Bottom-Up EquitiesDaily Briefs

Equity Bottom-Up: China Risun, Premier Anti-Aging, Bharti Airtel, China Longyuan Power Group Corp, Eubiologics, Hawkins Inc, Sabre Corp, Kasikornbank PCL and more

In today’s briefing:

  • China Risun (1907 HK): Even Greater Profits Or A Steel Trap?
  • Premier Anti-Aging: Up More than 300%, But Remains Undervalued on Fundamentals
  • China Risun – Coke-Coking Coal Spread Inverting
  • Bharti Airtel (BHARTI IN) | Revisiting Core Thesis
  • China Longyuan (916 HK): Takeaways from Management Update
  • EuBiologics (206650 KS): Cashing on Vaccine Business
  • HWKN: Chemically Outperforming
  • Two River’s Solvency Risk Short Candidates: Sabre Corp, PBF Enrgy, BellRing Brnds, PowerSchool Hldgs
  • KBANK: Expect 3Q21 Earning to Grow YoY and QoQ

China Risun (1907 HK): Even Greater Profits Or A Steel Trap?

By David Blennerhassett

Replacing coal-generated electricity with renewable energy to meet future carbon emission targets looks good on paper. Except when consumption surges in tandem with flood-impacted coal mines being shut down. This has resulted in varying degrees of production restrictions amid power curtailment in coke production areas. 

Yesterday coking coal’s most-active January contract on China’s Dalian Commodity Exchange increased by ~6.9% to a contract high of RMB3,428 (US$532.80) per tonne. That’s up from ~RMB1,800/tonne in the middle of July.

Coke, the processed form of coking or metallurgical (met) coal, is the key reducing agent of iron ore, the primary steelmaking ingredient.

Dalian iron ore closed 6.5% higher yesterday at RMB797.50/tonne, just below a session-high RMB799.50, the highest level since1st September. 

S&P summarised the provincial warnings by the NDRC, as it relates to power curtailment, as follows:

 … where green represents “smooth progress”, yellow is a “relatively tough situation” and red presents a “very tough situation.”

The coal chemical industry is highly susceptible to upstream and downstream industries. And rising raw materials (coke prices) will likely push steel prices higher.

China Risun (1907 HK) operates in the midstream of the coal value chain. This insight takes a look at Risun’s recent fortunes and compares it to Henan Jinma Energy (6885 HK).

Premier Anti-Aging: Up More than 300%, But Remains Undervalued on Fundamentals

By Oshadhi Kumarasiri

  • Premier Anti-Aging (4934 JP) is a relatively small Japanese cosmetics company with a limited number of brands focusing on the skin cleansing segment. The company’s shares rose more than 350% from the IPO price during its first year on the mothers section of the Tokyo Stock Exchange. However, valuation multiples remain towards the low side compared to peer multiples.
  • We think Premier Anti-Aging could re-rate towards the peer average multiples over the medium term. The downside risk is rather low for Premier Anti-Ageing but the share price momentum currently remains unsupportive. Thus, we would wait till a shift in the price momentum before considering a long position.

China Risun – Coke-Coking Coal Spread Inverting

By Mio Kato

China Risun and cheaper compatriot Henan Jinma have enjoyed strong performance in 2021 as supply issues and a recovering economy have driven met coke prices to record levels and bolstered gross profits. Now, however, coking coal prices have risen so far that spreads appear to be under threat.

Bharti Airtel (BHARTI IN) | Revisiting Core Thesis

By Pranav Bhavsar

As Bharti Airtel (BHARTI IN) rights issue is underway, we take this opportunity to re-visit our core thesis on Bharti (Bharti Airtel (BHARTI IN) | The Last One Standing ) along with assessing the current valuation standpoint. 

Rights issue specifics are assumed to be widely known and hence will not be covered in this insight.  

China Longyuan (916 HK): Takeaways from Management Update

By Osbert Tang, CFA

In a management update by China Longyuan Power Group Corp (916 HK), the company highlights that outlook stays positive and see no company- and industry-specific reasons for the recent retreat in share price. In fact, Longyuan believes that it is on track to reach its target to achieve utilisation hours of 2,240 for the full-year and the Sep generation figures (+21.7% YoY for wind generation and +15.8% YoY) remain very decent performance.

Longyuan also shared that there will not be significant impact of the recent rise in coal price on its coal-fired power stations, thanks to its own coal trading business which provides a hedge. Other positive developments including the good progress on A-share listing, derived benefit from relaxation of coal-fired power tariffs and increase in power trading. However, offshore wind project will remain on elevated capital costs but Longyuan notes that it is in a good position to secure new projects.  

EuBiologics (206650 KS): Cashing on Vaccine Business

By Tina Banerjee

South Korea-based EuBiologics is the largest supplier of oral cholera vaccine in the world, representing more than 80% market share. By leveraging on market leadership positioning, amid increasing demand and capacity expansion, its oral cholera vaccine has become a stable cash cow for the company. This year, EuBiologics has started developing COVID-19 vaccine, EuCorVac-19, which is currently under clinical trial. The company is one of the frontrunners among the local COVID-19 vaccine developers. With just 2.5% of the people in low-income countries (EuBiologic’s core operating markets) receiving at least one dose of a COVID-19 vaccine, EuCorVac-19 has the potential of becoming second major revenue stream for EuBiologics. Demand for vaccinations will remain for years to come, as more populations become eligible for vaccinations and booster vaccines are rolled out. EuBiologics has a rich late-stage pipeline of typhoid and pneumococcal conjugate vaccines, which target a combined market size of more than KRW8 trillion.   

HWKN: Chemically Outperforming

By Hamed Khorsand

  • The shortages that facilitated Hawkins (HWKN) reporting better than expected June quarter results have persisted through the September quarter. In the June quarter there were a handful of chemicals with nationwide shortages. Caustic soda and sodium hypochlorite (bleach) are two of the main chemicals to catch headlines, but the industry continues to experience shortages with many other chemicals.


  • The increase in chlorine demand related to COVID-19 has been replaced with demand for water treatment. The reopening of public and private pools has increased demand for the chemical without a corresponding increase in supply.


  • HWKN has been inventing in its water treatment segment through acquisitions. The business generates gross margin above the Company average and benefits from the growing need for water treatment solutions.


  • The September quarter has all the ingredients for beating our expectations.

Two River’s Solvency Risk Short Candidates: Sabre Corp, PBF Enrgy, BellRing Brnds, PowerSchool Hldgs

By Eric Fernandez, CFA

Solvency Risk Model:  

This model seeks companies facing dangerously high leverage coupled with negative or declining cash flows.  It considers interest expense, capex and short-term maturities for additional input.

 Solvency shorts can be great short candidates.  The key characteristic is that the company may not be viable, economically, given their cash flows and capital structures.  These shorts tend to have moderate to higher betas, time horizons that depend on their particular situations, and can have strong down moves as the crisis is recognized.  They can also go bankrupt, pushing the stock price close to zero.

 See below (and attached) for discussion on featured stocks and the top stocks at risk.

KBANK: Expect 3Q21 Earning to Grow YoY and QoQ

By Research Group at Country Group Securities

We expect its 3Q21 net profit at Bt9.06bn (+36%YoY, +1.9%QoQ), driven by growth in NII and drop in provision.

• Meanwhile, pre-provision profit will slightly drop 1.8%QoQ (+16%YoY) due to weak fee income from low economic activities during city lockdown.
• Earnings momentum should recover from 4Q21 onwards backed by loan expansion from Corporate and SME segment after lockdown easing.
• The bank should be a prime beneficiary for reopening country in 2022 and beyond due to its high exposure to SME and tourism related segment in its loan portfolio. Moreover, its digital lending platform under KBTG will expedite retail loan growth following recovery in economic activities.
Reiterate our BUY and roll over TP by 3% to Bt174 based on target PBV’22E at 0.85x, its 3-years trading average. Our rating factor in outstanding loan growth relative to peers backed by high exposure to SME with a support by the Bank of Thailand.

Related tickers: China Risun (1907.HK), China Risun (1907.HK), Bharti Airtel (BRTI.NS), China Longyuan Power Group Corp (0916.HK), Eubiologics (206650.KQ), Hawkins Inc (HWKN.O), Sabre Corp (SABR.O), Kasikornbank PCL (KBANK.BK)

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