In today’s briefing:
- Haier Smart Home (6690 HK): Smart Moves
- Harmonic Drive – Orders Rolling Over
- SMIC (981.HK): The Overall Demand Situation Is Growing Up in 2022.
- SMC – Guidance Ignores Potential For Down Cycle
- JD.com (9618 HK): 1Q22 Result, Undervalued Despite of Weak Revenue
- TME – Miss on Revenue and Margins; Earnings Continue to Remain Under Pressure
- Asahi: More Downside Left After Maintaining The Optimistic 2022 Guidance
- Aier Eye Hospital Group (300015.CH) 2021/2022Q1 Results – Overvaluation and a Risky Outlook
- CRC: Growth Momentum Intact Despite Uncertainties
- Aeon Shows up Seven & I in E-Commerce Growth and Strategy
Haier Smart Home (6690 HK): Smart Moves
- Besides as nationalistic consumption play, Haier Smart Home (6690 HK) also offers attractive investment theses with bright growth prospects. Despite share price rebound, valuations are still not yet reflecting fundamentals.
- The surge in demand for refrigerators and freezers during the pandemic-led lockdowns has boosted HSH’s business in 4M22 while it will also reap benefits from Rmb depreciation.
- The government’s support of healthy development of residential real estate market will be positive towards smart home appliance demand which HSH is set to gain from its leadership position.
Harmonic Drive – Orders Rolling Over
- Harmonic Drive posted revenue that was a touch above guidance but just below consensus and rather weak OP of just ¥2.23bn.
- While that was just below consensus it represented a deviation from typical gross margin and SG&A trends that is concerning.
- More troubling however is the drop in orders and particularly the composition thereof.
SMIC (981.HK): The Overall Demand Situation Is Growing Up in 2022.
- SMIC reported revenue/GM were US$1,869/40% for revenue/GM in 1Q22 respectively. The revenue matched to our expectation, but the GM was exceeding ~8% versus guidance.
- The outlook is a little bit lower than our expectation for revenue/GM to be US$1860-1,897/37-39% in 2Q22 guidance.
- The overall demand situation is growing up although inflation, Russia-Ukraine war, and other factors may affect.
SMC – Guidance Ignores Potential For Down Cycle
- SMC 4QFY22 was in-line with consensus revenue estimates at ¥185bn, but missed at the OP level with ¥52.7bn (10% below consensus) in a now familiar pattern for the sector.
- The company’s FY23 guidance was strong projecting revenue of ¥805bn (+4.5% vs. consensus) and OP of ¥265bn (+6.9% vs. consensus).
- The problem is that this ignores the typical cyclicality for the company and we believe OP will in fact be down YoY.
JD.com (9618 HK): 1Q22 Result, Undervalued Despite of Weak Revenue
- JD will continue to close its unprofitable minor businesses in following quarters.
- The growth rate of total revenue slowed down in 1Q21 due to weak demand of home appliance.
- We believe JD has a significant upside despite that the revenue growth will continue to slow down.
TME – Miss on Revenue and Margins; Earnings Continue to Remain Under Pressure
- Tencent Music (TME US) reported 1Q2022 results today. Revenue declined 15% YoY to RMB6.64bn (vs consensus RMB6.69n) while reported OP dropped 35.7% YoY to RMB749m (vs consensus RMB817m).
- Revenue from Online music services declined YoY for the first time since 2017 while revenue from Social Entertainment services further declined during the quarter.
- We expect TME’s earnings to remain under pressure with increased competition and regulatory restrictions on livestreaming sector.
Asahi: More Downside Left After Maintaining The Optimistic 2022 Guidance
- Asahi Group Holdings (2502 JP)’s 1Q22 OP of ¥9.0bn from ¥496.9bn revenue was significantly below the consensus OP of ¥34.0bn from ¥489.4bn revenue.
- Yet the company maintained its aggressive 2022 guidance, which expects domestic beer volume growth while prices are scheduled to increase by 6-10%.
- We don’t find this estimate credible, especially given that Asahi generates most of the domestic revenue from the price-sensitive high malt beer segment.
Aier Eye Hospital Group (300015.CH) 2021/2022Q1 Results – Overvaluation and a Risky Outlook
- Aier’s private placement was approved by the Shenzhen Stock Exchange, but we don’t think it signals a complete policy shift that private medical institutions are welcomed by capital markets.
- The high goodwill impairment risk and medical disputes are great concerns. However, if Aier changes its development mode, its performance growth would probably slow down or becomes uncertain.
- Aier’s Q2 performance could be affected by pandemic/lockdown. Even after continuous corrections, Aier is still overvalued based on current valuation, which has not priced in all the concerns and risks.
CRC: Growth Momentum Intact Despite Uncertainties
- Last week analyst meeting came out with neutral tone.We reiterate our BUY rating for CRC with a target price of Bt43.0,based on DCF (WACC of 8.2% and TG of 2%)
- Management maintained its key 2022 financial guidance. CRC targeted 2022 sales growth of 15%-20%YoY, mainly from fashion business and targeted GPM retail sales to expend by 100-120bps YoY.
- •CRC showed three measures to mitigate the effect from uncertainties under global issue such as(1)cost optimization by controlling OPEX growth to not be higher than 50% of total sales growth
Aeon Shows up Seven & I in E-Commerce Growth and Strategy
- Aeon has finally published numbers on its e-commerce growth and performance.
- It has a ¥1 trillion target for FY2025 and while this is still a far off target, Aeon is making progress.
- Digital sales have doubled in the past two years and Aeon is now well ahead of Seven & I which continues to fail to present a coherent e-commerce plan.
Related tickers: Harmonic Drive Systems (6324.T), Semiconductor Manufacturing International Corp (SMIC) (0981.HK), SMC Corp (6273.T), Tencent Music (TME.N), Asahi Group Holdings (2502.T), Aier Eye Hospital Group (300015.SZ), Aeon Co Ltd (8267.T)
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