Industrials

• We forecast EBITDAR of KRW3.35trn for Korean Air in 2023 (KRW3.8trn previously) with EBITDAR/ATK up 50% on 2019/32% on 2018. We remain at KRW2.9trn in 2024 (EBITDAR/ATK +28% vs 2019).
• Unwinding cargo yields may fully eliminate earnings gains but cost management safeguards future prospects despite Asiana merger uncertainty.
• Cost inflation management inflected negatively in 3Q as labour costs rose – control crucial as market conditions normalize and low cost competitors expand.

• LG Energy Solution reported disappointing preliminary earnings in 4Q 2023. The company reported operating profit of 338.2 billion won (43.5% lower than consensus).
• Post a major earnings miss for LGES in 4Q 2023, the consensus is likely to reduce earnings estimates of the company in 2024 and 2025.
• Major EV players such as Tesla were reducing prices in the past year causing higher pressures on EV battery makers such as LGES to reduce their prices as well. 

• Overview: arara primarily serves retailers such as supermarkets and restaurant chains, offering Dokuji Pay (branded currency payment + marketing) and high-speed e-mail delivery software as a service.
• With its Dokuji Pay service, where clients are the issuers, the company has a certain level of distinction from its competitors in this niche field, and is solidifying its market position.
• Starting in March 2024, the company plans to integrate its digital signage- related business as well, aiming to quickly accelerate its retail marketing platform strategy to help retail stores strengthen their connection with consumers both inside and outside their stores. 

• BluSmart Unlike other players in India’s crowded EV scene, BluSmart Mobility does not build its own electric vehicles.
• Instead, the company is a ride-hailing firm that leases EV models like the Tata e-Tigor, MG ZS, and Hyundai Kona to be part of its 5,500-strong fleet.
• But an equally important of BluSmart’s business is its charging infrastructure division.

• InterGlobe Aviation Ltd (INDIGO IN)’s co-founder Rakesh Gangwal’s 25%+ stake will be released from lock-up tomorrow.
• He had earlier stated his intention to pare down his stake. He has sold shares in Sep 2022, Feb 2023 and Aug 2023.
• In this note, we will talk about the lockup dynamics and possible placement.

• We forecast EBITDAR of KRW3.35trn for Korean Air in 2023 (KRW3.8trn previously) with EBITDAR/ATK up 50% on 2019/32% on 2018. We remain at KRW2.9trn in 2024 (EBITDAR/ATK +28% vs 2019).
• Unwinding cargo yields may fully eliminate earnings gains but cost management safeguards future prospects despite Asiana merger uncertainty.
• Cost inflation management inflected negatively in 3Q as labour costs rose – control crucial as market conditions normalize and low cost competitors expand.

• LG Energy Solution reported disappointing preliminary earnings in 4Q 2023. The company reported operating profit of 338.2 billion won (43.5% lower than consensus).
• Post a major earnings miss for LGES in 4Q 2023, the consensus is likely to reduce earnings estimates of the company in 2024 and 2025.
• Major EV players such as Tesla were reducing prices in the past year causing higher pressures on EV battery makers such as LGES to reduce their prices as well. 

• Overview: arara primarily serves retailers such as supermarkets and restaurant chains, offering Dokuji Pay (branded currency payment + marketing) and high-speed e-mail delivery software as a service.
• With its Dokuji Pay service, where clients are the issuers, the company has a certain level of distinction from its competitors in this niche field, and is solidifying its market position.
• Starting in March 2024, the company plans to integrate its digital signage- related business as well, aiming to quickly accelerate its retail marketing platform strategy to help retail stores strengthen their connection with consumers both inside and outside their stores. 

• BluSmart Unlike other players in India’s crowded EV scene, BluSmart Mobility does not build its own electric vehicles.
• Instead, the company is a ride-hailing firm that leases EV models like the Tata e-Tigor, MG ZS, and Hyundai Kona to be part of its 5,500-strong fleet.
• But an equally important of BluSmart’s business is its charging infrastructure division.

• InterGlobe Aviation Ltd (INDIGO IN)’s co-founder Rakesh Gangwal’s 25%+ stake will be released from lock-up tomorrow.
• He had earlier stated his intention to pare down his stake. He has sold shares in Sep 2022, Feb 2023 and Aug 2023.
• In this note, we will talk about the lockup dynamics and possible placement.

• Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
• Furuya Metal (7826 JP) and Visional (4194 JP) are expected to be included in the TOPIX index at the end of January 2024
• There are couple of other pre-event names that we have been tracking for the past few months.

• Our FY24 to March 2024 EBIT forecast for ANA of ¥ 196bn is considerably higher than company guidance of ¥ 140bn, supported by our analysis of historical earnings seasonality.
• However, we are only narrowly above consensus of ¥186bn, and narrowly below consensus of ¥204bn, ¥208bn in FY25, FY26.
• In contrast, we see considerably greater upside to expectations at JAL, where our FY24 EBIT is 27% above consensus.

• Adi Sarana Armada (ASSA IJ) represents one of the most interesting plays on people and goods mobility and end-to-end logistics in Indonesia, being market leaders in auto leasing and auctions.
• Revenues slowed in 9M2023 due to a slowdown in Anteraja because of slower e-commerce but other areas saw strong growth, especially its auction and used car business.
• Adi Sarana Armada continues to build its renamed Cargoshare end-to-end logistics business with new customers and a move into cold chain logistics. Valuations are attractive relative to growth.

• Use of quantum technology expected to improve electrical die sorting (EDS) performance by several percentage points.
• Collaboration with Quanmatic aims at full-scale introduction in April, the first month of FY Mar-25. 
• Buy for long-term growth led by power semiconductors with margin expansion from efficiency gains.

• Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
• Furuya Metal (7826 JP) and Visional (4194 JP) are expected to be included in the TOPIX index at the end of January 2024
• There are couple of other pre-event names that we have been tracking for the past few months.

• Our FY24 to March 2024 EBIT forecast for ANA of ¥ 196bn is considerably higher than company guidance of ¥ 140bn, supported by our analysis of historical earnings seasonality.
• However, we are only narrowly above consensus of ¥186bn, and narrowly below consensus of ¥204bn, ¥208bn in FY25, FY26.
• In contrast, we see considerably greater upside to expectations at JAL, where our FY24 EBIT is 27% above consensus.

• Adi Sarana Armada (ASSA IJ) represents one of the most interesting plays on people and goods mobility and end-to-end logistics in Indonesia, being market leaders in auto leasing and auctions.
• Revenues slowed in 9M2023 due to a slowdown in Anteraja because of slower e-commerce but other areas saw strong growth, especially its auction and used car business.
• Adi Sarana Armada continues to build its renamed Cargoshare end-to-end logistics business with new customers and a move into cold chain logistics. Valuations are attractive relative to growth.

• Use of quantum technology expected to improve electrical die sorting (EDS) performance by several percentage points.
• Collaboration with Quanmatic aims at full-scale introduction in April, the first month of FY Mar-25. 
• Buy for long-term growth led by power semiconductors with margin expansion from efficiency gains.

• We discuss the potential KOSPI200 rebalance candidates in June 2024. In the past several years, there have been a lot of alpha generating stocks arising from the KOSPI200 rebalances.
• The following companies are likely candidates which could be included in KOSPI200 rebalance in June 2024, including Posco DX, Doosan Robotics, Hyosung Heavy Industries Corp, and DS Dansuk. 
• For the potential exclusion candidates, we included 10 stocks that are in the bottom 5% market caps in KOSPI200.

• Sumitomo Chemical (4005 JP) and Mizuho Trust & Banking are looking to raise around US$180m through the sale of their stake in Inabata & Co (8098 JP).
• The deal is a large one to digest, at 90 days of three month ADV and 15% of current mcap. 
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• We revisit FY24 prospects by highlighting that historical full service carrier (FSC) earnings seasonality suggests group EBIT guidance of ¥130bn is very conservative.
• FSC FY24 EBIT guidance of ¥80bn implies only ¥9bn in 2H, 12% of 1H’s ¥71bn, whereas historically 2H has represented 74-83% of 1H. We model ¥59bn or 84% in 2H.
• Our ¥176.5bn group EBIT for FY24 is 36% above guidance but also 27% above Visible Alpha consensus, largely due to lower costs, which position JAL strongly for the long-term.

• Ferrotec shares have dropped by a third since last July and are now selling at 8.2x EPS guidance and 0.6x book value.
• Sales and operating should start to recover in 2H of FY Mar-24, led by power semiconductor substrates.
• Buy for the upturn in the semiconductor cycle and capacity expansion in Japan, China and Malaysia. No significant damage from the Noto Peninsula earthquake has been reported.

• Kerry Logistics Network will pay a special dividend in the form of KEX shares
• This will trigger a general offer by SF Holding for all KEX shares at THB 5.50
• Why is SF Holding doing this, & how could its int’l express business change?

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess Standard Profil’s ESG as “Adequate”, in line with its “Adequate” Environmental, Social and Governance scores. Controversies are “Immaterial”, but Disclosure is “Weak”. 
• Standard Profil (SP) is a European manufacturer of automotive sealing solutions.

• We discuss the potential KOSPI200 rebalance candidates in June 2024. In the past several years, there have been a lot of alpha generating stocks arising from the KOSPI200 rebalances.
• The following companies are likely candidates which could be included in KOSPI200 rebalance in June 2024, including Posco DX, Doosan Robotics, Hyosung Heavy Industries Corp, and DS Dansuk. 
• For the potential exclusion candidates, we included 10 stocks that are in the bottom 5% market caps in KOSPI200.

• Sumitomo Chemical (4005 JP) and Mizuho Trust & Banking are looking to raise around US$180m through the sale of their stake in Inabata & Co (8098 JP).
• The deal is a large one to digest, at 90 days of three month ADV and 15% of current mcap. 
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• We revisit FY24 prospects by highlighting that historical full service carrier (FSC) earnings seasonality suggests group EBIT guidance of ¥130bn is very conservative.
• FSC FY24 EBIT guidance of ¥80bn implies only ¥9bn in 2H, 12% of 1H’s ¥71bn, whereas historically 2H has represented 74-83% of 1H. We model ¥59bn or 84% in 2H.
• Our ¥176.5bn group EBIT for FY24 is 36% above guidance but also 27% above Visible Alpha consensus, largely due to lower costs, which position JAL strongly for the long-term.

• Ferrotec shares have dropped by a third since last July and are now selling at 8.2x EPS guidance and 0.6x book value.
• Sales and operating should start to recover in 2H of FY Mar-24, led by power semiconductor substrates.
• Buy for the upturn in the semiconductor cycle and capacity expansion in Japan, China and Malaysia. No significant damage from the Noto Peninsula earthquake has been reported.

• Kerry Logistics Network will pay a special dividend in the form of KEX shares
• This will trigger a general offer by SF Holding for all KEX shares at THB 5.50
• Why is SF Holding doing this, & how could its int’l express business change?

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess Standard Profil’s ESG as “Adequate”, in line with its “Adequate” Environmental, Social and Governance scores. Controversies are “Immaterial”, but Disclosure is “Weak”. 
• Standard Profil (SP) is a European manufacturer of automotive sealing solutions.

• On Friday after the close, Inabata & Co (8098 JP) announced Sumitomo Chemical (4005 JP) would sell down a large stake in a ~$200mm secondary equity offering. 
• Mizuho Bank’s Retirement Benefit Trust account sells down too. Sumitomo Chem will keep 10+% and other crossholders remain. 
• This is “big” at 80 days of ADV with limited early index demand, but a 10% fall would make this cheap enough to buy vs Peers.

• The share price has increased by around 20% since mid-last year.
• A new revenue stream from the booking fee through the Zig app and calls that, albeit small, it was never possible to share upside with cabbies before. 
• Extension from 15 days to 30 days visa-free for Chinese tourists to come to Singapore on early 2024. 

• Human services company Millennium Services Group Ltd (ASX:MIL) has entered a Scheme of Arrangement with an entity associated with Softbank Robotics Singapore for the acquisition of 100% of shares at $1.15/share cash.
• Shareholders also have the option to accept a mix of cash and scrip in the new unlisted entity, with certain management committing not less than a total of 30% for this option.
• The bid price represents an 89% premium to the last RaaS update note (October 23) and 360% premium from July 1, 2023. 

• On Friday after the close, Inabata & Co (8098 JP) announced Sumitomo Chemical (4005 JP) would sell down a large stake in a ~$200mm secondary equity offering. 
• Mizuho Bank’s Retirement Benefit Trust account sells down too. Sumitomo Chem will keep 10+% and other crossholders remain. 
• This is “big” at 80 days of ADV with limited early index demand, but a 10% fall would make this cheap enough to buy vs Peers.

• The share price has increased by around 20% since mid-last year.
• A new revenue stream from the booking fee through the Zig app and calls that, albeit small, it was never possible to share upside with cabbies before. 
• Extension from 15 days to 30 days visa-free for Chinese tourists to come to Singapore on early 2024. 

• Human services company Millennium Services Group Ltd (ASX:MIL) has entered a Scheme of Arrangement with an entity associated with Softbank Robotics Singapore for the acquisition of 100% of shares at $1.15/share cash.
• Shareholders also have the option to accept a mix of cash and scrip in the new unlisted entity, with certain management committing not less than a total of 30% for this option.
• The bid price represents an 89% premium to the last RaaS update note (October 23) and 360% premium from July 1, 2023. 

• Our base case valuation of Hyundai Hyms is implied target price of 8,025 won per share, which is 27% higher than the high end of the IPO price range. 
• We believe Hyundai Hyms’ valuation premium to the comps is appropriate due to much stronger operating profit growth and its strong relationships with HD Hyundai Heavy Industries.
• Hyundai Hyms’s main business includes shipbuilding equipment and related services. The company manufactures a wide variety of items necessary for ship construction, such as ship unit blocks and piping manufacturing.

• Last week Kerry Logistics Network (636 HK) (KLN) announced it would in-specie its entire 52.1% stake in Kerry Express Thailand (KEX TB) (KET).
• As S.F. Holding (002352 CH) holds a controlling 51.5% stake in KLN after the 2021 partial Offer, it will hold 26.8% in KET post-in-specie. That triggers an unconditional MTO.  
• The MTO price will be THB5.50/share. The key regulatory approval is Thai SFC. That won’t be an issue. 

• Our updated analysis suggests that JAL’s FY24 to March 2024 EBIT guidance of  ¥ 130bn remains conservative. We see  ¥ 177bn as achievable unless forward bookings weaken.
• Our analysis of JAL’s management of inflation highlights it is outperforming many APAC and global peers, keeping unit cost increases to a minimum. 
• Reduced overheads have proved the key driver of inflation avoidance, while stable unit personnel costs contrast starkly with US carriers in particular; JAL’s largest international market.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).

We assess Almaviva’s ESG as “Adequate”, in line with its Environmental and Governance scores. The company has a “Strong” score for the Social pillar. Controversies are “Immaterial” and Disclosure is “Adequate”.

Almaviva is an Italian company with a focus on IT services and business process outsourcing (BPO) in customer relationship management (CRM).

• Our base case valuation of Hyundai Hyms is implied target price of 8,025 won per share, which is 27% higher than the high end of the IPO price range. 
• We believe Hyundai Hyms’ valuation premium to the comps is appropriate due to much stronger operating profit growth and its strong relationships with HD Hyundai Heavy Industries.
• Hyundai Hyms’s main business includes shipbuilding equipment and related services. The company manufactures a wide variety of items necessary for ship construction, such as ship unit blocks and piping manufacturing.

• Last week Kerry Logistics Network (636 HK) (KLN) announced it would in-specie its entire 52.1% stake in Kerry Express Thailand (KEX TB) (KET).
• As S.F. Holding (002352 CH) holds a controlling 51.5% stake in KLN after the 2021 partial Offer, it will hold 26.8% in KET post-in-specie. That triggers an unconditional MTO.  
• The MTO price will be THB5.50/share. The key regulatory approval is Thai SFC. That won’t be an issue. 

• Our updated analysis suggests that JAL’s FY24 to March 2024 EBIT guidance of  ¥ 130bn remains conservative. We see  ¥ 177bn as achievable unless forward bookings weaken.
• Our analysis of JAL’s management of inflation highlights it is outperforming many APAC and global peers, keeping unit cost increases to a minimum. 
• Reduced overheads have proved the key driver of inflation avoidance, while stable unit personnel costs contrast starkly with US carriers in particular; JAL’s largest international market.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).

We assess Almaviva’s ESG as “Adequate”, in line with its Environmental and Governance scores. The company has a “Strong” score for the Social pillar. Controversies are “Immaterial” and Disclosure is “Adequate”.

Almaviva is an Italian company with a focus on IT services and business process outsourcing (BPO) in customer relationship management (CRM).