Bottom-Up EquitiesDaily Briefs

Equity Bottom-Up: Nintendo Co Ltd, Geely Auto, Safie, Yichang HEC Changjiang Pharma, ROBLOX Corp, China Dongxiang Group Co, Fast Retailing, NCSOFT Corp, K Car, Electricity Generating and more

In today’s briefing:

  • Nintendo – Time to Start Buying Again if You Are a Long-Term Investor
  • Geely: Challenges from New EVs Are Limited
  • Safie – Overreaction to Specific Distributor Issue
  • Yichang HEC Changjiang Pharma (1558 HK): Multiple New Products Launches Bring New Opportunities
  • Roblox Analyst Day: TAM Unlimited
  • China Dongxiang (3818 HK): Disappointing Result, But Still a Very Undervalued Asset Play
  • China’s Boycott of Western Brands Could Extend to Japanese Brands Amidst Xinjiang Cotton Controversy
  • NCSoft – Minnows Attract Sharks and Sharks Attract Whales
  • K Car’s Share Price Roars Higher Driven by a Greater Demand for Online Purchase of Used Vehicles
  • EGCO: Targets 15% Growth from New M&A’s in 2022

Nintendo – Time to Start Buying Again if You Are a Long-Term Investor

By Mio Kato

  • We have been skittish to turn genuinely bullish on Nintendo since early July. 
  • While we have called the stock oversold several times since then we did not feel it was ready to really begin a strong rally. 
  • We are still not certain it is, but valuations are cheap enough that we are more focused on what could be a spectacular pipeline for 2022 than on downside risks.

Geely: Challenges from New EVs Are Limited

By Victoria Li

  • Zeekr 001 production has been affected by insufficient supply of a certain components. The market is reducing its expectation on Nov delivery to around 2,000 cars.
  • On Guangzhou Auto Show(19th-28th Nov), we saw more new EVs would be launched in the coming year. BEV market competition is getting fierce.
  • Among to-be-launched new EVs, only Xpeng G9 might dilute market interest on Zeekr 001. However Zeekr 001 should have enough time to build up market reputation before it happens.

Safie – Overreaction to Specific Distributor Issue

By Mio Kato

  • Safie has fallen almost 20% since announcing results despite revising up revenue guidance by 3.8%. 
  • This is due to revelations that a lone distribution partner had been heavily incentivising the sale of its cameras and return rates had been climbing. 
  • While this does cast a shadow on previous growth trends a careful analysis suggests that it is not a grave concern.

Yichang HEC Changjiang Pharma (1558 HK): Multiple New Products Launches Bring New Opportunities

By Tina Banerjee

  • HEC Pharma (1558 HK) launched multiple new products, which will reduce its over-dependence on a single drug. Among those, insulin and oral HCV drug have large market opportunities in China.
  • As of 30 June 2021, 11 products of the company have won the bid for centralized bulk purchase of drugs, including six products have won the bid in H1 2021.
  • HEC’s rich pipeline consists of 50 innovative class 1 drugs, targeting fast-growing therapeutic areas including oncology. Its late-stage pipeline will enable robust product launches in 2022 and beyond.

Roblox Analyst Day: TAM Unlimited

By Aaron Gabin

  • Roblox is early days in so many new TAMs: advertising, music, commerce, education.
  • The advertising opportunity is enormous, given the amount of hours spent on the platform, one can easily see Roblox building a $2B+ ad business.
  • Roblox is still early in building out the infrastructure to support many new forms of monetization, and they are doing so in a thoughtful fashion.

China Dongxiang (3818 HK): Disappointing Result, But Still a Very Undervalued Asset Play

By Osbert Tang, CFA

  • China Dongxiang Group Co (3818 HK) posted Rmb748m losses for 1H FY22, primarily a result of investment losses. Nonetheless, we still consider it a very undervalued asset play.
  • Net cash reached Rmb1.4bn and investment portfolio is valued at Rmb7.7bn. This compared attractively relative to current market cap of just HK$4.3bn, or roughly equals to 61% discount.  
  • Its sports business will suffer in the near term as the rejuvenation progress is weaker than expected. However, this is not an important part and should not move CNDX much. 

China’s Boycott of Western Brands Could Extend to Japanese Brands Amidst Xinjiang Cotton Controversy

By Oshadhi Kumarasiri

  • A host of Japanese apparel brands are starting to reject cotton produced in the Xinjiang region.
  • Even though Fast Retailing is unlikely to stake a strong stand against the Xinjiang cotton controversy, actions by other Japanese brands could still affect Uniqlo in the Chinese market.
  • The Uniqlo brand resonates with Japan and a boycott of Japanese brands in China could have severe consequences to Uniqlo’s Chinese business.

NCSoft – Minnows Attract Sharks and Sharks Attract Whales

By Ken S. Kim

  • NCSoft moved on the following positives from their call – 1) NFT game in 2022 and 2 success of Lineage W thus far
  • One thing problematic was the concentration bet by one whale
  • Has the worst passed for NCsoft? The monetization of Lineage W will be key

K Car’s Share Price Roars Higher Driven by a Greater Demand for Online Purchase of Used Vehicles

By Douglas Kim

  • After a terrible IPO book building results, K Car’s shares have rallied nicely in the past several days. 
  • The company generated sales of 1,400.6 billion won (up 42% YoY) and operating profit of 56.9 billion won (up 88.8% YoY) in 1Q-3Q 2021.
  • Our base to high case valuation of K Car is 38,809 won and 46,959 won, respectively, which represent 12% and 35% higher upside versus current price.

EGCO: Targets 15% Growth from New M&A’s in 2022

By Research Group at Country Group Securities

  • Yesterday analyst meeting came out in a positive tone. We maintain the BUY recommendation based on a target price of Bt220.0 derived using DCF methodology (WACC 9.8% and TG 1%)
  • Expect the 4Q21 recurring profit to improve YoY on the back of profit recognition from Linden gas power plant (USA) added in 2Q21. While soften QoQ due to seasonal 
  • The company has set an investment budget of Bt30bn for 2022 (with in the framework of Bt150bn for 2021-25), which will focus on new renewable energy project acquisitions.We expect EGCO

Related tickers: Nintendo Co Ltd (7974.T), Geely Auto (0175.HK), Yichang HEC Changjiang Pharma (1558.HK), ROBLOX Corp (RBLX.N), China Dongxiang Group Co (3818.HK), Fast Retailing (9983.T), NCSOFT Corp (036570.KS), Electricity Generating (EGCO.BK)

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