Industrials

• Timee Inc (215A JP)  operates an on-demand job platform in Japan and the company has filed for an IPO where existing shareholders will offer shares worth of $290m.
• The company’s top line saw accelerated growth during last 4-5 years driven by increase in no. of clients/workers while Timee also has turned around its profitability during the last 2-years.
• In this insight, we have discussed the company’s business model and financials in detail and we will discuss our forecasts and valuation in a follow-up insight.

• The Czech Republic government is in the final stages of selecting companies to build four nuclear power plants which could cost nearly US$30 billion.
• A Korean consortium including KHNP, Doosan Enerbility, KEPCO E&C, and Daewoo E&C is competing mainly against EDF, a French government owned electric utility company. 
• If the KHNP consortium is able to win this new order, Doosan Enerbility will be a key beneficiary as it will supply the nuclear reactors and steam generators.

• General Electric Company, known as GE, recently marked a significant milestone by completing the spin-off of GE Vernova and launching GE Aerospace, positioning the company as a focused leader in the aerospace and defense industry.
• This transition follows the successful spin-off of GE Healthcare last year, achieving a strategic restructuring aimed at strengthening the company’s core operations and financial health.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• J.B. Hunt Transport Services, Inc. presented its First Quarter 2024 results delineating challenges primarily driven by continued market pressures, alongside optimistic notes on strategic positioning and long-term growth.
• The results highlighted a decline in revenues and profits, accentuated by inflationary pressures intermingling with deflationary pricing dynamics, reflecting the intricate operational environment the company navigates.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• We cut our 2024 EBITDAR by 19% following a disappointing May revenue performance at GOL.
• We also emphasise that plans to double 2023 EBITDAR by 2029 are highly ambitious in the context of Brazilian competitors LATAM and Azul margin progress since 2019.
• GOL, undergoing Chapter 11, is the subject of much consolidation focus with an Azul codeshare and parent Abra discussing combining GOL with Azul. Leverage plans render effective consolidation more difficult. 

• We are reiterating our Buy recommendation, $8 price target and projections as we look at key trends for 2H2024 and beyond for urban-gro.
• Given the increase in Controlled Environment Agriculture (“CEA”) contract momentum, the pending reclassification from a Schedule I to a Schedule III drug for marijuana, the potential for Florida to legalize recreational cannabis on Election Day, and what we believe has been continued demand for commercial services, we believe the potential for top and bottom line upside for the company has continued to increase.
• That said, we have, given urban-gro’s prior history and the current valuation, remained conservative in our projections.

• FuelCell Energy, a global leader in delivering fuel cell power solutions, reported its financial results for the second quarter of fiscal year 2024.
• The company is recognized for its innovative technologies that contribute to a sustainable environment, such as carbon-neutral power generation and hydrogen production.
• However, the recent earnings exhibits both robust achievements and certain challenges that are integral for stakeholders to consider.

• Sales increased by JPY108mn (+0.8% YoY), driven by growth in Creative (Japan), Accounting and Legal, and Other sectors.
• Operating profit decreased by JPY318mn (-20.2% YoY), mainly due to reduced profits in Creative (Japan) and Medical Staffing.
• Sales and operating profit decreased YoY due to reduced COVID-19 vaccination projects and structural reforms in Medical Principle.

• Timee Inc (215A JP)  operates an on-demand job platform in Japan and the company has filed for an IPO where existing shareholders will offer shares worth of $290m.
• The company’s top line saw accelerated growth during last 4-5 years driven by increase in no. of clients/workers while Timee also has turned around its profitability during the last 2-years.
• In this insight, we have discussed the company’s business model and financials in detail and we will discuss our forecasts and valuation in a follow-up insight.

• The Czech Republic government is in the final stages of selecting companies to build four nuclear power plants which could cost nearly US$30 billion.
• A Korean consortium including KHNP, Doosan Enerbility, KEPCO E&C, and Daewoo E&C is competing mainly against EDF, a French government owned electric utility company. 
• If the KHNP consortium is able to win this new order, Doosan Enerbility will be a key beneficiary as it will supply the nuclear reactors and steam generators.

• General Electric Company, known as GE, recently marked a significant milestone by completing the spin-off of GE Vernova and launching GE Aerospace, positioning the company as a focused leader in the aerospace and defense industry.
• This transition follows the successful spin-off of GE Healthcare last year, achieving a strategic restructuring aimed at strengthening the company’s core operations and financial health.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• J.B. Hunt Transport Services, Inc. presented its First Quarter 2024 results delineating challenges primarily driven by continued market pressures, alongside optimistic notes on strategic positioning and long-term growth.
• The results highlighted a decline in revenues and profits, accentuated by inflationary pressures intermingling with deflationary pricing dynamics, reflecting the intricate operational environment the company navigates.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• We cut our 2024 EBITDAR by 19% following a disappointing May revenue performance at GOL.
• We also emphasise that plans to double 2023 EBITDAR by 2029 are highly ambitious in the context of Brazilian competitors LATAM and Azul margin progress since 2019.
• GOL, undergoing Chapter 11, is the subject of much consolidation focus with an Azul codeshare and parent Abra discussing combining GOL with Azul. Leverage plans render effective consolidation more difficult. 

• We are reiterating our Buy recommendation, $8 price target and projections as we look at key trends for 2H2024 and beyond for urban-gro.
• Given the increase in Controlled Environment Agriculture (“CEA”) contract momentum, the pending reclassification from a Schedule I to a Schedule III drug for marijuana, the potential for Florida to legalize recreational cannabis on Election Day, and what we believe has been continued demand for commercial services, we believe the potential for top and bottom line upside for the company has continued to increase.
• That said, we have, given urban-gro’s prior history and the current valuation, remained conservative in our projections.

• FuelCell Energy, a global leader in delivering fuel cell power solutions, reported its financial results for the second quarter of fiscal year 2024.
• The company is recognized for its innovative technologies that contribute to a sustainable environment, such as carbon-neutral power generation and hydrogen production.
• However, the recent earnings exhibits both robust achievements and certain challenges that are integral for stakeholders to consider.

• Sales increased by JPY108mn (+0.8% YoY), driven by growth in Creative (Japan), Accounting and Legal, and Other sectors.
• Operating profit decreased by JPY318mn (-20.2% YoY), mainly due to reduced profits in Creative (Japan) and Medical Staffing.
• Sales and operating profit decreased YoY due to reduced COVID-19 vaccination projects and structural reforms in Medical Principle.

• Last December, Recruit Holdings (6098 JP) announced a ¥200bn buyback which sounded big but with lots of cross-holders, wasn’t huge. The stock is up 80% in 6+ months since.
• Today, the company announced a new buyback of ¥600bn. This is very aggressive, and at 25x EBITDA and 40x PER, is probably due to demand to sell. 
• Crossholders now hold ¥2trln which is three-plus times this buyback. And if the price were to rise 10% a year for 3yrs, it would be four times.

• In this insight, we discuss recent, active insiders buying and selling their shares prior to the mandatory block deal pre-announcement requirement starting 24 July in Korea.
• The three companies that announced insiders selling (July) are down on average 3% YTD. However, the three companies that announced insiders buying (July) are up on average 74% YTD. 
• LS Cable has been consistently increasing its ownership of LS Marine Solution, up from 46% stake as of 27 May 2024 to 56.14% as of 8 July 2024.

• Sanil Electric (062040 KS) is looking to raise up to US$165m in its Korean IPO.
• Sanil Electric is a specialized company that manufactures and sells reactors, transformers, railway vehicle parts, and switchboards. As an industrial transformer manufacturer, the company mainly manufactures power and distribution transformers.
• In our previous notes, we talked about the company’s historical performance. In this note, we undertake a quick peer comparison and share our thoughts on valuation.

• Shenzhen Yuejiang Technology (Dobot), a Shenzhen-based cobot company with a diversified customer base globally, filed publicly for Hong Kong IPO.
• The terms of the IPO were not disclosed. The robotics company plans to increase production capacity due to high demand in the coming years.
• Dobot may be trading above the last round valuation of ~RMB3.5b, but I believe investors should focus on the company’s long-term growth prospects and rapidly growing TAM.

• Sales increased by 2.5% YoY to JPY81.1bn, operating profit decreased by 5.2% YoY to JPY3.3bn.
• Sales growth in Facilities Management, Security Services, Cleaning Services, and Materials and Supplies Sourcing Services contributed to overall revenue increase.
• Operating profit fell YoY due to higher SG&A expenses despite segment profit growth in several divisions.

• FedEx Corporation delivered a robust finish to its fiscal year 2024, showcasing a mixture of challenges and triumphs that reflect the intricate dynamics of the current global logistics and transportation landscape.
• In its fourth quarter, FedEx managed to inflect positive revenue growth amid an environment characterized by continuous demand volatilities and transitioning market conditions, all while advancing significant structural reforms aimed at improving efficiency and profitability.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• Herein, we refresh our estimates and economic model for MillerKnoll after its release and conference call for 4QFY24, which ended May 2024.
• As noted in our earlier earnings analysis note dated June 27, 2024, management delivered strong margins, enabling it to beat estimates with the report.
• The margin performance benefited from cost discipline and sustained pricing benefits.

• Last December, Recruit Holdings (6098 JP) announced a ¥200bn buyback which sounded big but with lots of cross-holders, wasn’t huge. The stock is up 80% in 6+ months since.
• Today, the company announced a new buyback of ¥600bn. This is very aggressive, and at 25x EBITDA and 40x PER, is probably due to demand to sell. 
• Crossholders now hold ¥2trln which is three-plus times this buyback. And if the price were to rise 10% a year for 3yrs, it would be four times.

• In this insight, we discuss recent, active insiders buying and selling their shares prior to the mandatory block deal pre-announcement requirement starting 24 July in Korea.
• The three companies that announced insiders selling (July) are down on average 3% YTD. However, the three companies that announced insiders buying (July) are up on average 74% YTD. 
• LS Cable has been consistently increasing its ownership of LS Marine Solution, up from 46% stake as of 27 May 2024 to 56.14% as of 8 July 2024.

• Sanil Electric (062040 KS) is looking to raise up to US$165m in its Korean IPO.
• Sanil Electric is a specialized company that manufactures and sells reactors, transformers, railway vehicle parts, and switchboards. As an industrial transformer manufacturer, the company mainly manufactures power and distribution transformers.
• In our previous notes, we talked about the company’s historical performance. In this note, we undertake a quick peer comparison and share our thoughts on valuation.

• Shenzhen Yuejiang Technology (Dobot), a Shenzhen-based cobot company with a diversified customer base globally, filed publicly for Hong Kong IPO.
• The terms of the IPO were not disclosed. The robotics company plans to increase production capacity due to high demand in the coming years.
• Dobot may be trading above the last round valuation of ~RMB3.5b, but I believe investors should focus on the company’s long-term growth prospects and rapidly growing TAM.

• Sales increased by 2.5% YoY to JPY81.1bn, operating profit decreased by 5.2% YoY to JPY3.3bn.
• Sales growth in Facilities Management, Security Services, Cleaning Services, and Materials and Supplies Sourcing Services contributed to overall revenue increase.
• Operating profit fell YoY due to higher SG&A expenses despite segment profit growth in several divisions.

• FedEx Corporation delivered a robust finish to its fiscal year 2024, showcasing a mixture of challenges and triumphs that reflect the intricate dynamics of the current global logistics and transportation landscape.
• In its fourth quarter, FedEx managed to inflect positive revenue growth amid an environment characterized by continuous demand volatilities and transitioning market conditions, all while advancing significant structural reforms aimed at improving efficiency and profitability.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• Herein, we refresh our estimates and economic model for MillerKnoll after its release and conference call for 4QFY24, which ended May 2024.
• As noted in our earlier earnings analysis note dated June 27, 2024, management delivered strong margins, enabling it to beat estimates with the report.
• The margin performance benefited from cost discipline and sustained pricing benefits.

• Barnes Group, a diversified global manufacturer and service provider, presented its financial results and strategic developments during the first quarter of 2024.
• The company reported a robust start to the year, underlined by a significant growth in revenue and adjusted EBITDA, alongside progress in strategic pillars aimed at enhancing shareholder value.
• This performance is particularly noteworthy as Barnes Group is currently evaluating strategic options, including a potential sale, which could influence the market’s perception and future performance of the company.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We view Rolls-Royce’s (RR) ESG as “Adequate”, in line with its “Adequate” Environmental and Social scores. Governance is “Strong”. Controversies are “Immaterial” and Disclosure is “Adequate”.

Notably, RR in 2023 successfully retained its No. 2 position in the Dow Jones Sustainability Index for the aerospace & defence industry.

• Q224 parcel volume growth slowed dramatically in all markets versus Q124 pace
• Share price has fallen by more than half compared to Q124 peak levels
• HK$7.8 is our target, but slower growth, sub-par margins & disclosure = AVOID

• Q1 FY02/25 results: Revenue JPY11.6bn (+5.2% YoY), Gross profit JPY1.9bn (+12.7% YoY), Operating profit JPY550mn (+6.9% YoY).
• Food Packaging and Containers: 65.7% of revenue, gross profit rose 17.4% YoY, revenue increased 5.0% YoY.
• Net income attributable to owners of the parent: JPY532mn (+95.3% YoY) due to decreased income taxes.

• Barnes Group, a diversified global manufacturer and service provider, presented its financial results and strategic developments during the first quarter of 2024.
• The company reported a robust start to the year, underlined by a significant growth in revenue and adjusted EBITDA, alongside progress in strategic pillars aimed at enhancing shareholder value.
• This performance is particularly noteworthy as Barnes Group is currently evaluating strategic options, including a potential sale, which could influence the market’s perception and future performance of the company.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We view Rolls-Royce’s (RR) ESG as “Adequate”, in line with its “Adequate” Environmental and Social scores. Governance is “Strong”. Controversies are “Immaterial” and Disclosure is “Adequate”.

Notably, RR in 2023 successfully retained its No. 2 position in the Dow Jones Sustainability Index for the aerospace & defence industry.

• Q224 parcel volume growth slowed dramatically in all markets versus Q124 pace
• Share price has fallen by more than half compared to Q124 peak levels
• HK$7.8 is our target, but slower growth, sub-par margins & disclosure = AVOID

• Q1 FY02/25 results: Revenue JPY11.6bn (+5.2% YoY), Gross profit JPY1.9bn (+12.7% YoY), Operating profit JPY550mn (+6.9% YoY).
• Food Packaging and Containers: 65.7% of revenue, gross profit rose 17.4% YoY, revenue increased 5.0% YoY.
• Net income attributable to owners of the parent: JPY532mn (+95.3% YoY) due to decreased income taxes.

• Grandblue Environment Co A (600323 CH) disclosed a potential pre-conditional privatisation of Canvest Environmental Protection Group (1381 HK) at HK$4.90 per share, a 20.7% premium to the last close price. 
• Completing the capital injection from SOE entities into the offeror is a precondition. Grandblue also proposes that the controlling shareholder roll over 7.23% of its effective 44.75% stake. 
• While not a knockout bid, the offer is reasonable. Shareholders with blocking stakes should support a binding proposal. Timing is the key risk. 

• Timee Inc (215A JP), a leading part-time job platform in Japan, is seeking to raise up to US$286 million. Book-building runs from 9 to 23 July.
• We previously discussed the IPO in Timee (215A JP) IPO: The Bull Case and Timee (215A JP) IPO: The Bear Case. 
• In this note, we discuss valuation. Our analysis suggests that Timee is attractively valued at the IPO price range in the context of the forecasted growth. 

• Timee Inc (215A JP) is looking to raise US$290m in its Japan IPO. The IPO will be a 100% secondary selldown by existing shareholders.
• Timee operates an on-demand staffing platform that connects part-time jobseekers with businesses in Japan.
• In an earlier note, we looked at the firm’s past performance and peer comparison. In this note, we discuss our thoughts on valuation.

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net SELL RMB 13.9bn of A-shares. NORTHBOUND bought utilities and raw materials and sold everything else, especially consumer names. Appliances remain on the sell side.
• It is notable that net flows as a percentage of value traded are clearly “short gamma”, which is to say, sector underperformers are being sold, not bought.

• The review period for the September rebalance ends 30 July. We expect the changes to be announced 30 August with the implementation taking place after the close on 13 September.
• We forecast 6 changes for the index, including migrations between the STAR 100 Index and the SSE STAR50 (STAR50 INDEX).
• Excluding the migrations, the potential adds have outperformed the potential deletes since the start of the calendar year and there could be further outperformance over the next few weeks.

• Operations are on track with earlier guidance given during FY23 results, loads and yields are healthy, with UK and North American performing better than expected  
• Will buyback and cancel remaining 97.7m preference shares for a sum of HKD10b by end of July 2024. Shareholder dilution has been avoided  
• Cathay Pacific is a value BUY, our target price of HK$9.90 (+24% UPSIDE) implies 10x FY2024 PE, parity multiple against its arch-rival Singapore Airlines (SIA SP) 

• Shenzhen Yuejiang Technology (Dobot), a China-based cobot company, filed for a Hong Kong IPO. Cobots are robots with operational robotic arms intended for collaboration within a shared space.
• Dobot was backed by CICC, CRRC VC, Greenpine Growth, Qianhai Equity, and China Internet Investment Fund, among others. The company was founded in 2015 in Shenzhen, PRC.
• The offering may attract significant investor interest after South Korea’s robotics company Doosan Robotics could raise ~$318M in October 2023.

• We believe SF’s core express margins are higher than most of its peers’ margins
• But on 2023 EV / EBITDA SF trades at multiples below most Chinese, US peers
• One objective of SF listing in HK is to attract global investors, lift valuation

• Grandblue Environment Co A (600323 CH) disclosed a potential pre-conditional privatisation of Canvest Environmental Protection Group (1381 HK) at HK$4.90 per share, a 20.7% premium to the last close price. 
• Completing the capital injection from SOE entities into the offeror is a precondition. Grandblue also proposes that the controlling shareholder roll over 7.23% of its effective 44.75% stake. 
• While not a knockout bid, the offer is reasonable. Shareholders with blocking stakes should support a binding proposal. Timing is the key risk. 

• Timee Inc (215A JP), a leading part-time job platform in Japan, is seeking to raise up to US$286 million. Book-building runs from 9 to 23 July.
• We previously discussed the IPO in Timee (215A JP) IPO: The Bull Case and Timee (215A JP) IPO: The Bear Case. 
• In this note, we discuss valuation. Our analysis suggests that Timee is attractively valued at the IPO price range in the context of the forecasted growth. 

• Timee Inc (215A JP) is looking to raise US$290m in its Japan IPO. The IPO will be a 100% secondary selldown by existing shareholders.
• Timee operates an on-demand staffing platform that connects part-time jobseekers with businesses in Japan.
• In an earlier note, we looked at the firm’s past performance and peer comparison. In this note, we discuss our thoughts on valuation.

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net SELL RMB 13.9bn of A-shares. NORTHBOUND bought utilities and raw materials and sold everything else, especially consumer names. Appliances remain on the sell side.
• It is notable that net flows as a percentage of value traded are clearly “short gamma”, which is to say, sector underperformers are being sold, not bought.

• The review period for the September rebalance ends 30 July. We expect the changes to be announced 30 August with the implementation taking place after the close on 13 September.
• We forecast 6 changes for the index, including migrations between the STAR 100 Index and the SSE STAR50 (STAR50 INDEX).
• Excluding the migrations, the potential adds have outperformed the potential deletes since the start of the calendar year and there could be further outperformance over the next few weeks.

• Operations are on track with earlier guidance given during FY23 results, loads and yields are healthy, with UK and North American performing better than expected  
• Will buyback and cancel remaining 97.7m preference shares for a sum of HKD10b by end of July 2024. Shareholder dilution has been avoided  
• Cathay Pacific is a value BUY, our target price of HK$9.90 (+24% UPSIDE) implies 10x FY2024 PE, parity multiple against its arch-rival Singapore Airlines (SIA SP) 

• Shenzhen Yuejiang Technology (Dobot), a China-based cobot company, filed for a Hong Kong IPO. Cobots are robots with operational robotic arms intended for collaboration within a shared space.
• Dobot was backed by CICC, CRRC VC, Greenpine Growth, Qianhai Equity, and China Internet Investment Fund, among others. The company was founded in 2015 in Shenzhen, PRC.
• The offering may attract significant investor interest after South Korea’s robotics company Doosan Robotics could raise ~$318M in October 2023.

• We believe SF’s core express margins are higher than most of its peers’ margins
• But on 2023 EV / EBITDA SF trades at multiples below most Chinese, US peers
• One objective of SF listing in HK is to attract global investors, lift valuation

• The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
• In mid-June 2024, we had two expected ADDs and DELs for the September 2024 index rebal event and they remain unchanged even after the end of the reference period.
• However, our capping flow expectations continue to change as the pro-forma post-rebalance weights change with share prices. In this insight, we have provided our latest flow estimates.

• The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
• In mid-June 2024, we had two expected ADDs and DELs for the September 2024 index rebal event and they remain unchanged even after the end of the reference period.
• However, our capping flow expectations continue to change as the pro-forma post-rebalance weights change with share prices. In this insight, we have provided our latest flow estimates.