Equity Bottom-Up

• We believe Havells India (HAVL IN) has chosen the route of instant gratification by not increasing prices and gaining market share for Lloyd this AC Season. 
• After-Sales Service and aspirational value for the Lloyd brand is poor, there is no brand loyalty in the segments Lloyd operates in and is price sensitive. 
• Increased prices and course correction by  Voltas Ltd (VOLT IN) could result in HAVL giving up some of its recent market share gains building a stronger Bear case for HAVL. 

• Enzychem Lifesciences Corp (183490 KS) is eyeing on its lead innovative drug candidate, EC-18 for long-term sustainable growth driver. EC-18 is in late-stage clinical trial for couple of indications.
• EC-18 is in phase 2 clinical trial for the treatment of chemoradiation-induced oral mucositis (CRIOM), an acute inflammation of the oral mucosa following systemic chemoradiation therapy.
• Currently, CRIOM has no approved therapies. Enzychem Lifesciences has filed for FDA breakthrough therapy designation for EC-18 in CRIOM, which will enable designing of phase 3 study.  

• Elastic NV (ESTC US)  reported stronger than expected 4QFY22 results, and management provided guidance for FY25 total revenue of $2 billion. 
• The net expansion rate was 140%+ for Elastic Cloud in 4QFY22, and the company expects cloud revenue to exceed 50% of total revenue by 4QFY24.  
• Elastic NV (ESTC US) appears well-positioned to outperform across observability and security market segments. Management was confident in achieving growth objectives in FY23 and beyond.

• Sony’s State of Play today highlighted a variety of games headlined by Capcom’s Street Fighter 6 and Resident Evil 4 Remake and Square Enix’s Final Fantasy 16. 
• The title line-up was strong but the standout in our view was the degree of support Sony appears to be getting for PSVR2. 
• We had commented on this previously but it is increasingly looking like a key differentiating factor for PlayStation and no longer a gimmick.

• Voltas Ltd (VOLT IN) had a brutal Q4FY24 especially for its UPC segment where it lost market share to rival Havells India (HAVL IN).  
• There is a possibility of regaining some of the lost market share with some pricing interventions and high brand equity, however, it will be at cost of margins. 
• The sector view remains bearish, however, relative to HAVL, the downside would be limited with market share gains in Air-Conditioners (ACs) as key monitorable. 

• Integra Indocabinet’s recent 1Q2022 results confirmed the strong momentum in its wooden furniture and component sales to the US, which have seen even stronger growth than last year.
• Manufactured exports saw growth of +114% YoY in 1Q2022, whilst wooden building components saw growth of +194% YoY, as the company continued to gain market share in the US market.
• Integra Indocabinet trades on 8.3x FY21E PER and 8.1x FY22E PER, with consensus forecast EPS growth of +2.6% and +11.6% for FY2022E and FY2022E looking too low. 

• 61% revenue growth, 17% operating margins (up 720bps YoY) and 32% FCF margins. Best in class growth + profitability.
• ECommerce engine opening up from 4 modules to 12 means higher velocity sales on the come.
• VMWare’s Carbon Black will become a major share donator due to Broadcom acquisition.

• We discuss a pair trade among the major Japanese trading companies. We propose going long on Marubeni Corp and going short on Itochu. 
• We believe Marubeni has one of the most attractive valuations among the five major Japanese trading companies in terms of ROE vs. P/B and Itochu is the least attractive.
• We like Marubeni’s strength in food and agri businesses. Itochu is more dependent on metals, minerals and energy sectors which tend to be more volatile. 

• Bukwang Pharmaceutical (003000 KS) is developing innovative new drug candidates in partnership with pharmaceutical and bio-venture companies in Korea and abroad.
• Antipsychotic lurasidone (brand name: Latuda), in-licensed from Sumitomo Pharma is the lead candidate of Bukwang’s innovative drug pipeline. Lurasidone will be launched in 3–4 years in Korea.
• Recently, Bukwang announced positive phase 1 trial for SOL-804 for the treatment of prostate cancer, in-licensed from Solural Pharma. SOL-804 has an addressable market opportunity of KRW23 trillion in 2027.

• Weibo Corp (WB US) delivered robust 1Q22 results with ad revenue growing 10% year-over-year and outperforming other Chinese social networks, which underscores Weibo’s prominent position for advertisers.
• However, widespread lockdowns in China and economic slowdown could pressure Weibo in 2Q, and we expect a gradual recovery in 3Q-4Q with limited visibility. 
• We like Weibo attractive valuation at 10x forward P/E; it has amassed MAU 582 million till March 2022 and user engagement has been improving.

• The bank is a former finance company, still holds much term deposits
• As interest rates rise, loan re-pricing can occur, with lower funding costs
• Time deposits are contracting, while CASA accounts are rising 1Q22 YoY

• In January this year, we wrote about Los Andes Copper and how it is undervalued. YTD the stock is up over 40% in difficult tape.
• Recent drill results highlight the attractiveness of the company with multiple intercepts indicating its prime Vizcachitas asset continues to grow in all directions.
• Copper supply/demand dynamics could get really tight going into FY23/FY24. Positioning ahead of this is important.

For our next Corporate Webinar, we are glad to welcome China Shenshan Orchard (DKNG SP) Executive Director, David Zhao.

In the upcoming webinar, David will share a short company presentation, after which he will engage in a fireside chat with Smartkarma Analyst Angus Mackintosh. A live Q&A session will follow.

The Corporate Webinar will be hosted on Tuesday, 28 June 2022, 17:00 SGT.

China Shenshan Orchard Holdings Co. Ltd. is a horticultural company in the business of planting, cultivating, and selling kiwi fruit in the People’s Republic of China (“PRC”). The Group holds forest use rights for eight strategically located orchards, spanning a total land area of 9,805 mu (approximately 6.5 million sqm), which is believed to be one of the largest domestic kiwi fruit orchards concentrated in Chibi City, Hubei, the PRC.

Corporate Webinars by Smartkarma Corporate Solutions feature discussions with IROs and Executives, discussing their companies, the challenges they face, and the opportunities in their sectors and markets.

• Revenue growth mainly came from initiatives, which is the focus of April layoff.
• We believe revenue will slow down and the operating loss will shrink.
• We set a downside of 11.5% and a price target of HK$160.

• Medium-Term revenue growth expectations could be exceeded given capacity expansion plans, announced pricing increases and a continued tight semiconductor supply market.
• Based on TSMC’s robust medium-term outlook, for revenue growth and profitability, current sell-side estimates of only 10% EPS growth for FY2023f seem conservative.
• TSMC is currently trading at a 16.2x forward PE ratio, one standard deviation below its 5-year average, a level which has historically proven to be a good entry point.

• After a tough 3Y since the IL&FS crisis, Edelweiss’ credit business is now getting back on track. Asset quality has normalized to <2% Net NPA.
• Edelweiss’ other businesses continue to post robust growth. ARC, Asset Management and Insurance businesses are scaling up well. Wealth Management business is on track for listing by Feb 2023.
• At a market cap of INR 5200cr, Edelweiss is trading cheap even if one ascribes zero valuation to its Credit business.

• Burning Rock Biotech (BNR US) reported strong Q1 2022 results, with accelerated double-digit revenue growth of 27% y/y, higher than full year 2022 revenue growth guidance of 22%.
• Operating loss widened due to 41% y/y surge in opex, primarily attributed to higher staff cost, which resulted from an increase in headcount.
• Management reiterated 2022 revenue growth guidance of 22% y/y. With Shanghai re-opening, this seems to be achievable.

• We expect high-end musical instruments to be one of the worse affected among consumer discretionary names during a high inflationary environment.
• Although Roland Corp (7944 JP) says that demand remains strong, the numbers such as revenue and backlog suggest weakening conditions.
• In addition, there’s a risk of a recession and it appears that Roland has not made sufficient progress in streamlining operations to maintain profitability in a low revenue environment.

• Elastic just dramatically raised its revenue guidance for FY2025…implying a massive acceleration in revenue growth that the 18% move in the stock underplayed.
• Dynatrace is a wildly profitable software company trading at a significant discount to its Rule of 40 metrics.
• The overall observability space is red hot, unimpacted by macro factors and being overlooked by software investors.

• Meituan reported 1Q2022 results yesterday. Revenue grew 25.0% YoY to RMB46.3bn (vs consensus RMB45.3bn) while operating losses for the quarter slightly dropped to 12.1% of revenues from 12.9% in 1Q2021.
• As a result of Omicron spread in March, revenue declined sequentially as all three segments reported QoQ decline in revenue during 1Q2022.
• Meituan hasn’t reported GTV for food delivery as well as no. of domestic hotel room nights for In-Store, Hotel & Travel which seems strange, suggesting 2Q numbers could be worse.

• This model uncovers companies facing recent sharp cuts in estimates. These shorts can have very disparate characteristics.
• The key judgement involves whether the negative revisions are temporary or if they are indications of ongoing weakness in the business. 
• Breaking Estimates stocks often continue to decline after the cuts.  This week we flag:  Nutanix, Upstart, Ubiquiti, Corsair Gaming

• Galaxy Digital (GLXY) was worth more than C$14 bn in 2021, but by May 2022 GLXY traded down to a market cap of less than C$2.8 bn.
• Founder Mike Novogratz, a supporter of Luna, tattooed LUNA on his arm and tweeted “I’m a Lunatic!” As LUNA went into a death spiral, GLXY shares have been hit hard.
• However, there’s more than meets the eye, or the tattoo, in GLXY and we see value in the current share price range.

• There were 128k visitors to South Korea in April, up 32% MoM which was the biggest jump in MoM change in visitors to South Korea in the past year.
• There were 215k outbound people from South Korea in April 2022, up 48% MoM and up 202% YoY.
• Among the 21 major reopening plays in Korea, we prefer certain sectors including casino related plays (GKL, Paradise, and Kangwon Land) as well as F&B related (Hitejinro and CJ Cheiljedang).

• Huons Global (084110 KS) is focusing on new growth drivers such as health functional food, medical devices, and research collaboration to accelerate its earnings further.
• Huons’ health functional food brand, Menolacto has become Korea’s no. 1 brand for menopausal lactic acid bacteria and generated cumulative sales of KRW64 billion within two years of its launch.
• Through external research collaboration and developing its own pipeline, Huons has a rich pipeline of new products, including new chemical entities, medical devices, and functional foods for the domestic market.

• Fanuc’s share price is geared into the machine tool cycle. Unfortunately the cycle is rolling over
• Fanuc is also facing extreme margin pressure from rising parts and logistics costs
• We expect the share price to trade down 20% from here and bottom at around 2x book value

• The correlation between Xinyi Glass Holdings (868 HK) and Flat Glass (6865 HK) has narrowed thus it is time to lock the profit while it is still possible.
• Xinyi Glass formed a JV with Xinyi Solar Holdings (968 HK) to set up a polysilicon manufacturing facility. 
• A 7% dividend with some potential growth juice from owning the shares at less than 7x PER is really quite a steal.

• GoTo announced its much-anticipated FY2021 and 1Q2022 results, which did not disappoint, with improvements in a number of different metrics across its main verticals.  
• 1Q2022 saw a QoQ increase for on-demand, e-commerce, and fintech versus a seasonally strong 4Q plus the group improved take rates and contribution margin in 1Q2022 versus 4Q2021.
• GoTo‘s guidance for 2Q2022 is positive and it should be boosted by higher commission rates plus continuing synergies across the group, helping to improve profitability and growth.

• Tencent reported lowest YoY increase in revenue in 1Q2022. Subsequent to this, Tencent mentioned during earnings call that it continues to scale back on loss-making activities across its business segments.
• Recent scale back of operation is in its cloud-services segment that includes loss-making activities such as projects with high proportion of sub-contractors and deeply discounted-contracts for CVM and CDN capacity.
• Layoffs have become prevalent as a cost cutting measure and Tencent is in the process of reducing headcount at gaming and fintech businesses.  

• The overall Air Condition (AC) season has been good, with volumes up by more than +20% compared to the last two years.
• Daikin Industries (6367 JP) & Voltas Ltd (VOLT IN) have performed below expectations with stiff pricing and poor dealer support. 
• Havells India (HAVL IN) (Lloyd) market share gain is on the back of lower prices. The focus has moved from premiumizing brand & expanding margins to gaining market share. 

• IQiyi reported 1Q2022 results last week. Revenue fell 8.7% YoY to RMB 7.3bn (vs consensus RMB 7.22bn) and reported an OP of RMB 93.4m (vs consensus loss of RMB 297m).
• Growth in ARM helped offset decline in the number of subscribers for membership revenue. However, online advertising and content distribution both declined due to lack of content and macroeconomic weaknesses.  
• IQiyi’s shares have gained 11.2% since its earnings announcement as the company reported an OPM for the first time.

• Fast Retailing (9983 JP)’s share price rose 10% towards the top end of the trend channel since reporting 15.8% YoY same-store sales growth in April 2022.
• However, the growth rate was influenced by weak comps and in April 2022 domestic revenue was 9% below the pre-pandemic level.
• Meanwhile, Uniqlo’s growth drivers are faltering with China’s revenue near pandemic lows and North America, Europe and Asia affected by rising inflation.

• Since our March-end report, our shorts – especially Kakao Pay – worked better than our longs, given the continuing turbulent conditions; Santander’s offer for Getnet minorities signals a specific opportunity
• We still favour Mastercard in the megacaps, and we stick with PagSeguro and Nexi despite both having disappointed; Cielo has been a strong performer, but we would not chase it
• Among our shorts, we remain negative on DLocal, given its very demanding valuations, and we still see Kakao Pay to be fundamentally over-valued; we reintroduce Paytm to the shorts list

• PureTech Health (PRTC LN) has highly differentiated wholly owned pipeline of seven therapeutic candidates and four lymphatic and inflammation platforms. It also has strategic investments in six founded entities.
• KarXT, lead candidate of founded entity Karuna Therapeutics Inc (KRTX US), is progressing toward commercialization, thereby entailing milestone and royalty opportunities for PureTech. 
• PureTech’s lead candidate LYT-100 is in three late-stage clinical trials for three indications addressing large patient population. LYT-100 also has potential to address to other underserved diseases.

• Due to the reduction of glove selling price, lower demand, significant cost hike and inflation, it is expected that Intco would continue to face declining performance and margins. 
• Under current circumstances, supply exceeds demand. The overcapacity could lead to substantial asset impairment. So, it would take some time before the industry clearing is finished or reach new balance.
• Intco’s weak performance would continue. Its share price is likely to remain depressed for some time.So, it may not be wise to bottom fishing that early even with low valuation.

• United Spirits (UNSP IN) Q4F22 results have shown some good improvement.
• There is all round progress witnessed, including debt reduction, focus on gaining market share, better scope of working capital management. There is an intent of supporting premiumization as well.
• The results and strategic decision making reinforces our bullish stance on United Spirits; the cherry on top is that there is further room for improvement in the short-mid term.

• Alibaba Group (9988 HK)’s 4QFY22 results were yet another disappointment with the company’s revenue growing by 8.9% YoY, a new low after slowing to 9.7% YoY in the previous quarter.
• This was mostly priced-in, considering that 4QFY22 revenue and OP exceeded consensus by 2.3% and 216% respectively.
• However, FY23 and FY24 estimates are still ambitious and there’s a lot of downside risk to consensus from 2QFY22 onwards.

• Q1 cost pressures surprised the market but the share price has already discounted the news
• Underlying beer demand is solid as global economies recover from 2 years of Covid restrictions
• Improving sales mix and higher prices should offset the cost pressures. With Asahi trading at the bottom of its valuation range, our glass is half full on the stock

For our next Corporate Webinar with Siloam International Hospitals (SILO IJ), we are glad to welcome Daniel Phua, CFO, and Varun Khanna, Senior Director of Healthcare Business, Corporate Strategy, and Investments.

In the upcoming webinar, Daniel and Varun will share a short company presentation, after which they will engage in a fireside chat with Smartkarma Analyst Angus Mackintosh. A live Q&A session will follow.

The Corporate Webinar will be hosted on Tuesday, 21 June 2022, 17:00 SGT.

PT Siloam International Hospitals Tbk (ticker: SILO) is recognised as a reputable and leading operator of private hospital network in Indonesia, with 41 hospitals spread across several islands, namely Java, Sumatra, Kalimantan, Sulawesi, Bali, and Nusa Tenggara. Siloam’s medical team of more than 3,000 general practitioners and specialist doctors, and 8,000 nurses and support staff, offers international quality healthcare services to around two million patients annually.

Corporate Webinars by Smartkarma Corporate Solutions feature discussions with IROs and Executives, discussing their companies, the challenges they face, and the opportunities in their sectors and markets.

• PDD achieved high growth rates in main businesses and a higher operating margin in 1Q22.
• However, we believe third-party retailers are scared about the logistics problem caused by the lockdown.
• We set a downside of 17% and a price target of US$40.

• We are increasingly concerned about Kakao Bank which has been losing market share to other leading Internet banks in Korea (especially to Toss bank). 
• We are also concerned about the Kakao Bank approving greater amount of loans to customers with weak to moderate credit ratings who have been rejected loans from commercial banks. 
• Our base case valuation of Kakao Bank is market cap of 16.4 trillion won or price of 34,504 won per share, which represents 16.5% lower than the current share price.

• Sariguna Primatirta Tbk PT (CLEO IJ) is Indonesia’s only pure water brand (CLEO), using US-nanotechnology and eco-friendly packaging with a market share of around 5%.
• The company has co-branded with both Alfamart and Indomaret and is launching new health-driven products such as alkaline oxygenated water as well as expanding with new factories.
• Sariguna Primatirta Tbk PT (CLEO IJ) is an uncovered yet high-quality and high growth consumer company owned by the Tanoko Family, which also owns PT Avia Avian (AVIA IJ). 

• PT Surya Citra Media 1Q2022 were more about the future than the past given that its investment in new content and sporting rights depressed margins but should help drive growth.
• It has been gaining FTA TV audience share, helping to drive ad revenues. Vidio is seeing strong growth in paying subscribers with 2.5m in 1Q2022 with 4m targeted by December.
• PT Surya Citra Media Tbk (SCMA IJ) looks cheap versus history and should benefit from the economic recovery, with an increasingly diversified exposure across FTA TV and digital through Vidio. 

• Malaysia’s reopening play for the consumption sector is Heineken Malaysia Bhd (HEIM MK) .
• Q1 22 revenue has bounced back to Q4 19 level and higher than Q1 2019 by 33% before taking into account the potential upside since the reopening of the nightlife.
• Compared to other consumer names in Malaysia such as Carlsberg Malaysia, British American Tobacco, Nestle (Malaysia), and QL Resources, Heineken Malaysia is trading at a discount.

• BILI dismissed employees in game, e-commerce, and video in May.
• We believe the growth rates of minor businesses will slow down significantly in 1Q22.
• However, the operating margin will improve in 2022 and 2023.

• The CARVYKTI commercialization will bring GenScript increasing revenue and cash flow. Together with the rapid growth of GCT CDMO, it is expected to see gradual improvement in GenScript’s financial performance.
• The complex international relations, geopolitical conflicts and anti-globalization risks could weigh on bullish sentiment in the short term or cause stock prices to fluctuate wildly.
• In the long term, GenScript’s “all-in” on GCT area enables it follow the industry trend closely. So,GenScript have the exponential growth potential in valuation, with possibility of surpassing WuXi Biologics.

• Japan’s reopening has started and pre-departure and on arrival tests for vaccinated tourists have also been abolished. 
• The beneficiary of this theme is less obvious for Japan Airport Terminal Co (9706 JP) while it is very obvious for Keisei Electric Railway Co (9009 JP) . 
• Japan Airport is trading at a PBR premium to Keisei while the former has a higher debt than the latter. 

• PT Avia Avian (AVIA IJ) is the leading decorative paint and coatings player in Indonesia listing last December and trading 20% below its IPO price but with an institutional following.
• 1Q2022 results were weaker due to a high base last year but has seen a strong pick-up since. It has raised prices twice to offset higher raw material prices. 
• PT Avia Avian is an interesting proxy for the recovery in the domestic economy together with the property market plus M&A could be a further catalyst this year.

• The six Indonesian banks have strong capital adequacy ratios, healthy credit quality and good NPL coverage; also, GDP recovery supports positive cost of risk trends and the bank earnings outlook
• We believe that Bank Mandiri screens best, with its attractive pre-provision profitability and steadily improving cost of risk, whilst trading on undemanding multiples versus peers; we also like Bank Rakyat
• We see Bank Permata as a potential “turn around” stock, especially if management can improve credit quality, and keep lowering its cost of risk to boost returns

• Splunk Inc (SPLK US) , a leading American provider of machine-generated data platform and established software vendor, announced strong 1QFY23 earnings results. 
• Total revenues grew to $674M, up 34% YoY, the highest revenue growth rate for the last 3 years. Cloud revenues jumped by 66%, reflecting customer adoption of the cloud platform.
• WSJ reported that Cisco made a $20B+ takeover offer for Splunk. However, no deal was on the table, but if talks resume, Cisco could pay $20B+, according to The NYT.   

• Life opened a new, upscale supermarket last month in central Tokyo that is designed to process online orders as easily as serving in-store customers.
• The new store, replacing Mitsukoshi in Ebisu Garden Place, includes a backroom that acts as a dark store for online orders.
• This frees up space in the store for higher margin items like deli foods and is a sign of the supermarket’s intentions going forward.

• The most recent two quarters have maintained positive growth. It is of great significance for Huadong, who once suffered a significant decline and now in a critical period of transformation.
• The large growth potential of medical cosmetology and industrial microbiology would be important driver for future development. It’s also wise to strike a balance between current performance and future strategy.
• Huadong’s revenue growth would be above 10% in next few years. It would have higher valuation than Imeik. Investors are advised to follow Huadong. It could be a “dark horse”.

• The sharp plunge in share price of China Conch Environment Protection Holdings (587 HK) has not yet brought its valuations back to more reasonable levels and we see more downside.
• Its 10.1x PER for FY22F is at a significant premium over peer average. Even taking into account the impressive ROE, we still cannot find justifications for its high P/B multiple.  
• Negative catalysts include overly aggressive expansion target, slower profit growth than rise in capacity and surge in gearing and finance costs – they will potentially lead to earnings disappointment.

• Takashimaya will close its store in Tachikawa early next year.
• This can be seen as a further sign of an improving outlook for a smaller department store sector. 
• More closures will rid the sector of excess capacity and solidify positioning as a genuinely upscale format for the affluent.

• Chinese lockdowns are taking their toll on Q2 sales. We expect the upcoming report to be much worse than the last 
• Estee Lauder’s recent results suggest that travel retail will be a negative shock too 
• We believe there is one large downgrade to full-year guidance and consensus numbers. Too early turn bullish 

• Dabur India Ltd (DABUR IN) is over-exposed to rural India where the recovery is uncertain and slow. 
• Channel feedback with regards to relationships with distributors and the company’s strategic direction has been poor. 
• A weak operating environment coupled with a weak on-ground execution suggests underperformance may continue. 

• Mitra Adiperkasa‘s recent 1Q2022 results and a follow up conversation with management confirmed continuing momentum in the recovery with a lot more to come in the next few quarters.
• Sports, digital, and F&B are leading the recovery with greater mobility boosting sales but online sales remain strong reflecting changing consumer habits and the success of the company’s strategy there.
• Mitra Adiperkasa is back on an expansion tack both in Indonesia and in Thailand, Vietnam, and the Philippines, with capex forecast at 2019 levels this year. Valuations are attractive.

• Maintain our BUY recommendation with TP of Bt29.75,derived from 27.0xPE’22 (+2SD of average 10-yr trading). Yesterday’s analyst meeting came out with neutral tone. While we are cautious of the inflationa
• Management affirms that weakening consumer demand, shortages caused by China lockdowns and Russo-Ukrainian War, and weakening Baht will not impact SYNEX’s 2022 performance.
• Management maintains their guidance of +15% revenue growth YoY in 2022, but admits post-2022 top-line growth will not match the levels seen during Covid period (2020-21).

• The analyst meeting came out in a positive tone.The solid 2022 earnings outlook, decent dividend yield and lowering ESG concerns from transition to clean energy should support the stock performance.
• Expect 2Q recurring profit to remain weak and recover thereafter, following seasonality of Paju ES, (49% stake, 1.8GWe).
• The 2022 outlook looks solid from normalizing power plant operation (recovering demand)after COVID1-19 impact. Also,we see upside from new project acquisition as the company target to add 1.0GWe to portfolio

• Sony’s hosted its 2022 Corporate Strategy Meeting last week. Our key takeaway is that SONY is shifting towards greater investment in Content, Creators, and Communities.  
• Sony recognizes that technology is changing the way that content is produced and consumed and is responding with new experiences and monetization models.  
• Sony will continue to benefit from the evolution of the internet as it becomes more social, immersive and financialized (otherwise known as the metaverse). 

• Operating margin improved in 4Q22 due to well controlled expenses in minor businesses.
• We believe the state council meeting will provide a turning point in June.
• We set an upside of 31% and a price target at HK$106.

• ITC Ltd (ITC IN) ‘s core cigarette portfolio is relatively inelastic to the current commodity inflation. With the reopening of offices and social events, volumes are likely to trend higher. 
• A renewed focus on FMCG is likely to aid volumes for the non-cigarette segment. 
• Valuations are in favor and we see limited scope for de-rating if not re-rating.

• MediaTek’s revised downward forecast for 650-680nm smartphone delivery in 1Q22 earnings conference, but we think that number could be revised down again by the end of July.
• MediaTek announced new WiFi products, Filogic 880 and 380, in COMPUTEX2022 on May 24-27. Besides, MediaTek invests in new opportunities for AI in the US.
• The mainland China fights fiercely against COVID-19 and stays at the Zero Policy. 

• There are three major reasons we like a pair trade between Doosan Corp (go long) and Doosan Enerbility (go short). 
• First, share prices of two companies have diverged too much this year. Second, Doosan Corp is currently trading at a 76% discount to its NAV, which is excessive. 
• Third, as investors have poured capital into nuclear power themed Doosan Enerbility, they have neglected its parent Doosan Corp. 

• Hindustan Unilever (HUVR IN) is focusing on protecting its business model and market share, which is the key in such an operating environment. 
• Presence across multiple price points and playing a targeted game in target geographies will aid in maintaining steady-state growth. 
• Current valuations, lack of trigger for driving exponential volume growth and expected slowing pace of premiumisation warrant caution. 

• Dr Lal PathLabs Ltd (DLPL IN) reported 35% y/y revenue growth in its non-COVID business in FY22. Non-COVID realization per patient is also back to pre-COVID levels.  
• The company has acquired Suburban Diagnostics last year, which will further widen its geographical footprint, with western region contributing 24% of revenue from 10% earlier.
• There is a lot of noise regarding competition in the industry. Thus far, DLPL has not seen much pricing pressure and underpenetrated Indian diagnostic segment can accommodate more players.

• LIC Housing Finance (LICHF IN) reported stellar results, in line with the expectation from our last note. NIM expanded while provisions declined leading to Q4FY22 PAT of INR 1100cr+.
• Asset quality improved with Stage 3 assets at 4.64% vs 5.04% QoQ and Stage 2 assets at 3.08% vs 3.75% QoQ. LICHF also recovered 350cr of NPAs during Q4FY22.
• Adjusted for one-off tax benefits and assuming FY23 NIM at 2.4%, LICHF’s normalized PAT potential is INR 3600cr+ suggesting that LICHF is trading at <6x P/E on FY23E PAT.

• Shenzhen Expressway Co H (548 HK) guided that many drivers are presented for the rest of the year to support growth, after a 24% YoY decline in 1Q22 net profit. 
• Toll road business should benefit from organic growth and project completions, while clean energy and waste treatment businesses will experience astronomical growth from capacity acquisitions. 
• There exists room to leverage up for growth as liabilities-to-asset ratio is still 11pp below its tolerance level of 65%. Besides below-average PERs, FY22F yield of 10% is attractive too.

• Upgrade to BUY from HOLD rating with an unchanged TP of B21.00, based on 14.36xPE’22E which is close to -2SD of 3-years trailing average.
• We see earnings trend to fall QoQ in 2Q22, as COVID-19 contribution fades in parallel with declining infection patients cases and dropped RT-PCR test for vaccinated tourists.
• We view profit trend to drop HoH in 2H22, as COVID-revenue normalizes YoY off high base in 2H21 based on our expectation government declares COVID as endemic in July.