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Equity Bottom-Up Archives | Page 73 of 222 | Smartkarma

Dec 01
0

Daily Brief Equity Bottom-Up: Denso – Thoughts On The Cross-Holdings Sell-Down and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Denso – Thoughts On The Cross-Holdings Sell-Down
  • BYD (1211 HK) | Takeaways from India Showroom Visit | “Tata” Of China
  • Altman Allure at OpenAI: Where the Hunter Gets Hunted
  • Pinduoduo (PDD US): TEMU at Center Stage
  • 2024 High Conviction: Meituan / MT (3690 HK) – Big Opportunity Emerging After Plunge
  • Memory Monitor: Micron Expects 2025E to Be Best-Ever for Memory; But Valuations Have Run Up a Lot
  • TSMC: Defensive AI Play in Long Upward Re-Rating Trend?
  • [Futu Holdings(FUTU US, SELL, TP US$46)Rating Change]: Run Out of Growth Momentum, Downgrade to SELL
  • OCBC – Market Capitalization Rising, Unlike Peers | Insurance Is Lack Luster | Credit Costs Seem Low
  • 2024 High Conviction – CyberAgent: Worst Seems to Be Over

Denso – Thoughts On The Cross-Holdings Sell-Down

By Mio Kato

  • The trend of governance reform in Japan continues with Toyota, Toyota Industries and Aisin selling shares of Denso. 
  • Denso is buffering some of the flow impact by repurchasing roughly half of the shares to be sold. 
  • While the size of these moves is relatively large we believe their impact could be disproportionately large for the market as a whole.

BYD (1211 HK) | Takeaways from India Showroom Visit | “Tata” Of China

By Pranav Bhavsar

  • We recently visited a BYD (1211 HK)  showroom in Ahmedabad, with the objective of understanding the preference for Electric Vehicles in India.
  • Pitched as the “Tata” of China, BYD offers 2 models ATTO 3 and e6 in India. 
  • Considering Tesla Motors (TSLA US) India interest, and Mahindra & Mahindra (MM IN) big bet on EV, BYD’s current operations in India seem to be minuscule and may find little success.

Altman Allure at OpenAI: Where the Hunter Gets Hunted

By Pranay Yadav

  • Sam returned as the CEO of OpenAI days after his surprise removal. Its board was overhauled with new members – Larry Summers and Bret Taylor.
  • The surprise removal of Sam was driven by philosophical differences over AI safety. Fears of employee exodus to Microsoft is the primary driver of his return to OpenAI leadership.
  • Recent events have solidified Microsoft’s partnership with OpenAI and Sam. Outcome from fallout suggests Microsoft will have a larger role in shaping OpenAI’s future.

Pinduoduo (PDD US): TEMU at Center Stage

By Eric Chen

  • Stock rally on strong revenue growth suggests TEMU will be at center stage of the investment thesis for PDD down the road. 
  • Besides soaring GMV, TEMU achieved blowout performance likely due to much higher-than-expected take-rate and disciplined marketing, resulting in narrower-than-expected losses.
  • We expect the company’s growth will even accelerate in 4Q23 and generate adjusted net profit of US$12 bn for FY24, with a target market cap of US$240 bn (20xPE).

2024 High Conviction: Meituan / MT (3690 HK) – Big Opportunity Emerging After Plunge

By Ming Lu

  • The stock has been declining for about three years and plummeted after the 3Q23 results.
  • However, we believe MT and its corporate clients have been recovering and MT’s profits will rise by 129% in 2024.
  • We set an upside of 132% and a price target of HK$209 for 2024. Buy.

Memory Monitor: Micron Expects 2025E to Be Best-Ever for Memory; But Valuations Have Run Up a Lot

By Vincent Fernando, CFA

  • Memory names have rallied strongly, with Nanya Tech outperforming since the start of November.
  • DRAM bottomed and NAND flash prices have jumped. Micron says that 2025E could be a record year for the Memory industry.
  • High valuations make near-term upside for Memory names uncertain. For Long/Shorts one can consider Long Micron vs. Short SK Hynix or Long Micron vs. Short Nanya Tech.

TSMC: Defensive AI Play in Long Upward Re-Rating Trend?

By Vincent Fernando, CFA

  • We believe TSMC represents defensive exposure to AI for investors concerned that many other AI-related stocks’ valuations may be too high.
  • While one may think TSMC seems too obvious as a play, we note that the stock is up only 4.5% over the last six months.
  • We view TSMC as trading at an inexpensive valuation; even a cheap valuation should our hypothesis that the stock is structurally re-rating upwards turn out to be true.

[Futu Holdings(FUTU US, SELL, TP US$46)Rating Change]: Run Out of Growth Momentum, Downgrade to SELL

By Eric Wen

  • We think FUTU is stepping into a stagnant phase in 2024. Japan is not a game changer.
  • Client asset inflow from overseas is not meaningful, and growth from mainland is frozen by regulation.
  • We downgrade the stock into SELL rating and cut TP to US$46/ADS, mainly due to slow progress in overseas expansion and difficulty in monetization.

OCBC – Market Capitalization Rising, Unlike Peers | Insurance Is Lack Luster | Credit Costs Seem Low

By Daniel Tabbush

  • OCBC has seen its mkt cap RISE by ~4% YTD. This is stark contrast to the ~6.5% lower mkt cap at DBS and around 10% lower mkt cap at UOB.
  • Net interest income had been strong, and this likely slows, a lot. Other areas are far from strong. Credit costs are up 103% YoY at 9M23.
  • Profit from insurance is down 12% YoY and down 16% QoQ, in 3Q23 (Great Eastern). Profit from associates is -1% YoY in the quarter and only +1% YoY

2024 High Conviction – CyberAgent: Worst Seems to Be Over

By Shifara Samsudeen, ACMA, CGMA

  • CyberAgent Inc (4751 JP) (CA) is a Japan-based media and entertainment company offering media, internet advertising, smart games and investment development businesses in Japan.
  • The gaming business of the company has collapsed with the slowdown of hit title UMA MUSUME while titles released after UMA MUSUME have failed to perform satisfactorily.
  • Profitability of Internet advertising and media are expected recover and seems that worst is over for the games business as several titles are slated for release in the near future.

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Nov 30
0

Daily Brief Equity Bottom-Up: L’Occitane (973 HK):  FY1H24 Earnings Hurt By Massive Increase In Marketing and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • L’Occitane (973 HK):  FY1H24 Earnings Hurt By Massive Increase In Marketing, As Expected
  • Perfect Medical H1 FY24: Rebound of Growth in H2 FY24, 9% Div Yield, New High ROIC Investment
  • YSB (9885.HK) – Being Included in ETF Offers a Great Escape Opportunity
  • ELS Losses for HSCEI Index Could Result in Lowering Dividend Expectations for Korean Banks in 2024
  • Meituan: Earnings to Weaken Further
  • Korean Air (003490 KS): Cheap, but a Value Trap
  • [Miniso Group (MNSO US, BUY, TP US$31) Company Update]:Opportunity for a Reposition Has Come to Fore
  • India Industrials | Quarterly Update – ABB India, Siemens, Polycab and Havells
  • Taiwan Tech Post-Earnings Takeaways: Semis Margins Underestimated? Hardware 2024E Forecasts Ramped
  • UMC (2303.TT; UMC.US): There Is a Greater Chance for a Rebound in 2Q24F.

L’Occitane (973 HK):  FY1H24 Earnings Hurt By Massive Increase In Marketing, As Expected

By Steve Zhou, CFA

  • L’Occitane (973 HK) reported FY1H24 (fiscal year ending March 31) results yesterday after market, with net profit down 45% yoy. 
  • The sharp drop in earnings is mainly due to a 48% yoy increase in marketing costs, as well as increased finance costs.
  • The company maintained the FY24 outlook of 17% topline growth and an operating profit margin of 12% (FY1H24:  7.2%). 

Perfect Medical H1 FY24: Rebound of Growth in H2 FY24, 9% Div Yield, New High ROIC Investment

By Sameer Taneja

  • Perfect Medical Health (1830 HK) results showed 7% revenue growth and 10% YoY profit (27% YoY adjusted profit for subsidies) growth in H1 FY24.
  • The company declared a 14.2 cent/share interim dividend. H2 dividends usually are higher, so we expect a 32-35 cent dividend for FY24. 
  • This is another dividend-yielding gem, trading at 12.0x PE FY24e, a 9% dividend yield, and 15% of the market cap in cash and investments with a >50% ROE. 

YSB (9885.HK) – Being Included in ETF Offers a Great Escape Opportunity

By Xinyao (Criss) Wang

  • YSB would be added to KraneShares CSI China Internet ETF.Cornerstone investors could opt to cash out directly,taking advantage of improved liquidity, which means even they’re not optimistic about YSB’s prospects.
  • YSB’s profit margin is disappointing. It would be hard for YSB to deliver decent profits in the end. This business does not make money. YSB is also short of money.
  • Since going public, YSB’s share price has been on a rollercoaster, which has deviated from the fundamentals, but it should be pointed out eventually stock prices will return to fundamentals.

ELS Losses for HSCEI Index Could Result in Lowering Dividend Expectations for Korean Banks in 2024

By Douglas Kim

  • The equity linked securities (ELS) losses related to Hang Seng China Enterprises Index (HSCEI INDEX) could lower dividend expectations for Korean banks in 2024. 
  • On average, if H-Index declines below 5,699, then the majority of the investors on these H-Index could start to incur major losses starting 1Q 2024. 
  • Amid challenges of lower interest rates expectations and higher losses from ELS products, major Korean banks could be more hesitant on share buybacks and increasing their dividends in 1H 2024.

Meituan: Earnings to Weaken Further

By Shifara Samsudeen, ACMA, CGMA

  • Meituan (3690 HK) ‘s 3Q2023 revenues beat estimates while OP for the quarter was well below consensus estimates.
  • There were clear signs of slowdown in earnings growth due to macroeconomic challenges and weaker demand. 4Q earnings are expected to decline further.
  • Meituan’s share price went down by about 11% following its earnings announcement as slowdown in core local commerce and weakening earnings have concerned investors.

Korean Air (003490 KS): Cheap, but a Value Trap

By Mohshin Aziz

  • Korean Air Lines (003490 KS) is cheap, against peers and its own history. The impending merger with Asiana Airline is a major overhang  
  • Business is good, with steady passenger loads and yields, and cargo showing decent signs of recovery. Lower fuel prices could surprise on the upside 
  • Target Price KRW23,868 based on FY24 P/BV of 0.81x (1SD below mean). Too little upside for the level of uncertainty. PASS   

[Miniso Group (MNSO US, BUY, TP US$31) Company Update]:Opportunity for a Reposition Has Come to Fore

By Eric Wen

  • MNSO reported C3Q23 revenue in line with our estimate/consensus, and non-GAAP operating income in line with our estimate.
  • However, stock fell 14% over two days, mainly on concern of slowdowns in overseas distributors;
  • Based on our channel checks, overseas distributor inventory has always been a problem, more so when heightened US interest rate pricking the consumption bubble in developing markets.

India Industrials | Quarterly Update – ABB India, Siemens, Polycab and Havells

By Pranav Bhavsar

Taiwan Tech Post-Earnings Takeaways: Semis Margins Underestimated? Hardware 2024E Forecasts Ramped

By Vincent Fernando, CFA

  • Taiwan Tech companies beat analyst expectations by a high rate in the latest quarter
  • Semiconductors: Consensus could be underestimating a margin rebound for 2024E
  • Hardware aggregate forecast earnings growth increased significantly for 2024E as compared to just three months ago

UMC (2303.TT; UMC.US): There Is a Greater Chance for a Rebound in 2Q24F.

By Patrick Liao

  • Although it is still early to determine the extent of the utilization rate that could be reached in UMC for 2Q24F, there is a greater chance for a rebound.
  • UMC’s high-end technology, specifically 28nm, has a utilization rate of over 80% in 4Q23F. 
  • MediaTek is UMC’s largest client, dominating in WiFi, TV SoC, Bluetooth, and other areas.

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Nov 29
0

Daily Brief Equity Bottom-Up: Asics (7936) | Stepping Ahead with New MTP and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Asics (7936) | Stepping Ahead with New MTP
  • [Week 11] Namaste India 🙏 | Honasa’s Innovation or Innovative Narrative?
  • PDD (PDD US): 3Q23, Grew Dramatically Overseas, Still Upside After Reaching Our Last Target
  • Kaken Pharmaceutical (4521 JP): Key Operating Parameters Weakened in H1; H2 Not Seem to Be Better
  • PT Nippon Indosari Corpindo (ROTI IJ) – Baking in Rising Expectations
  • Bosideng (3998 HK): Never Fail to Deliver
  • Dong E E Jiao Co Ltd (000423.CH) – The Situation Is Getting Better and Better
  • [Blue Lotus Transportation Sector Update]: Huawei’s R&D & Marketing Alignment Makes It Stronger
  • Aspira Women’s Health, Inc. – Secures Important Reimbursements
  • AViC (9554 JP) – Moving To Achieve Mission With a Better Hand

Asics (7936) | Stepping Ahead with New MTP

By Mark Chadwick

  • Asics unveils MTP with focus on financial milestones: 7-10% Sales CAGR to 660 billion yen and Operating profit of 80 billion yen by 2026. 
  • The biggest risk to the MTP looks to be market share goals in the US. However, we think overall sales and margin targets are achievable.
  • The share price is up 80% YTD and stock is no longer cheap. However, plugging in the MTP assumptions into a DCF reveals further 17% upside

[Week 11] Namaste India 🙏 | Honasa’s Innovation or Innovative Narrative?

By Pranav Bhavsar

PDD (PDD US): 3Q23, Grew Dramatically Overseas, Still Upside After Reaching Our Last Target

By Ming Lu

  • In 3Q23, total revenue surged by 94% YoY, as Temu started operations in nine European countries in August.
  • Operating profits increased by 60% YoY in 3Q23, so we believe overseas businesses have made profits.
  • The stock price reached our last target, but we believe there is still an upside of 40% for 2024.

Kaken Pharmaceutical (4521 JP): Key Operating Parameters Weakened in H1; H2 Not Seem to Be Better

By Tina Banerjee

  • Kaken Pharmaceutical (4521 JP) reported 2% YoY decline in revenue H1FY24, while operating profit decreased 33% YoY. Top selling products are impacted by NHI drug price revision and increasing competition.
  • The company has reiterated FY24 guidance of flat revenue, 5% YoY decline in operating profit, and 23% YoY growth in net profit. Profitability is expected to deteriorate in H2.
  • Kaken is not expected to see any immediate respite as the small contribution from the new products will not compensate for the revenue loss from its top selling products.

PT Nippon Indosari Corpindo (ROTI IJ) – Baking in Rising Expectations

By Angus Mackintosh

  • PT Nippon Indosari Corpindo (ROTI IJ) saw a strong QoQ recovery in sales in 3Q2023 but its return rate also increased as it adjusted to distributing new products.
  • Raw material & packaging costs have abated and A&P spending stabilised, giving the company a strong base for recovery, as it expands its distribution in modern and general trade.
  • The outlook for ROTI in 4Q and into FY2024 looks positive given a wider footprint and the potential for improvements in its return rate. Valuations are well below historical averages.

Bosideng (3998 HK): Never Fail to Deliver

By Osbert Tang, CFA

  • Even China’s consumption market is tough, Bosideng Intl Holdings (3998 HK) has still achieved a 25.1% profit growth. Revenue maintained a healthy trend while gross margin was stable.
  • Sales trend stayed solid in 2H FY24, and it ranked first in major online channels in various categories of apparel sales during the “double-11” shopping festival.
  • Store efficiency improved as revenue saw double-digit growth despite a 9.7% YoY fewer retail network. It is encouraging to see its 3-year target is to outperform the last 5 years.

Dong E E Jiao Co Ltd (000423.CH) – The Situation Is Getting Better and Better

By Xinyao (Criss) Wang

  • Some investors are disappointed with 23Q3 performance, but we think Dong-E-E-Jiao is getting back on track. The de-stocking has achieved great results and pressure on distribution channels has been alleviated.
  • Since Dong-E-E-Jiao’s contract liabilities hit a record high, we are optimistic about the performance in 23Q4 and 24Q1. China Resources could further improve Dong-E-E-Jiao’s dividend rate, making it more attractive.
  • Since Dong-E-E-Jiao’s performance is continuously improving, valuation still has room to grow. A significant increase in valuation in the short term depends on whether there would be M&A deal emerges.

[Blue Lotus Transportation Sector Update]: Huawei’s R&D & Marketing Alignment Makes It Stronger

By Eric Wen

  • Huawei’s decision to accept investments to its Intelligent Automotive Solution (HI) has no impact on its Harmony Intelligent Mobility Alliance (HIMA). It might actually strengthen it, in our view;
  • We also believe it concludes Huawei’s internal battle of visions.
  • The newly integrated business has short term impacts on Li, Nio and XPeng and long-term impact on Baidu and Xiaomi.

Aspira Women’s Health, Inc. – Secures Important Reimbursements

By Water Tower Research

  • Aspira Women’s Health made two reimbursement announcements this week.
  • On November 27, Aspira announced that the Centers for Medicare and Medicaid Services (CMS) approved the crosswalk of the fee to be paid to the company for OvaWatch to the fee paid historically for Ova1.
  • Aspira will be reimbursed at a rate of $897 for all OvaWatch and Ova1 tests processed for Medicare patients meeting applicable coverage requirements beginning on January 1, 2024. 

AViC (9554 JP) – Moving To Achieve Mission With a Better Hand

By Sessa Investment Research

  • Touting a mission of “improving people, companies, and society through marketing,” AViC is involved in the commissioned handling of internet advertising and provision of SEO (search engine optimization) consulting services with the goal of providing high quality digital marketing services to clients with small- to medium-sized advertising budgets.
  • Having transformed FACT Inc., which offers support services for EC mall sales promotion optimization, into a wholly-owned subsidiary in October 2023, the company is also moving forward with mutually supplementing its lineup of services and conducting cross-sales to clients.

  • The company’s competitiveness comes from (1) the deep understanding of various media algorithms possessed by its management team, particularly the company’s representative who was the chief executive of the internet advertisement business at CyberAgent, and content backed by experience and a track record

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Nov 28
0

Daily Brief Equity Bottom-Up: Recruit Holdings (6098) | 2024 High Conviction and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Recruit Holdings (6098) | 2024 High Conviction
  • [Baidu, Inc. (BIDU US, BUY, TP US$157) TP Change]: C4Q/2024 Ads Upswing Bridge Gap to the Future
  • TSMC (2330.TT; TSM.US): 2024 High Conviction for Upside >15% YoY
  • 2024 High Conviction: Full Truck Alliance | Strong Top Line, Margins in Q3 | Worth US$9.5 on 21x PER
  • Income Statement Analysis of Global Luxury Brand Korea Operations and Luxury Brand Spending Slowdown
  • Monthly Chinese Tourism Tracker | Recovery Still Sluggish | Trip.com as Value Name | (November 2023)
  • Taiwan Dual Listings Monitor: Spreads Generally Trading in the Middle of Their Ranges
  • China Education Group (839 HK): Not so Encouraging in the near Term
  • Monthly Chinese Express Tracker | Q3 Margins Battered By Price | More to Come in Q4 (November 2023)
  • Sinocelltech Group (688520.CH) – Magical Leaps in Valuation Are Hard to Sustain

Recruit Holdings (6098) | 2024 High Conviction

By Mark Chadwick

  • We are bullish on Recruit at the current share price and believe that the stock has around 40% upside potential to our fair value estimate of Y7,700.
  • We believe that investors have been overly concerned with the cyclical slowdown in the job market as it normalizes from the post-Covid recovery
  • Indeed.com remains a disruptor in the HR recruiting market and the potential monetization of this asset is significantly under-appreciated by the market.

[Baidu, Inc. (BIDU US, BUY, TP US$157) TP Change]: C4Q/2024 Ads Upswing Bridge Gap to the Future

By Ying Pan

  • Baidu reported revenue/non-GAAP operating profit/GAAP net income inline/7.72%/66.1% vs. our estimation.
  • We believe short term cyclical and medium term AIGC-led upswing in advertising can bridge Baidu’s long-term business, which we do see them difficult to monetize.
  • We maintain a BUY rating and adjusted TP to US$157, implying a 14.6x PE. It is currently trading at 11.4x PE in 2024.

TSMC (2330.TT; TSM.US): 2024 High Conviction for Upside >15% YoY

By Patrick Liao

  • TSMC is expected to experience growth of ~15% YoY in 2024F.
  • TSMC’s N3 is expected to dominate the market in 2024F, with applications in CPU, GPU, smartphone SoC, and more.
  • We also estimate that the N2 pilot run will begin in 4Q24.

2024 High Conviction: Full Truck Alliance | Strong Top Line, Margins in Q3 | Worth US$9.5 on 21x PER

By Daniel Hellberg

  • Full Truck Alliance reported strong growth in Q3, from the right sources
  • Improved sales mix & progress on expense control lifted core margins
  • With 22% upside to US$9.5 based on 21x PER, our high conviction pick

Income Statement Analysis of Global Luxury Brand Korea Operations and Luxury Brand Spending Slowdown

By Douglas Kim

  • In this insight, we provide the income statement comparisons of the eight largest global luxury brand Korea operations including Louis Vuitton Korea, Prada Korea, Ralph Lauren Korea, and Moncler Korea.
  • In 2022, Korea spent $16.8 billion in luxury goods, representing per capita consumption of $325 per person, surpassing the United States ($280 per person) and China ($55 per person). 
  • Luxury brand spending in Korea is often a leading indicator of global luxury brand spending. Luxury brand spending in Korea has been weak this year and this continued in 3Q23.

Monthly Chinese Tourism Tracker | Recovery Still Sluggish | Trip.com as Value Name | (November 2023)

By Daniel Hellberg

  • In October, the sluggish recovery in outbound tourism demand continued
  • Outbound capacity growth also timid; but domestic recovery is mostly complete
  • As growth stock, Trip.com’s disappointed; maybe it can attract value investors?

Taiwan Dual Listings Monitor: Spreads Generally Trading in the Middle of Their Ranges

By Vincent Fernando, CFA

  • TSMC: 8.2% Premium — Still Best to Wait for Better Levels
  • ASE: 6.4% Premium — Wait for 5% as the Level to Go Long the Spread
  • ChipMOS: -0.5% Discount — Stay Long the Spread if You Started at -2.0%

China Education Group (839 HK): Not so Encouraging in the near Term

By Osbert Tang, CFA

  • China Education Group (839 HK) appears to be facing the headwinds from higher USD interest rate and reduction in capitalised interest. The intangible write-off is another drag on FY23.
  • Newly registered students increased 17.8% for FY24. With better average fees, this will help the topline. Our concerns are high finance and operating costs will erode revenue growth.
  • Consensus is overly aggressive and there are risks of downgrade. Earnings may re-accelerate in the future, but weaker 1H FY24F keeps us on the sideline in the short term. 

Monthly Chinese Express Tracker | Q3 Margins Battered By Price | More to Come in Q4 (November 2023)

By Daniel Hellberg

  • October’s industry numbers hide pricing turmoil seen at company level
  • STO Express appears to be using price to gain share from Yunda, others
  • We believe price competition continues to hurt ‘ground’ express margins

Sinocelltech Group (688520.CH) – Magical Leaps in Valuation Are Hard to Sustain

By Xinyao (Criss) Wang

  • The real value of Sinocelltech Group (688520 CH)’s pipeline will be greatly discounted because in the current context of fierce homogeneous competition, the commercialization performance of latecomers will be bleak.
  • Through frequent capital operations, in two and a half years, valuation of Sinocelltech was successfully raised by nearly 300 times. However, the Company’s owner’s equity is negative, with delisting risk. 
  • The SSE STAR Market has been full of bubble if compared with HKEX. Sinocelltech has been severely overvalued. We think the reasonable market value of Sinocelltech is around RMB15-20 billion.

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Nov 27
0

Daily Brief Equity Bottom-Up: 2024 High Conviction: VinFast (VFS US) – Heading for Trouble and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • 2024 High Conviction: VinFast (VFS US) – Heading for Trouble
  • 2024 High Conviction: Long BYD and Short Tesla
  • China Healthcare Weekly (Nov.24) – Gold Content Of License-Out Deals, NRDL Pricing Levels, CR Sanjiu
  • Tongcheng Travel (780 HK): Rides on the Tourism Upswing
  • China Consumption Weekly (27 Nov 2023): Trip.com, Xiaomi, IQiyi, Full Truck, Home Appliance Export

2024 High Conviction: VinFast (VFS US) – Heading for Trouble

By Arun George

  • Vinfast (VFS US), a Vietnamese EV manufacturer and a majority-owned affiliate of Vingroup Jsc (VIC VN), completed its merger with Black Spade on 14 August. 
  • Due to the low float, the shares have been on a wild ride, with the last close of US$6.56 materially below the high of US$82.35 per share.
  • VinFast remains an avoid due to related party-driven EV sales, declining customer traction, operating losses, cash burn, equity raise overhang and frothy valuation.  

2024 High Conviction: Long BYD and Short Tesla

By Henry Soediarko

  • Tesla Motors (TSLA US) market share in China has decreased and its 3Q23 operational data suggested it offered discounts to defend its market share. 
  • Albeit losing some market share, BYD (1211 HK) operational data is much more solid, even expanded its profit margin during a difficult environment in China. 
  • Tesla share price has outpaced BYD’s this year by 70%, it should reverse in the next year.

China Healthcare Weekly (Nov.24) – Gold Content Of License-Out Deals, NRDL Pricing Levels, CR Sanjiu

By Xinyao (Criss) Wang

  • It is the upfront payment rather than the total or subsequent milestone payments that indicates the gold content of license-out collaborations. We analyzed our criteria.
  • Investors actually don’t need to worry too much about the NRDL negotiation results, because the NRDL price of domestic innovative drugs has become relatively stable. There are basically three levels.
  • We analyzed key points about China Resources Sanju. Considering the impact of anti-corruption in 23Q3 and the weak performance of TCM formula granules business, 23H2 performance could be under pressure. 

Tongcheng Travel (780 HK): Rides on the Tourism Upswing

By Osbert Tang, CFA

  • Tongcheng Travel Holdings (780 HK) is best positioned to capture post-COVID travel, especially in lower-tier cities. This is reflected in a 146.5% growth in 3Q23 adjusted net profit.
  • The cooperation with Tencent (700 HK) continues to bear fruits and will drive accelerated momentum as it leverages on QQ Browser, Weixin mini-program, and Tencent Docs.
  • 3Q23 net cash increased 1.5x from the end-FY22 level and now represents 10.9% of market capitalisation. Its earnings valuations are attractive relative to both growth and peers.

China Consumption Weekly (27 Nov 2023): Trip.com, Xiaomi, IQiyi, Full Truck, Home Appliance Export

By Ming Lu

  • Trip.com’s domestic hotel bookings increased by 70% over pre-COVID 3Q19.
  • Xiaomi’s revenue began to grow in 3Q23 after decreasing for five quarters.
  • China home appliance export surged in October, for example, fridge export amount growing by 42% YoY.

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Nov 26
0

Daily Brief Equity Bottom-Up: ELS Losses Related to Hong Kong H-Index Could Top Nearly 3 Trillion for Major Korean Banks in 2024 and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • ELS Losses Related to Hong Kong H-Index Could Top Nearly 3 Trillion for Major Korean Banks in 2024
  • Singapore Airlines:
  • Uchi Technologies (UCHI MK): Solid Q3 2023,ROE >30%/Div Yield >7%
  • Classys (214150 KS): Record High Quarterly Performance in Q3; 2024 to Continue to Be Radiant

ELS Losses Related to Hong Kong H-Index Could Top Nearly 3 Trillion for Major Korean Banks in 2024

By Douglas Kim

  • The FSS has launched a formal investigation into KB Kookmin bank due to potentially massive losses related to the HSCEI linked ELS products. 
  • The three major listed banking groups (KB Financial, Shinhan Financial, and Hana Financial) could be burdened with nearly 86% of the HSCEI linked ELS losses (close to 2.6 trillion won). 
  • Major Korean banks may need a “Hail Mary” pass to avoid this disaster. Such positive outlook would include sharply rising HSCEI index in 2024, similar to what happened in 2016. 

Singapore Airlines:

By Neil Glynn

  • Following 2Q24 , our operating profit of S$2.9bn and a net profit of S$2.6bn, stand considerably higher than consensus of S$2.5bn and S$2.3bn respectively. 
  • SIA’s continue to suffer more inflation than most peers (ex-Qantas). However, 1H24 illustrated that continued restoration of capacity is diluting pressure and narrowing the gap to peers.
  • The true test for SIA will be management of normalizing profitability beyond FY24. We model operating profit of S$1.8bn/net profit of S$1.5bn in FY25, versus consensus of S$1.5bn/S$1.2bn.

Uchi Technologies (UCHI MK): Solid Q3 2023,ROE >30%/Div Yield >7%

By Sameer Taneja

  • Uchi Technologies (UCHI MK) reported a 15% YoY revenue growth/ 27% YoY operating profit growth led by constant USD revenue growth of 10% YoY and 4.5% MYR depreciation. 
  • Profit grew only 3.5% YoY due to an increase in the effective tax rate from 2.8% to 21.0% as the company’s tax holidays lapsed earlier this year.
  • Trading 12x PE, 7.5% dividend yield (based on a 90% payout), >30% ROE, and more than 10% of the market cap in cash; this a stock to explore. 

Classys (214150 KS): Record High Quarterly Performance in Q3; 2024 to Continue to Be Radiant

By Tina Banerjee

  • Classys (214150 KS) reported solid performance in 3Q23, with revenue and operating profit growing 45% and 41%, YoY, respectively, mainly driven by export in devices and domestic sales of consumables.  
  • Despite being an offseason, Q3 2023 witnessed increase in both the number of countries selling the new product Ultraformer MPT and the monthly average domestic sales of Volnewmer.
  • Continued improvement in equipment sale and increasing consumables contribution should drive growth in 2024. Entry into the U.S. and China will be the key for re-rating of the stock.   

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Nov 25
0

Daily Brief Equity Bottom-Up: Cathay Pacific (293 HK and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Cathay Pacific (293 HK, BUY, TP HK$9.90): Inputs from Analyst Briefing
  • 2024 High Conviction: Orion Corp
  • 2024 High Conviction – Doosan Robotics – Levitating
  • [Meituan (3690 HK, BUY, TP HK$128) Target Price Change]: Douyin’s Near-Term Impact Is Overrated… BUY
  • Sumber Alfaria Trijaya (AMRT IJ) – Ongoing Momentum Sustained
  • JD.com: Test of Investor Resolve as Selling Continues
  • 2024 High Conviction – New Horizon Health – Overhangs Are Over, Upgraded ’23 Guidance
  • [Kuaishou (1024 HK, BUY, TP HK$78) TP Change]: Refined Operation Supports Sustainable Growth
  • Daiichi Kigenso Kagaku-Kogyo (4082) – Navigating Business Expansion Challenges
  • EM Neobanks – Positive on Banco PAN, Cautious on Nubank & KakaoBank Is One to Watch

Cathay Pacific (293 HK, BUY, TP HK$9.90): Inputs from Analyst Briefing

By Mohshin Aziz

  • All positives from management: strong demand, loads and yields strong, cargo improving, costs are high but can cope, big profits coming but have to redeem preference shares  
  • The near-term future is a golden runaway for Cathay Pacific. All the parameters are in the right place and we think this will persist until 1H-2024 at the very least 
  • Cathay Pacific is a value BUY, our target price of HK$9.90 (+21% UPSIDE) implies 10x FY2024 PE, parity multiple against its arch-rival Singapore Airlines (SIA SP). 

2024 High Conviction: Orion Corp

By Douglas Kim

  • We are positive on Orion Corp. Regardless of the overall market movement next year (up or down), we believe Orion Corp could outperform KOSPI in the next 6-12 months.
  • The company has millions of loyal customers in major overseas countries including China, Russia, and Vietnam. Despite difficult operating conditions, Orion continues to generate stable growth in sales and profits.
  • Orion Corp’s valuations are attractive. Orion Corp is currently trading at 2024E EV/EBITDA of 4.4x (42% lower than average valuation multiple from 2019 to 2023).

2024 High Conviction – Doosan Robotics – Levitating

By Ethan Aw

  • In Oct 23, Doosan Robotics (454910 KS) raised around US$318m through its Korean IPO, after pricing the IPO at the top end of the range at KRW26,000/share.
  • Doosan Robotics (DR) manufactures and sells collaborative robots (Cobots). The firm’s product portfolio primarily includes different series of robot arms as well as its coffee module.
  • In this note, we will talk about the company’s past performance and future prospects.

[Meituan (3690 HK, BUY, TP HK$128) Target Price Change]: Douyin’s Near-Term Impact Is Overrated… BUY

By Ying Pan

  • We expect Meituan to report C3Q23 top line, non-GAAP operating profit and GAAP net income 2%, 4% and 20% vs. consensus. Our C4Q23 estimates are 6%, 19%, and 30% …
  • Douyin’s in-store GMV growth decelerated in September/October, per local media. We believe there are two main causes, (1) local life’s share of Douyin video views is around 10%~, which…
  • Douyin’s next threat to Meituan is food delivery, but GMV is less than 1% of Meituan food delivery in 3Q, we estimate. At the current trajectory, we expect Douyin…

Sumber Alfaria Trijaya (AMRT IJ) – Ongoing Momentum Sustained

By Angus Mackintosh

  • A company visit with Sumber Alfaria Trijaya revealed confidence in the outlook with its more aggressive store expansion on track, as it nearly draws level with Indomaret.
  • The company remains focused on expanding its Lawson convenience store outlets plus larger size Midi outlets. Its membership scheme is growing fast with 10m shopping once a week. 
  • Sumber Alfaria Trijaya (AMRT IJ) remains a core retail holding, with its premium valuation justified by its strong growth prospects, with estimated 2-year Forward EPS growth of +25% and +17%. 

JD.com: Test of Investor Resolve as Selling Continues

By Steven Holden

  • EM Fund ownership in JD.com continues to fall. Average weights slip to 4-year low as managers close out in large numbers.
  • Between February 2023 and October 2023, there were 56 closures versus 6 openings in JD.com, led by managers at the growth end of the spectrum.
  • Despite this, JD.com is still the 16th most widely held stock globally, with combined AUM among the funds in this analysis of $1.27bn.

2024 High Conviction – New Horizon Health – Overhangs Are Over, Upgraded ’23 Guidance

By Ke Yan, CFA, FRM

  • New Horizon reported a strong 1H2023 results. Company has upgraded its ’23 sales guidance.
  • The company will continue to deliver strong sales growth despite recent anti-corruption movement in China.
  • We believe that the evidence presented by the recent short-selling report is not sound. We believe the impact is over. 

[Kuaishou (1024 HK, BUY, TP HK$78) TP Change]: Refined Operation Supports Sustainable Growth

By Ying Pan

  • Kuaishou reported revenue/non-GAAP operating profit/GAAP net income 1.13%/35.0%/52.2% vs. our estimation.
  • The bottom-line beats were primarily due to reduced S&M costs related to effective user retention strategies and the operation of the newly constructed data centre in Ulanqab…
  • We maintain our BUY rating and raised TP to HK$78 for a positive outlook in the e-commerce business and viral playlets, stimulating advertising growth…

Daiichi Kigenso Kagaku-Kogyo (4082) – Navigating Business Expansion Challenges

By Astris Advisory Japan

  • Q1-2 FY3/2024 results were in line with revised company guidance, highlighting progress in growing prioritized businesses in the Strategic Areas segment such as Healthcare.
  • However, the company is experiencing headwinds due to weakness in demand from the electronics sector and market divergence for EV battery cathode materials.
  • Volumes have also fallen more than anticipated YoY in the legacy Automotive Catalyst Areas. 

EM Neobanks – Positive on Banco PAN, Cautious on Nubank & KakaoBank Is One to Watch

By Victor Galliano

  • We turn positive on Banco PAN, for its consistently improving operational metrics to 3Q23, attractive valuations and sound capital adequacy
  • Nubank is operationally strong but we remain cautious on Nubank shares as we see this neobank to be challenged by capital constraints, as well as being on stretched valuations
  • Inter has been improving operationally, and is sound on capital but is in the shadow of PAN in terms of valuations; KakaoBank is sound operationally and one to watch

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Nov 24
0

Daily Brief Equity Bottom-Up: NVIDIA. Another Beat & Raise and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • NVIDIA. Another Beat & Raise, Yet Shares Slide. But Why?
  • Oriental Watch (398 HK): H1 FY24 Lower than Expectation But A 15% Div Yield, Cash >60% of Mkt Cap
  • 2024 High Conviction – Giant Biogene – Growth Rate Keeps Moving Higher
  • [Xiaomi Inc.(1810HK,SELL,TP HK$12.6) Earnings Review]: Mi14 Success Does Not Alter Overall Headwinds
  • Aeon and Seven & I to Create Ecosystems Via Financial Services
  • Watts Finally Reacts to Margin Squeeze
  • A Turnaround Story for Intel by Accelerating 3nm Outsourcing to TSMC?
  • 2024 High Conviction – ZJLD – Buoyed by a Premiumisation Shift
  • Bumrungrad Hospital (BH TB): Strong 3Q23 Performance; Middle-East Tension Plays Spoilsports
  • BOC Aviation (2588 HK, BUY, TP:HKD70): High Quality Safe Bet

NVIDIA. Another Beat & Raise, Yet Shares Slide. But Why?

By William Keating

  • Q3FY24 revenues of 18.1 billion, up 34% QoQ and up a staggering 206% from the year ago period. It was also ~$2 billion higher than the guided number
  • NVIDIA’s current quarter forecast was for a further revenue raise of almost $2 billion with gross margins staying roughly flat at 74.5%
  • Share price reaction was negative, closing down 2.5% the following day. But why?

Oriental Watch (398 HK): H1 FY24 Lower than Expectation But A 15% Div Yield, Cash >60% of Mkt Cap

By Sameer Taneja

  • Oriental Watch (398 HK) reported an 8% YoY profit decline for H1 FY24 (Vs. our expectation of 10-15% growth) due to a higher taxation rate and lower margins in HK. 
  • Despite that, the company distributed 100% of its profits for a 28.5 cent HKD/share dividend (15% annualized) and built net cash/investments to 1.25 bn HKD (62% of market cap). 
  • Trading at 7x FY24e PE with abundant cash and real estate with a 15% yield, the stock is worth exploring with the perspective of building a high-yield portfolio.

2024 High Conviction – Giant Biogene – Growth Rate Keeps Moving Higher

By Sumeet Singh

  • Giant Biogene was listed in Hong Kong IPO in 2022. It has done well since and is now trading 45% above its IPO price, but its still cheap.
  • GB is a leader in the bioactive ingredient-based professional skin treatment product industry in China.
  • In this note, we will talk about the company’s past performance and future prospects.

[Xiaomi Inc.(1810HK,SELL,TP HK$12.6) Earnings Review]: Mi14 Success Does Not Alter Overall Headwinds

By Eric Wen

  • Xiaomi reported C3Q23 top-line, non-GAAP EBIT, and GAAP net profit (2%), 7% and in-line vs. our est., and in-line, 4%, and 13%, vs. consensus respectively.
  • Xiaomi’s recent run could be short lived, as (1) Huawei will soon launch mid-range 5G handsets, (2) the Mi 14 will soon face new high-end Android competition;
  • And (3) its underinvested EV project could disappoint. We maintain our SELL rating and HK$ 12.6 TP, implying 28x CY24 P/E.

Aeon and Seven & I to Create Ecosystems Via Financial Services

By Michael Causton

  • Aeon and Seven & I both have large financial services arms, generating a substantial share of consolidated profits.
  • With cashless payments now the norm, the old business models that relied on fees for cash dispensing are fast becoming outdated.
  • Both retailers plan major changes to create ecosystems that should deliver a lot more data to improve targeted marketing for e-commerce and retail stores.

Watts Finally Reacts to Margin Squeeze

By Michael Causton

  • The ¥100 Shop chains are facing higher COGS on one side and rising wages on the other, a problem when you run a fixed price chain at just ¥100. 
  • Most (except Seria Co Ltd (2782 JP)) have reacted by introducing new, higher priced lines led by Daiso.
  • Watts, the smallest chain, is now catching up and higher priced lines will make up a third of stock by 2027.

A Turnaround Story for Intel by Accelerating 3nm Outsourcing to TSMC?

By Andrew Lu

  • By offering 15k and 30k/m 3nm capacity by 4Q24/4Q25 to Intel, TSMC will see Intel becoming one of its top 3 customers by accounting for 12% of TSMC 2025 sales
  • By leveraging 3nm outsourcing, Intel will have incremental sales/capacity growth of 19-20% per year by accounting for 28%/44% of sales in 2024/2025, beating consensus’ 14%/9% y/y sales growth for 2024/2025.
  • We estimate 30-35% 5 years EPS CAGR for Intel, driven by TSMC’s 2/3nm foundry support, lower cost and process R&D, lower capex and depreciation cost, and AI PC CPU launch.

2024 High Conviction – ZJLD – Buoyed by a Premiumisation Shift

By Clarence Chu

  • In Apr 2023, ZJLD Group (6979 HK) raised around US$676m in its HK IPO. While it initially had a turbulent listing, the shares are now trading above its IPO price.
  • ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu. 
  • In this note, we will talk about the company’s past performance and future prospects.

Bumrungrad Hospital (BH TB): Strong 3Q23 Performance; Middle-East Tension Plays Spoilsports

By Tina Banerjee

  • In 3Q23, Bumrungrad Hospital Pub Co (BH TB) reported 18% YoY revenue growth to THB6.8 billion, driven by 27% and 20% YoY growth in Thai and expat patients revenue, respectively.
  • Revenue from international patients grew 16% YoY, driven by Middle-east and China, which grew 31% and 21%, YoY, respectively. EBITDA, PAT, and their respective margins reached record high in 3Q23.
  • Due to heavy revenue exposure in Middle-east, the ongoing tension in the region is acting as a setback. Bumrungrad shares tumbled ~15% over the last one month.

BOC Aviation (2588 HK, BUY, TP:HKD70): High Quality Safe Bet

By Mohshin Aziz

  • BOC Aviation (2588 HK) (BOCA) is the highest-quality aircraft leasing company, with a young asset portfolio, quality clientele, cheapest credit facility, and superb risk management.      
  • Outlook is attractive, strong demand and scarce supply ensures high lease rates and profits. Asset disposals have all recorded a healthy surplus, a potential earnings surprise. 
  • Our TP of HKD70/share implies 0.94x FY24 (22% UPSIDE) potential 

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Nov 23
0

Daily Brief Equity Bottom-Up: 2024 High Conviction:  Anta Sports (2020 HK) and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • 2024 High Conviction:  Anta Sports (2020 HK)
  • Beyond Fashion: Unraveling Bangladesh’s Garment Industry Challenges
  • Kuaishou: Strong Earnings With Further Improvement in Profitability
  • Medtronic (MDT US): Beat-And-Raise Q2; Weight Loss Drugs Not to Impact Growth; New Device Approval
  • China Dongxiang (3818 HK): Turned Around on Sports Business
  • Sunpower: Resilient Growth Story; Direct Competitor IPO’s in China and Highlights Sunpower Value
  • Monthly Container Shipping Tracker | Maersk, Evergreen, ZIM Report Disparate Results (November 2023)
  • 2024 High Conviction – China Healthcare: It’s Time to Embrace a New Era
  • Fast Retailing: On to the Next (Bigger) Stage
  • Nvidia Still Cheap: Enterprise AI Next Driver to Kick-In; Adjusting Our Taiwan AI Plays Short Hedge

2024 High Conviction:  Anta Sports (2020 HK)

By Steve Zhou, CFA

  • Anta Sports Products (2020 HK) is the second largest China sportswear company at 20% market share in 2022.
  • The thesis for Anta lies in Anta’s above-industry earnings growth for the next 3 years, low market expectations on China sportswear sector, and flexible multi-brand strategy.
  • Anta trades at a forward PE of 17x based on estimated 2024 earnings, with around 15-20% expected net profit growth in 2024-2026.

Beyond Fashion: Unraveling Bangladesh’s Garment Industry Challenges

By Nimish Maheshwari

  • Bangladesh’s garment industry grapples with a 14% export dip, prompting worker unrest over wage discrepancies.
  • Efforts by a wage board fall short as workers advocate for a Tk25,000 minimum, seeking fair compensation.
  • Economic turbulence looms as 3,500 factories, constituting 85% of exports, confront closure amid widespread unrest.

Kuaishou: Strong Earnings With Further Improvement in Profitability

By Shifara Samsudeen, ACMA, CGMA

  • Kuaishou’s 3Q2023 earnings beat consensus estimates with significant improvement to the company’s profitability driven by growth across all business segments.
  • Operating losses of the overseas segment has further reduced, and new offerings such as paid mini dramas have been driving strong growth for the company.
  • Though Kuaishou’s share price has moved up during the last few months, valuation multiples are at a steep discount to historical multiples, suggesting there is further upside.

Medtronic (MDT US): Beat-And-Raise Q2; Weight Loss Drugs Not to Impact Growth; New Device Approval

By Tina Banerjee

  • Medtronic Plc (MDT US) reported Q2FY24 revenue of $8B, representing 5% organic growth, topping guidance of 4.0–4.5%. Cardiovascular, neuroscience, and medical surgical grew mid-single-digit with diabetes accelerating to high-single-digit.
  • The company now expects FY24 organic revenue growth of 4.75% versus the prior 4.5%. Medtronic raised FY24 adjusted EPS guidance to $5.13–5.19 from $5.08–5.16 earlier.
  • In November, the company has received FDA approval for innovative renal denervation device for the treatment of hypertension, which should open a multi-billion-dollar market opportunity.

China Dongxiang (3818 HK): Turned Around on Sports Business

By Osbert Tang, CFA

  • The turnaround of sports business at China Dongxiang (3818 HK) is very welcoming. We are glad that sales trend in Oct-Nov is sustained and Phenix brand is well-received.
  • Reported losses widened as poor market environment enlarged investment losses. However, net cash and investment portfolio are still valued at Rmb8.5bn, or 5.9x its market capitalisation. 
  • CNDX looks comfortably at over 6% full-year dividend yield. Together with just 0.15x P/B, there are enough protections for the downside of the stock.  

Sunpower: Resilient Growth Story; Direct Competitor IPO’s in China and Highlights Sunpower Value

By Nicolas Van Broekhoven

  • Sunpower reported 9M23 results which showed the company performing strongly as a 100% GI business.
  • Revenues +15% and EBITDA +46% YoY. Earlier this month a competitor listed in China at a massive premium to Sunpower’s valuation.
  • The uncertainty over the CB due in April 2025 will be an overhang but management believes there are multiple ways to resolve this in FY2024.

Monthly Container Shipping Tracker | Maersk, Evergreen, ZIM Report Disparate Results (November 2023)

By Daniel Hellberg

  • Price momentum in October was negative, but decline moderated somewhat
  • Disparate Q3 profitability trends reported by Maersk, Evergreen, and ZIM 
  • As sentiment weakens (again), we also see signs of a cyclical bottom

2024 High Conviction – China Healthcare: It’s Time to Embrace a New Era

By Xinyao (Criss) Wang

  • After COVID-19, China healthcare has been under pressure for a long time. High interest rate environment is unfriendly to companies, but the current situation is not entirely devoid of opportunities.
  • GLP-1s has reignited investors’ interest in this industry, which will be long-term opportunity and bring alpha. With rich domestic/overseas catalysts ahead, related share price performance is worth looking forward to.
  • Among the domestic GLP-1s companies, Innovent is our top pick. The “concept validation” of Innovent’s business model has been completed. A qualitative change in the Company is coming soon.  

Fast Retailing: On to the Next (Bigger) Stage

By Michael Causton

  • We once called Uniqlo the Toyota of clothing. And this remains apposite. Its consistent, reliable quality, focus on supply chain efficiency, and increasingly global renown make it a solid bet.
  • The majority of the growth last year came from overseas markets, including even the US and Europe and the appointment of Daisuke Tsukagoshi as president will boost overseas performance further.
  • Fast Retailing is talking up the potential of GU, which should make up for lower domestic growth from Uniqlo but also now thinks it can make it a global brand.

Nvidia Still Cheap: Enterprise AI Next Driver to Kick-In; Adjusting Our Taiwan AI Plays Short Hedge

By Vincent Fernando, CFA

  • Nvidia’s street-beating results indicate strong growth to continue; Generative AI demand will next expand from startups, consumer internet, and cloud service providers increasingly to enterprise AI-linked demand.
  • Nvidia is not expensive despite recent market concerns. We believe Nvidia can meet or even beat its current calendar year 2024 earnings expectations and forward PE is cheap.
  • Short a basket of Taiwan AI concept stocks vs. a core Nvidia long position rather than take profits in Nvidia. We have swapped one Taiwan stock in our short basket.

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Nov 22
0

Daily Brief Equity Bottom-Up: Trip.com Q3 Quick Take: Net Inc > Consensus | Progress on Expenses | But Not a Game-Changer and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Trip.com Q3 Quick Take: Net Inc > Consensus | Progress on Expenses | But Not a Game-Changer
  • Taiwan Tech Weekly: Nvidia Results Today; Taiwan Market Surged But Why It Might Be Still Underowned
  • Taiwan Dual Listings Monitor: TSMC Premium Slumps; CHT & ChipMOS at Rare Opportunity Levels
  • 2024 High Conviction: Asahi Intecc (7747 JP)- Procedure Volume Recovery to Accelerate Growth
  • [NetEase, Inc.(NTES US,BUY,TP US$138)TP Change]: Raise TP for Upcoming and Highly Anticipated Titles
  • Panasonic (6752) | PAS-Ing the Keys
  • As Expected from Our Earlier BOM/CoWoS Analysis, Consensus to Raise Nvidia Estimates Inevitably
  • TSMC (2330.TT; TSM.US): N2 Technology Is Scheduled in 2025F.
  • 2024 High Conviction: Air China (753 HK) – What Comes Down Must Go Up
  • [Kanzhun Ltd.(BZ US, SELL, TP US$14.5) TP Change]: Growth Target Cannot Justify High Valuation

Trip.com Q3 Quick Take: Net Inc > Consensus | Progress on Expenses | But Not a Game-Changer

By Daniel Hellberg

  • Trip.com reported strong Q3 earnings, reflecting 2023’s ongoing tourism revival
  • Net Income beat expectations, and company made progress on expense control
  • But we don’t see “game-changing” numbers in Trip.com’s latest earnings release

Taiwan Tech Weekly: Nvidia Results Today; Taiwan Market Surged But Why It Might Be Still Underowned

By Vincent Fernando, CFA

  • Nvidia Results Today U.S. Time — Taiwan Market Surged Recently on Improving AI/Semiconductor Expectations and Potential for Easing U.S.-China Tensions.
  • Taiwan: Underowned, Yet Gaining on Peers. Our Fellow Insight Provider Analyzes Why Taiwan Might Still Be Underowned.
  • Asia Geopolitics: Following Biden-Xi Meeting, Asia Is a Safer Place For Now.

Taiwan Dual Listings Monitor: TSMC Premium Slumps; CHT & ChipMOS at Rare Opportunity Levels

By Vincent Fernando, CFA

  • TSMC: 7.4% Premium — Previous Short Has Worked, Now Wait For Better Levels
  • ChipMOS: -2.0% Discount — Good Level to Go Long the Spread
  • CHT: -1.2% Discount — Good Level to Go Long the Spread

2024 High Conviction: Asahi Intecc (7747 JP)- Procedure Volume Recovery to Accelerate Growth

By Tina Banerjee

  • Asahi Intecc (7747 JP) is poised for multi-year growth through strong market demand for its technically superior guidewires, market leadership positioning, new product launches, and direct marketing initiatives.
  • In FY24, Asahi Intecc aims to achieve revenue of ¥100B (+11% YoY), a significant milestone. The company targets revenue of ¥110B and an operating profit margin of 23–25% in FY26.
  • Asahi Intecc is expected to be a continued beneficiary of global procedure volume recovery. The company is likely to achieve its medium-term business plan ahead of schedule.

[NetEase, Inc.(NTES US,BUY,TP US$138)TP Change]: Raise TP for Upcoming and Highly Anticipated Titles

By Ying Pan

  • NetEase reported revenue/non-GAAP operating profit/GAAP net income inline/5.24%/16.2% vs. our estimation.
  • The bottom-line beats were primarily attributed to the operational efficiency achieved through the usage of AIGC tools, and reduced S&M expenses resulting from organic traffic generated by high-quality game content.
  • We maintain our BUY rating and raised TP to $138 for future game releases, implying 19x PE, and it is currently trading at 17x PE in 2024

Panasonic (6752) | PAS-Ing the Keys

By Mark Chadwick

  • Panasonic Holdings Corporation (PHD) is entering a strategic partnership with Apollo Global Management, involving the partial sale of its ownership in Panasonic Automotive Systems Corporation (PAS).
  • PAS, historically known for car stereos and navigation systems, has expanded into automotive electronics, holding approximately 15% of the global Automotive Digital Cockpit market with $3.6 billion in sales.
  • Despite a bearish view on Panasonic, this deal is seen as a positive step toward streamlining the group structure and concentrating on core, sustainable growth areas.

As Expected from Our Earlier BOM/CoWoS Analysis, Consensus to Raise Nvidia Estimates Inevitably

By Andrew Lu

  • Nvidia reports/guides a better than expected 3Q/4Q23 sales, margin, and EPS on stronger AI GPU sales growth of nearly 3x.
  • Nvidia reports a healthy 3.04 MOI, down 5% q/q and down 37% y/y and contributes nicely to account for 9% of TSMC sales.
  • In spite of concerns on good news priced in, seasonal weaker 1Q24, and MI300X/ASIC alternative AI solutions, we expect more raise to come in 2024-2025E.

TSMC (2330.TT; TSM.US): N2 Technology Is Scheduled in 2025F.

By Patrick Liao

  • TSMC’s N2 technology is currently undergoing verification for a 256Mb SRAM, and it will be implemented in Hsinchu and Kaohsiung, Taiwan.
  • The TSMC N3 technology capacity was 65kwpm in 3Q23, and the current version is N3B, which were adopted by Apple for the iPhone 15 this year.
  • Both N3E and N2 only have 20 layers EUV masks.

2024 High Conviction: Air China (753 HK) – What Comes Down Must Go Up

By Osbert Tang, CFA

  • With P/B back to the 5-year average of 1.9x but ROE surpassing the last five years, Air China Ltd (753 HK) is our High Conviction pick for 2024.
  • Lower US interest rates next year will reduce interest expenses as 18.7% of debt is USD-denominated. Potential Rmb appreciation vs. USD may bring significant exchange gain too.
  • Supportive government policies will further drive domestic traffic. For international traffic, more capacity resumption will power recovery. Cathay Pacific Airways (293 HK) is another profit accelerator.

[Kanzhun Ltd.(BZ US, SELL, TP US$14.5) TP Change]: Growth Target Cannot Justify High Valuation

By Eric Wen

  • BZ reported 3Q23 cash billing 0.8% higher than our est., revenue beat our estimate/consensus 5.2%/3.8%, non-GAAP NI beat our estimate/consensus by 103%/50%.
  • Cost saving and investment income are the main reasons for bottom-line beat, which we think are not sustainable.
  • Even BZ can deliver its “3 years with 100mn new users” target until 2025, we think its 20% earnings CAGR in 2023-25E still cannot justify its high valuation (TBC)

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