Equity Bottom-Up

Thomson Medical Group Limited (TMG SP) is a dual play on the re-opening of both Singapore and Malaysia. The company has a 70% stake in Tmc Life Sciences (TMCL MK).
The company is seeing strong recovery across all its business segments and is cautiously optimistic of its business prospects in the current financial year.
The recent pullback in the shares provides a good entry point for long-term investors.

The Puzzle of HDFC Bank’s Rapidly-Growing MSME Loans

By Hemindra Hazari

Issues with HDFC Bank’s Head-MSME statements which analysts and shareholders need to consider.
In MSME lending based on cash credit system verfication of stock statement is extremely important but there is no mention of it in his speech
HDFC Bank’s MSME loans growing at a rapid pace but asset quality remain sound. It appears HDFC Bank’s customers are very different as compared to the industry.

HYBE: Consensus to Slash Earning Estimates Due to BTS Going on A “Temporary Break” For Solo Projects

By Douglas Kim

HYBE announced a major news which was that the BTS group will go on a “temporary break” so that its members could pursue various solo projects.
Rather, we believe the consensus sales and operating profit estimates will decline by 20-40% in 2023 and 2024.
If P/E multiple is lowered to 20x (2024E), this would suggest an implied market cap of 4.8 trillion won or 117,138 won per share, representing a further 39% downside risk.

WuXi AppTec (603259.CH/2359.HK) – Behind the Proposed Disposal of A Shares

Our interpretation of WuXi AppTec’s proposed disposal is that its founder affiliates could be concerned about the Company’s future prospects, so they choose to offload in advance.
A possible reason for WuXi AppTec to highlight the optimism about its performance and deliver a prosperous outlook/positive signal to the market is to “shield” the implementation of its proposed disposal.
The risk is out of proportion to the opportunity. We advised investors to catch the rebound and offload rather than hold long term. It’s just temporary rebound not complete reversal.

Cargo Truckers Strike, Post Office Couriers Strike, & More Strikes Likely in Korea in 2022

By Douglas Kim

Amid the global markets chaos, there has been a huge truckers strike in South Korea, causing havoc across many industries.
On 14 June, the Post Office Courier Labor Union (POCLU) also warned that it will strike soon.
The labor union strikes by major industry groups in Korea could pose another big headache on the Korean equity markets in 2022.

ZTO Express (2057 HK/ZTO US): Growth at a Reasonable Price

ZTO Express Cayman Inc (2057 HK) has outperformed industry volume growth in 1Q22 and such trend continues into 2Q22 with good ASP improvement and cost control.
Its strong operating cash flow and declining capex will lead to an accumulation of cash over the next few years, adding to the 1Q22 net cash position of Rmb4.1bn.
We think the stock’s underperformance against peers not warranted. With a below-sector earnings multiple, leadership position and successful business model, we consider ZTO a “Growth at a reasonable price”.

CBG : Promising Growth Outlook

The medium to long-term outlook looks promising,thanks to high demand for energy drinks across Asia-Pacific owing to trend of urbanization and rising disposable income. Meanwhile, 2H22 earnings are confirmed recovery
More room to expand in Asia-Pacific Mordor Intelligence projected the Asia-Pacific energy drinks market value, which is the CBG key market focus to increase 8.46%CAGR in 2022-2027
China market (4% of total revenue in 2021) is one of the CBG’s key market given the largest size of energy drinks market in Asia-Pacific with plenty of opportunity

Before it’s here, it’s on Smartkarma

Jun 14

Equity Bottom-Up: MINISO Group Holdings, Kiatnakin Bank, Yaskawa Electric and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Miniso: Genuinely Undervalued & A Decent Long Hedge to Increase Short Exposure to Chinese E-Commerce
KKP – Small Enough To Grow
Yaskawa (6506) | Further 20% Downside on Higher Rate Cycle

Miniso: Genuinely Undervalued & A Decent Long Hedge to Increase Short Exposure to Chinese E-Commerce

By Oshadhi Kumarasiri

After hitting the bottom during the COVID crisis, the only direction left for MINISO Group Holdings (MNSO US) to move is up.
Given the current valuations, Miniso could generate multi-bagger returns during favourable market conditions.
In addition, Miniso could help investors generate sizable returns in the short-term on the short side with increased short exposure to Chinese E-commerce.

KKP – Small Enough To Grow

By Daniel Tabbush

This smaller Thai bank can more easily grow due to relatively small loan base
Strong core fundamentals of rising interest income and falling funding costs
Credit costs remain inflated, falling figures can support strong ROA growth

Yaskawa (6506) | Further 20% Downside on Higher Rate Cycle

Stay short ahead of Q1 results. Full year guidance remains too high and will likely be cut later this year
Yaskawa remains a cyclical stock that correlates with the SOX index – higher interest rates are impacting valuation multiples
We see 20% downside risk towards 3x price to book

Before it’s here, it’s on Smartkarma

Jun 13

Equity Bottom-Up: Asahi Intecc, Angelalign Technology, Lonking Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Asahi Intecc (7747 JP): Recovery From COVID-19 to Drive Double-Digit Revenue Growth in Near-Term
Angelalign Technology (6699.HK) – There Is Still Plenty of Downside, but Limited Upside Potential
Lonking (3339 HK): Not Out of the Woods Yet

Asahi Intecc (7747 JP): Recovery From COVID-19 to Drive Double-Digit Revenue Growth in Near-Term

Asahi Intecc (7747 JP) reported 27% y/y revenue growth during first nine months of FY22. For full-year FY22 and FY23, the company expects 22% and 11% revenue growth, respectively.
The company targets a consolidated revenue of more than ¥100 billion in FY26 through continued growth in the existing business and introduction of new business.
Asahi Intecc enjoys dominant market share in PTCA guide wires in major global markets. The company’s direct distribution strategy is further expanding its market share.

Angelalign Technology (6699.HK) – There Is Still Plenty of Downside, but Limited Upside Potential

Due to pandemic/lockdown/economic downturn, the case shipments could further decline. Our revenue forecast this year is below 20%, or even below 15%. We also lowered our forecast on profit margins.
Limited qualified orthodontists in China and challenging internationalization cast doubts on Angelalign’s long term growth prospects. We can’t see high growth potential of Angelalign with certainty.
Angelalign’s performance in 2022 would be under pressure. Although PE/TTM reached about 73 by the end of June 10 after corrections, it’s still overvalued. The upside potential could be limited.

Lonking (3339 HK): Not Out of the Woods Yet

Share price of Lonking Holdings (3339 HK) has seen muted reaction to weak industry figures recently but it is still unexciting in near-term, based on our catch-up with the company.
It has underperformed industry sales volume in 5M22 across all product categories, with that for wheel loader behind 4pp and excavator by 10pp. Forklift sales were down 18% YoY.
Both gross margin and investment income are set to contract in this year, making it highly likely to see significant earnings downgrade after 1H22 result announcement in Aug.

Before it’s here, it’s on Smartkarma

Jun 12

Equity Bottom-Up: Boryung Pharmaceutical and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Boryung Pharmaceutical (003850 KS): Focus on Prescription Drugs for Stability and Accelerated Growth

Boryung Pharmaceutical (003850 KS): Focus on Prescription Drugs for Stability and Accelerated Growth

Boryung Pharmaceutical (003850 KS) aims to achieve a revenue CAGR of 10.9% during 2022–2026 (from 7.8% in 2017–2021) through a chronic disease-focused prescription drug portfolio.
While hypertension and dyslipidemia drugs remain its cash cow, Boryung has identified oncology and CNS as its new growth engine to achieve KRW1 trillion revenue in 2026.
Driven by a 28% y/y growth in prescription drug revenue, Boryung has reported record high quarterly sales and operating profit in Q1 2022. The company is continuously launching new drugs.

Related tickers: Boryung Pharmaceutical (003850.KS)

Before it’s here, it’s on Smartkarma

By Shifara Samsudeen, ACMA, CGMA

Jun 11

Equity Bottom-Up: Ashok Leyland, Tokyo Electron, Bank Mandiri Persero, Bilibili Inc, Rajshree Polypack, Nesco Ltd, Tactile Systems Technology I, RPSG Ventures Limited, NU Holdings Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

India Channel Insight #38 | Ashok Leyland, Tata Motors (MHCV)
Tokyo Electron (8035 JP): New Medium-Term Plan Vs. Reality
Bank Mandiri (BMRI IJ) – Upping the Ante on Returns
Bilibili 1Q2022: Widening Losses and There Is Further Downside
RPPL: Set to Fire on All Cylinders
Nesco: IT Park Occupancy Continues to Improve; BEC Recovery on Track
Tactile Systems Technology (TCMD US): Subsiding COVID to Drive Mid-Teens Sales Growth in 2022
RPSG Ventures (RPSGV): FMCG Business Gaining Traction; IPL Media Rights Auction – A Key Monitorable
Brazil Digital Banks – Nubank and Banco Inter Shares Have De-Rated, but Still Face Challenges

India Channel Insight #38 | Ashok Leyland, Tata Motors (MHCV)

By Pranav Bhavsar

Infrastructure and E-commerce are core drivers of the MHCV recovery
The market for Retail fleet operators (1-5 trucks) has shrunk.
Ashok Leyland (AL IN) ‘s market share gain has been on the back of discounting and is unlikely to sustain.

Tokyo Electron (8035 JP): New Medium-Term Plan Vs. Reality

By Scott Foster

Tokyo Electron has announced a new Medium-term Plan that shows what the company could probably do if the next five years were as good as the last five years.
That seems unlikely. The plan ignores rising interest rates, the risk of recession, political risk, and the possibility of demand from South Korea, Taiwan and China maxing out.
It looks like FY Mar-23 guidance is intended to be conservative. That cannot be take for granted.

Bank Mandiri (BMRI IJ) – Upping the Ante on Returns

By Angus Mackintosh

Bank Mandiri (BMRI IJ) is executing well on its move to shift its focus toward higher-yielding assets in commercial, Micro, and SME segments and also high-quality corporate loans.
The company has seen the cost of funds continue to decline as it picks up new savings accounts through its Livin’ app, helping to improve NIMs and returns.
Bank Mandiri (BMRI IJ)‘s cost of credit continues to fall, with declining provisions also helping to improve profitability, and with ROEs hitting multi-year highs while valuations remain attractive.

Bilibili 1Q2022: Widening Losses and There Is Further Downside

Bilibili reported 1Q2022 results yesterday. Revenue grew 29.6% YoY to RMB5.1bn (vs consensus RMB5.04bn) while operating losses as a % of revenue increased to 39.4% from 26.4% in 1Q2021.
Monthly Paying Users (MPUs) reached 27.2m vs 20.5m in 1Q2021, however, blended ARPU declined to RMB41.8 from RMB43.4 a year ago suggesting that user growth comes at lower pricing.
Bilibili’s ADS’ closed 15% lower at the end of yesterday’s trading as widening losses and softer guidance for 2Q2022 disappointed the market.

RPPL: Set to Fire on All Cylinders

By Ankit Agrawal, CFA

RPPL posted a decent FY22 despite significant rise in the raw material costs. Sales volume grew 30%+ and EBITDA per kg improved by 11%.
FY23 is likely to be robust for RPPL. Revenue growth is likely to be strong at 20%+. Margins are guided to expand to 15%+ level from current 13.5%.
RPPL is consistently improving the mix of value-added products like Barrier Packaging and Tube Laminates. Contribution from Barrier Packaging is likely to grow to 10-15% in FY23 from 5% currently.

Nesco: IT Park Occupancy Continues to Improve; BEC Recovery on Track

By Ankit Agrawal, CFA

IT Park occupancy has been steadily rising over the past few quarters. Q4FY22 IT Park revenue grew 3.3% QoQ.
Bombay Exhibition Center (BEC) business is on track to normalize as COVID restrictions have been removed completely.
With the BEC business normalizing, Nesco Foods business is also ripe to scale up.

Tactile Systems Technology (TCMD US): Subsiding COVID to Drive Mid-Teens Sales Growth in 2022

Tactile Systems Technology I (TCMD US) offers pneumatic compression pump, which has total current addressable market opportunity of $10B+ in the U.S. The company’s annual run rate is ~$200M.
To penetrate the addressable market deeper, Tactile is aggressively expanding commercial team, which should lay the foundation for long-term sustainable revenue growth and margin expansion.
With the declining COVID-related headwinds, new product launch, and better commercial execution, Tactile should be well-positioned for accelerated growth trajectory.

RPSG Ventures (RPSGV): FMCG Business Gaining Traction; IPL Media Rights Auction – A Key Monitorable

By Ankit Agrawal, CFA

The FMCG Business reported Q4FY22 revenues, in line with the recent annualized revenue run-rate of around INR 400cr.
The relatively new Naturali brand was advertised prominently at the IPL and its products are becoming increasingly visible at department stores.
A key monitorable for RPSGV’s sports business is the IPL Media Rights Auction that is scheduled to be held on Jun 12.

Brazil Digital Banks – Nubank and Banco Inter Shares Have De-Rated, but Still Face Challenges

By Victor Galliano

Despite the compression in the Brazil digital banks’ multiples from the FinTech de-rating, big fundamental hurdles remain, especially for Nubank
Nubank is delivering on increased loan penetration and this should drive revenue growth; still, this also drives higher and front loaded provisioning charges along with capital absorption
Banco Inter is less challenged than Nubank on most metrics, and it is modestly profitable, but we believe it is too early to turn positive; we like Banco do Brasil

Before it’s here, it’s on Smartkarma

Jun 10

Equity Bottom-Up: Bilibili, Tesla Motors, Spotify, Saratoga Investama Sedaya, Haier Smart Home Co Ltd, Ryohin Keikaku, Endo International, Prima Marine PCL, PTG Energy PCL, Krung Thai Bank Pub and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Bilibili (9626 HK): 1Q22, User Bases Growing by 30%, Price Down to 1/4, Buy
Tesla Slips From #1 to #3 in Korea
Spotify Analyst Day: We’re Going to Be Huge and Profitable in 10 Years
Saratoga Investama Sedaya (SRTG IJ): A Track Record to Narrow the NAV Discount
Haier Smart Home (6690 HK): Still Looking for a Decent Year
Ryohin Keikaku (7453 JP) | No Time to Bargain Hunt
Endo International (ENDP US): Still in Troubled Waters; No Near-Term Growth Driver Is Seen
PRM : Earnings Growth Remain Dull
PTG : Improving Sales & Marketing Margin
KTB: Limited Upside Gain Potential

Bilibili (9626 HK): 1Q22, User Bases Growing by 30%, Price Down to 1/4, Buy

By Ming Lu

Monthly paying users grew by 33% YoY and monthly active users grew by 31% in 1Q22.
We believe operating loss is not a concern for a fast-growing company.
BILI’s stock price has plunged to about HK$200 from about HK$800 in one year.

Tesla Slips From #1 to #3 in Korea

By Douglas Kim

Hyundai’s IONIQ 5 surpassed Tesla’s Model 3 within a year of its launch. Hyundai’s IONIQ 5 was the best selling EV in Korea in January to May 2022.
Tesla EV sales in the first five months in Korea slipped to number three from its number one position in the same period last year.
Hyundai Motor is expected to introduce IONIQ 6 later this year. However, Elon Musk mentioned that Tesla will not launch any new models until 2023 at the earliest

Spotify Analyst Day: We’re Going to Be Huge and Profitable in 10 Years

By Aaron Gabin

Spotify disclosed podcasting is a €200M business with -57% gross margins currently, but will go breakeven in 1-2 years, and become GM accretive in 3-5 years.
Spotify put forth outlandish LT targets: 1B MAUs (vs. 422M today), €100B in revenues (vs. $10B today), of which € 10B will be advertising revenue (vs. € 1.2B today).
To hit these targets requires believing in fanciful TAM forecasts, market share, and margins.

Saratoga Investama Sedaya (SRTG IJ): A Track Record to Narrow the NAV Discount

By Arun George

Saratoga Investama Sedaya (SRTG IJ) is an active Indonesian investment firm with an exceptional track record of profitable investments across sectors.
The current NAV discount of 34% should continue to narrow as SRTG continues to burnish its ESG credentials and deliver significant realization of divestment gains.
Our SOTP valuation assumes a 25% NAV discount implying a 14% upside to the last close price. We are buyers.

Haier Smart Home (6690 HK): Still Looking for a Decent Year

Haier Smart Home Co Ltd (6690 HK) sees mid-to-high single digit revenue growth for 5M22; and with many cities out of lockdown now, the re-acceleration trend is gathering pace.
China market experienced lesser cost pressure than overseas, with its gross margin expanded on a YoY basis. Cost containment measures should help to preserve flat YoY overseas margin.
Reliance on property market has reduced, with growth mainly comes from upgrade demand. Its high-end brand Casarte stays as a growth engine with 5M22 revenue recording double-digit increase.

Ryohin Keikaku (7453 JP) | No Time to Bargain Hunt

Muji’s historically low valuations are no reason to get excited. We think normalisation is still several quarters out
China growth was the key valuation driver, but Muji faces continued headwinds from sporadic lockdowns and weak foot traffic
Rising costs are new problem for Muji in the domestic market. The company will remain behind the curve on price hikes, leading to weaker margins

Endo International (ENDP US): Still in Troubled Waters; No Near-Term Growth Driver Is Seen

Endo International (ENDP US) shares are trading near their lows. However, Endo does not seem to be an attractive bottom fishing idea as opioid litigation is still the major overhang.
Endo’s top selling drug Vasostrict is facing generic competition, which has dragged Q1 performance of the company. Q1 revenue declined 9%, while Q2 revenue is expected to decline 28%.
Endo is banking on specialty branded drug Xiaflex and QWO, and sterile injectables for its long-term growth. However, they cannot fully offset the impact of Vasostrict revenue loss in near-term.

PRM : Earnings Growth Remain Dull

Maintain HOLD recommendation for PRM with a target price at Bt6.30.We foresee limited room for the company’s earnings growth in the next 2-3years as a result from lack of concrete
2H22 expansion plan remains intact:TM’s second VLCC will go on-hire on 6th June 22 with a size of 280,000 DWT under 10 years,T/C contract with Thai Oil Group (BUY: Bt71.0)
Overall revenue from three VLCCS and 13 unit of crew boats won’t be sufficient to offset the impact from rising global crude oil price, which trimmed down FSU demand

PTG : Improving Sales & Marketing Margin

The 2Q-2H22 outlook looks promising, thanks to solid oil sales volume growth owing to economic recovery from COVID grip and revamping tourism activities. The improving oil marketing margin
Recovering MM should drive 2Q22 earnings : We expect the 2Q22 earnings to improve QoQ on the back of better sales volume and marketing margin.
The oil marketing margin should pick up to Bt1.7/liter in 2Q22(+3% QoQ)and remain at 1.7-to-1.8/Liter range in 2H22.From management guidance, the oil sales volume inched up 5% MoM and YoY

KTB: Limited Upside Gain Potential

Downgrade to HOLD (from BUY) with a target price of Bt16.70. Our downgrade reflects limited upside gain as a rise in share price is largely priced strong 1Q22 performance
Quarterly earnings passed the peak level in 1Q22:Like other banks, KTB’s fundamentals have improved from the economic reopening and its resilient asset quality.
Positive sentiments from digital lottery ticket sales The Government Lottery Office (GLO) mentioned that more than 5m lottery tickets were sold through KTB’s Paotang G-wallet app.

Before it’s here, it’s on Smartkarma

By Shifara Samsudeen, ACMA, CGMA

Jun 09

Equity Bottom-Up: Tencent, Netflix Inc, Escorts Ltd, GoTo, Ironwood Pharmaceuticals, Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Tencent/Netease: Smell of Common Prosperity in June Game Approval
Tencent – Cold Shoulder On New Game Approvals Is A Concern
TMT Quick Hits: INTC/AMD, NFLX/ROKU
Escorts Ltd (ESC IN) | Expected to Grow Slower than Industry
GoTo: Growth in Top Line Doesn’t Mean Improvement in Profitability
Ironwood Pharmaceuticals (IRWD US): Brand Leadership of Linzess Continues; Pipeline Advances

Tencent/Netease: Smell of Common Prosperity in June Game Approval

By Ke Yan, CFA, FRM

China announced game approval last night for June batch, after a break in May.
We discussed in our previous note that China had resume game approval but at a slower pace.
Tencent and Netease continue to score zero in June domestic game approval.

Tencent – Cold Shoulder On New Game Approvals Is A Concern

By Mio Kato

As reported by Reuters, yesterday China’s gaming regulator granted licences for 60 new games, none of which were published by Tencent or NetEase.
The two dominant companies in the industry did not feature in the list of 45 approvals in April either and this pattern should not be ignored by investors.
The lack of approval of foreign titles in the two batches is also striking and a further negative in our view.

TMT Quick Hits: INTC/AMD, NFLX/ROKU

By Aaron Gabin

Intel warned that conditions outlined in 1Q22 have worsened, key to see what AMD says tomorrow.
Netflix – Roku rumor doesn’t make much sense, we think its more likely Roku cut off insider selling because it is looking to acquire Starz.
Netflix churn is rising among longtime customers – going to ad-supported Peacock and Paramount. We think another guide down is coming in 2Q22.

Escorts Ltd (ESC IN) | Expected to Grow Slower than Industry

By Pranav Bhavsar

Escorts Ltd (ESC IN) has been losing market share. As per management, “there are no “big” problems and they will regain the market share”, but we do not think so.
Some flash channel checks are suggesting issues with some of the company’s products. These issues still remain unaddressed as per some dealers and customers.
While the export opportunity and overall industry dynamics are positive unless the market share is regained, growth is likely to be slower than industry.

GoTo: Growth in Top Line Doesn’t Mean Improvement in Profitability

GoTo (GOTO IJ) announced 1Q2022 and FY2021 results on 30th May. Gross income grew by 43.5% YoY in 2021 with a growth of 53.5% YoY in 1Q2022.
However, gross margins show no improvement and operating losses have also worsened with the merger of Tokopedia in May 2021.
GoTo plans to turnaround its profitability through synergies, improved monetisation and cost efficiencies. However, we don’t expect profits in the near future.

Ironwood Pharmaceuticals (IRWD US): Brand Leadership of Linzess Continues; Pipeline Advances

Ironwood Pharmaceuticals, Inc (IRWD US)’s sole marketed drug Linzess is the #1 prescribed branded treatment in the U.S. for adults with IBS-C/CIC with ~4M unique patients since launch.
First commercialized in December 2012, Linzess achieved blockbuster drug status in 2021. The earliest licensed entry of any generic Linzess in the U.S. is expected only in March 2029.
The company’s potential drug candidate IW-3300 is in phase 1 trial for interstitial cystitis/bladder pain syndrome (IC/BPS). Recently, Ironwood has shared positive findings from the study.

Before it’s here, it’s on Smartkarma

Jun 08

Equity Bottom-Up: Softbank Group, Hengan International Group, China Education Group, Escorts Ltd, PAL GROUP Holdings Co., Ltd., Shockwave Medical Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Softbank Group – Didi Relief and ZME Pain Highlight Multiple Potential Outcomes
Vinda Vs Hengan: Cut From A Different Cloth
China Education Group (839 HK): Further Evidences for Underlying Health
India Channel Insight #37 | Escorts & Mahindra & Mahindra (Tractors)
Record Sales for Pal Group Driven by 300 Yen Chain
Shockwave Medical Inc (SWAV US): An Emerging High-Quality Cardiovascular Devices Idea

Softbank Group – Didi Relief and ZME Pain Highlight Multiple Potential Outcomes

By Kirk Boodry

Didi shares jumped 24% on reports regulatory relief was at hand. That is good news for Softbank although the halo effect boosting Alibaba had more of a valuation impact
Less noticed but also relevant as a potential outcome is the de-listing of Zhangmen Education which fell 50% Monday and is down 97% for VF in total
Softbank shares trade at a 43% discount to fair value and remain range-bound. Tech market sentiment remains the primary driver and we continue to be cautious

Vinda Vs Hengan: Cut From A Different Cloth

By David Blennerhassett

Given their market leadership in China’s personal care industry, Hengan International Group (1044 HK) and Vinda International Holdings (3331 HK) arguably make a valid pair trade.
Yet Hengan’s bottom line is dominated by its sanitary napkin products; whereas Vinda’s tissue segment has a similarly high contribution to its net profit.
On various valuation metrics, both companies, relative to listed peers, and their historical trading numbers, appear inexpensive.

China Education Group (839 HK): Further Evidences for Underlying Health

Despite the 21% spike in share price, we believe good student enrollment outlook and earnings prospects of China Education Group (839 HK) are still yet to be fully reflected.
The 70.1% YoY surge in approved top-up degree program quotas in China and the guidance for substantial quota increase for bachelor’s degree and junior college programs are both exciting.
Its comprehensive cooperation agreement with Bank of China Jiangxi Branch adds another peace of mind as this suggests support from the state and lowers regulatory risks, in our view.

India Channel Insight #37 | Escorts & Mahindra & Mahindra (Tractors)

By Pranav Bhavsar

Consumer sentiment and demand environment is stable in Rural India.
There is a bit of optimism and hope of breaching FY20 volumes in FY23, supported with some pricing action.
Technical/Product issues are leading to a loss of market share for Escorts Ltd (ESC IN)

Record Sales for Pal Group Driven by 300 Yen Chain

By Michael Causton

Not many retailers could boast sales growth of more than 50% last year, especially a retailer from the fashion sector.
Pal Group’s 3Coins managed this thanks to the huge success of the discount fashion to home decor format.
Its success is one more example of the growth in discount chains.

Shockwave Medical Inc (SWAV US): An Emerging High-Quality Cardiovascular Devices Idea

Shockwave Medical Inc (SWAV US), with its differentiated local delivery of sonic pressure waves for the treatment of calcified plaque, seeks to establish a new standard of care through IVL.
The company is advancing IVL system for multiple large addressable markets totaling over $8.5B. Shockwave’s revenue has five-year CAGR of 244%, with continued improvement in gross margins.
Ongoing clinical programs to expand geographies and indications should further accelerate growth. Recently, the company obtained marketing approval in China and Japan.

Before it’s here, it’s on Smartkarma

Jun 07

Equity Bottom-Up: JD Logistics, Yonex Co Ltd, Shimamura, Remegen Co Ltd, MatsukiyoCocokara, Amplitude, Subaru Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Down from HK$40 to HK$15, Opportunity to Come After Hard Q2
Yonex: Rising Through the Ranks in New Markets
Shimamura Back on Track, Targeting Urban Centres
Remegen (9995HK) Vs Keymed Biosciences (2162HK)-Deep Dive the Logic & Internationalization Prospects
Japan Retail | 3 Stocks to Buy for Revenge Shopping
Amplitude: Valuations Look Attractive and Growth Catalysts May Materialize in CY22
Subaru (7270 JP) | Production Problems in the Rear View Mirror

Down from HK$40 to HK$15, Opportunity to Come After Hard Q2

By Ming Lu

JDL’s stock price has declined from HK$40 at its IPO to HK$15.
We believe JDL will recover from the lockdown in Shanghai in 3Q22.
We also believe the stock has an upside of 46%.

Yonex: Rising Through the Ranks in New Markets

By Oshadhi Kumarasiri

Driven by a sharp rise in revenue and profitability over the last three quarters, Yonex Co Ltd (7906 JP) shares continue to go up in relatively choppy overall market conditions.
We expect this strong growth momentum to continue over the medium term while Yonex builds popularity in new markets and new sports categories.
We think there could be around 100% upside to Yonex alongside improving confidence about sustainability of Yonex’s current performance.

Shimamura Back on Track, Targeting Urban Centres

By Michael Causton

Shimamura (8227 JP) is on a roll at the moment, clawing back share after a troubled few years of mis-merchandising and confused targeting.
After a record year, Shimamura now thinks its merchandise teams are strong enough to take on urban centre consumers – without raising operating costs. This could be a worry for Uniqlo.
Shimamura has tried this before but back then its focus was on young women and had weaker merchandising skills. This time around too urban consumers want more discount apparel.

Remegen (9995HK) Vs Keymed Biosciences (2162HK)-Deep Dive the Logic & Internationalization Prospects

Commercialization prospects of domestic autoimmune disease market is highly uncertain. Related drugs’ sales could be very limited in short term. Overseas market space is much larger, so internationalization is inevitable.
Our forecast on RemeGen’s total sales is just RMB3.5-4 billion. The deal with Seagen still puzzles us, which is the key to determine how far RemeGen can go in internationalization.
Keymed is like “a younger RemeGen” due to the differentiation strategy of pipeline layout. However, Keymed’s internationalization progress is much weaker, with higher risks and uncertainties than RemeGen.

Japan Retail | 3 Stocks to Buy for Revenge Shopping

Over the past 2 years, customers cut back drastically on shopping and travel. Many worked in home offices in sweatpants and t-shirts.
But now, people are vaccinated, and lockdowns have lifted. Even Japan’s borders are starting to spring open.
Consumers are looking for ways to make up for lost time – we highlight 3 beneficiaries of revenge shopping.

Amplitude: Valuations Look Attractive and Growth Catalysts May Materialize in CY22

By Andrei Zakharov

During the #1 product and growth conference Amplify 2022 in Las Vegas, Amplitude (AMPL US) introduced the Customer Data Platform (CDP) with integrated product analytics.
The company expanded partner integration with Snowflake Inc (SNOW US) to improve data connectivity while Amplitude Experiment sees strong traction with customers.
With shares down ~65% YTD, Amplitude has underperformed the Nasdaq Composite (-23%). Our PT is $28.00, implying ~14x EV/2022E revenue and ~10x EV/2023E revenue.

Subaru (7270 JP) | Production Problems in the Rear View Mirror

Subaru’s profitability is set to improve dramatically, driven by a weaker yen
After two painful years, production is starting to normalise post Covid
At 1xPBR, we think Subaru is significantly undervalued and see at least 30% upside

Before it’s here, it’s on Smartkarma

Jun 06

Equity Bottom-Up: Mercari Inc, China Power International, Green Cross LabCell, iRay Technology and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Mercari (4385 JP) | Time to Flee
China Power International (2380 HK): Moving in the Right Direction
GC Cell (144510 KS): Enviable Portfolio of Cell Therapy Funded by Sample Test Service Business
IRay Technology (688301.CH) – Limited Market Space Casts Doubt on Future Growth Potential

Mercari (4385 JP) | Time to Flee

Topix inclusion could generate some solid domestic passive buying interest, but we think the fundamentals remain Bearish
Mercari’s GMV growth in Japan is slowing sharply. We see higher promotional costs impacting margins as competition with PayPay Flea market heats up
We think that street estimates are too high and we don’t see a reason why the stock should be trading at substantial premium to Z Holdings

China Power International (2380 HK): Moving in the Right Direction

We think the underperformance of China Power International (2380 HK) (CPI) against the market in this year is unjustified given a projected improvement in profitability.
CPI has secured coal supply with more than 60% of contracts on annual long-term basis within the benchmark price range. Also, power tariff is expected to be on an uptrend.
The proposed new management incentive scheme will better align management’s and shareholders’ interests. CPI also indicated good room to lower leverage in this year while sustaining growth.

GC Cell (144510 KS): Enviable Portfolio of Cell Therapy Funded by Sample Test Service Business

Green Cross LabCell (144510 KS) (now known as GC Cell) the world’s largest cell therapy product producer with its top selling anticancer drug, Immunecell-LC. The drug has label expansion scope.
The company has developed a pipeline of late and early-stage cell therapy candidates for solid tumors. It also has a strong position in global cell therapy CDMO business.
GC Cell’s unrivaled position in the specimen test services in Korea acts as the main cash cow to feed its future growth engine of cell therapy development.

IRay Technology (688301.CH) – Limited Market Space Casts Doubt on Future Growth Potential

IRay’s performance has shown a trend of accelerating growth in 2021/2022Q1, mainly driven by the mobile DR sales during COVID-19 as well as the dental (CBCT) and industrial security businesses.
The sales of mobile DR would slow down after COVID is under control. The decreasing price due to fierce competition in grassroots markets would finally drag down gross profit margin.
The concern is that the market space (DR/dental/industrial fields) is not big, with obvious growth ceiling. So, we lowered our revenue/profit margin forecast and we think iRay is overvalued

Before it’s here, it’s on Smartkarma