenue growth provide momentum despite the still non-existence arrival of Chinese tourists. 
• Chinese tourists’ arrival in 2H 23 may be slow but chances are that they will arrive in Japan and will boost both ridership and revenue.

• We remain bullish on Komatsu despite returning a positive 37% return over the past year. 
• Q1 results are likely to exceed expectations and guidance is likely to be cautious, due to forex, pricing and cost factors.
• Komatsu is still attractively valued compared to its peers and historical averages, and has 20% upside potential.

Initiating coverage

• A successful market disruptor – Japan Elevator Service (JES) has been executing its growth strategy, increasing market share in the domestic elevator maintenance market via organic and acquisitive growth.
• Operating in a market dominated by OEMs, it is making solid headway by 1) offering a cost-effective solution, 2) a differentiated service offering technical services and availability of parts on par with the OEMs, and 3) experiencing rapid growth through by establishing a nationwide network providing regionally rooted services.
• Pursuing growth opportunities – we highlight two drivers for the company; 1) secular growth as building owners convert to reputable independent providers for cost management, and 2) structural demand from aging elevators requiring modernization.

• J&T’s China growth will slow from a lack of (1) M&A targets, and (2) cash to sustain a price war. SEA’s growth will slow, and profit margin decline due to
•  (1) Shopee in-sourcing of high-profit parcels(2) PE-backed rivals using price wars to gain market share. Lower penetration of China supply-chain platforms will stunt J&T’s growth in New Markets, we expect.
• In our base case we value J&T at US$ 10 bn, which is (25%) vs. J&T’s valuation in its latest round of funding.