Analyst

Steve Zhou, CFA

Equity Bottom-Up

Nongfu Spring Co. Ltd. supplies soft drinks. The Company develops, produces, and sells bottled mineral water, fruit juice, sports drinks, and tea drinks. Nongfu Spring also offers barreled mineral water door-to-door services.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/nongfu-spring-co-ltd" target="_blank" data-smartkarma-citation="entities:28955:1" rel="noopener">Nongfu Spring (9633 HK)</a>'s valuation has come down to a much more reasonable 20x forward PE with expected net profit CAGR of 15% for the next 3 years.</li>
<li>The derating is largely due to the negative media portrayal of the company's Nongfu brand since February 2024, resulting in a -18% decline in its water business in 1H24. </li>
<li>Unsweetend tea business on the other hand has continued to shine, growing 59% yoy in sales in 1H24, while operating profit of the segment surged 63% yoy. </li>
</ul>



Nongfu Spring (9633 HK)'s valuation has come down to a much more reasonable 20x forward PE with expected net profit CAGR of 15% for the next 3 years.
The derating is largely due to the negative media portrayal of the company's Nongfu brand since February 2024, resulting in a -18% decline in its water business in 1H24. 
Unsweetend tea business on the other hand has continued to shine, growing 59% yoy in sales in 1H24, while operating profit of the segment surged 63% yoy. 


Nongfu Spring (9633 HK):  Trading At Below 20x Forward PE With 15% NP 3-Year CAGR

JD.com Inc is an online direct sales company in China.  The Company offers a wide selection of products through its website and mobile applications.  JD.com sells appliances, computers, digital products, communication products, garments, books, and household items to consumers and vendors.

<ul>
<li>Profitability of the business surprised on the upside, as the net profit margin of JD.com increased from 3% in 2Q23 to 5% in 2Q24.</li>
<li>Share buyback accelerated in 2Q24, as the company bought USD2.1bn worth of stock in the quarter, up from USD1.2bn in 1Q24. </li>
<li>The stock is trading at 7x 2024 PE, with a yield of &gt;10% through dividend and buyback.</li>
</ul>


Profitability of the business surprised on the upside, as the net profit margin of JD.com increased from 3% in 2Q23 to 5% in 2Q24.
Share buyback accelerated in 2Q24, as the company bought USD2.1bn worth of stock in the quarter, up from USD1.2bn in 1Q24. 
The stock is trading at 7x 2024 PE, with a yield of &gt;10% through dividend and buyback.


JD.com (JD US):  Strong Profitability And Upsized Share Buyback in 2Q24

NIPPON PAINT HOLDINGS CO., LTD. produces paints for automobiles, ships, and other industrial paints.  The Company also manufactures fine chemicals such as finishing agents and adhesives.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/nippon-paint-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:7387:1" rel="noopener">Nippon Paint Holdings (4612 JP)</a>'s 2Q24 was largely uneventful, with sales up 5.4% yoy and net profit up 7.3% yoy.</li>
<li>Management maintained its full-year guidance of Y184bn operating profit target in 2024 (10% growth vs. 2023).</li>
<li>China was a bright spot with operating profit up 30% yoy and made up 35% of total operating profit of the company. </li>
</ul>



Nippon Paint Holdings (4612 JP)'s 2Q24 was largely uneventful, with sales up 5.4% yoy and net profit up 7.3% yoy.
Management maintained its full-year guidance of Y184bn operating profit target in 2024 (10% growth vs. 2023).
China was a bright spot with operating profit up 30% yoy and made up 35% of total operating profit of the company. 


Nippon Paint (4612 JP):  Stable Execution in 2Q24; Outlook Unchanged

Midea Group CO., LTD manufactures, markets and installs household electrical appliances, compressors and components. Midea also provides services in information technology, corporate investment consultation, software and hardware development, property management and corporate engineering supports. Midea Group provides its products worldwide.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/midea-group-co-ltd-a" target="_blank" data-smartkarma-citation="entities:16185:1" rel="noopener">Midea Group Co Ltd A (000333 CH)</a> posted strong 4Q23 results, with net profit up 18% yoy and sales up 10% yoy. </li>
<li>In terms of 2024 outlook, management targets a 5-10% yoy growth in both the top and bottom line. </li>
<li>The stock is has rerated up to 12x 2024E earnings, compared to an average of 13x over the last 10 years. </li>
</ul>



Midea Group Co Ltd A (000333 CH) posted strong 4Q23 results, with net profit up 18% yoy and sales up 10% yoy. 
In terms of 2024 outlook, management targets a 5-10% yoy growth in both the top and bottom line. 
The stock is has rerated up to 12x 2024E earnings, compared to an average of 13x over the last 10 years. 


Midea Group (000333 CH):  Strong 4Q23 Result As Expected

SAIZERIYA CO., LTD. operates an Italian restaurant chain based in the Tokyo metropolitan area.  The Company's menu includes pizza, pasta, seafood, and meat entrees.

<ul>
<li>Since the release of 3Q24 (YE August) results on July 10, the share price of <a href="https://www.smartkarma.com/entities/saizeriya-co-ltd" target="_blank" data-smartkarma-citation="entities:14362:1" rel="noopener">Saizeriya (7581 JP)</a> is up nearly 10%, greatly outperforming Nikkei during the same time frame. </li>
<li>The 3Q24 results showed that Japan's operating profit finally improved, while China remained solid.  </li>
<li>The company is currently trading at 24x 2025E PE with strong earnings growth.</li>
</ul>


Since the release of 3Q24 (YE August) results on July 10, the share price of Saizeriya (7581 JP) is up nearly 10%, greatly outperforming Nikkei during the same time frame. 
The 3Q24 results showed that Japan's operating profit finally improved, while China remained solid.  
The company is currently trading at 24x 2025E PE with strong earnings growth.


Saizeriya (7581 JP):  Improvement In Profitability In Japan Materialized in 3Q24

15 years of experience in both buy and sell-side in Asia.

Steve Zhou, CFA
Analyst

Nongfu Spring (9633 HK): Trading At Below 20x Forward PE With 15% NP 3-Year CAGR

Nongfu Spring's valuation has dropped to 20x forward PE due to negative media coverage of its water business, but its unsweetened tea segment is...

Steve Zhou, CFA

Nippon Paint (4612 JP): Stable Execution in 2Q24; Outlook Unchanged

Nippon Paint saw steady growth in sales and profit in 2Q24, with China driving strong performance. Operating profit target for 2024 was maintained.

Steve Zhou, CFA

Midea Group (000333 CH): Strong 4Q23 Result As Expected

Major stimulus policy announced yesterday afternoon from China on home appliance: the National Development and Reform Commission and the Ministry...

Steve Zhou, CFA

Saizeriya (7581 JP): Improvement In Profitability In Japan Materialized in 3Q24

Saizeriya's share price up 10% post strong 3Q24 results, outperforming Nikkei; Japan's profit improves while China remains solid.

Steve Zhou, CFA

Nongfu Spring (9633 HK): Trading At Below 20x Forward PE With 15% NP 3-Year CAGR

​Nongfu Spring's valuation has dropped to 20x forward PE due to negative media coverage of its water business, but its unsweetened tea segment is...

Steve Zhou, CFA

JD.com (JD US): Strong Profitability And Upsized Share Buyback in 2Q24

Two pieces of news: 1) According to public news, Wal-Mart is looking to offload its entire stake (144.5m ADRs) in JD.com at USD24.85 - USD25.85....

Steve Zhou, CFA

Nippon Paint (4612 JP): Stable Execution in 2Q24; Outlook Unchanged

​Nippon Paint saw steady growth in sales and profit in 2Q24, with China driving strong performance. Operating profit target for 2024 was maintained.

Steve Zhou, CFA

Midea Group (000333 CH): Strong 4Q23 Result As Expected

Major stimulus policy announced yesterday afternoon from China on home appliance: the National Development and Reform Commission and the Ministry...

Steve Zhou, CFA

Saizeriya (7581 JP): Improvement In Profitability In Japan Materialized in 3Q24

​Saizeriya's share price up 10% post strong 3Q24 results, outperforming Nikkei; Japan's profit improves while China remains solid.

Steve Zhou, CFA

Nongfu Spring's valuation has dropped to 20x forward PE due to negative media coverage of its water business, but its unsweetened tea segment is...

Nippon Paint saw steady growth in sales and profit in 2Q24, with China driving strong performance. Operating profit target for 2024 was maintained.

Saizeriya's share price up 10% post strong 3Q24 results, outperforming Nikkei; Japan's profit improves while China remains solid.