Industrials

• We argue that the top 20 listed construction companies in Korea are likely to underperform KOSPI in 2024 mainly due to the excessive risks in the housing/commercial real estate sectors.
• We expect the share prices of these 20 domestic construction companies to fall by at least 15%-20%+ on average in the next 6-12 months. 
• On 2 January 2024, Financial Supervisory Service (FSS) announced that there will be new reporting requirements for PF loans of Korean construction companies starting 2023 annual reports.

• We argue that the top 20 listed construction companies in Korea are likely to underperform KOSPI in 2024 mainly due to the excessive risks in the housing/commercial real estate sectors.
• We expect the share prices of these 20 domestic construction companies to fall by at least 15%-20%+ on average in the next 6-12 months. 
• On 2 January 2024, Financial Supervisory Service (FSS) announced that there will be new reporting requirements for PF loans of Korean construction companies starting 2023 annual reports.

• Japan Airline’s Flight JL516 operated by a two-year-old Airbus A350-900 burst into flames upon landing at Haneda Airport, apparently hitting a small Japanese Coast Guard aircraft  
• 379 passengers and crew were safely evacuated, but five of six crew on a Japanese coast guard aircraft were unaccounted for
• Haneda Airport runaways are all closed, aircraft heading to Haneda are diverted to other airports or flights aborted altogether   

• Ushio has tied up with Applied Materials (AMAT) to develop lithography systems for package substrates using AMAT’s Digital Lithography Technology.
• This should keep the focus on Ushio’s more advanced technologies (which also include EUV mask inspection light sources) and its potential to rebound with the semiconductor cycle.
• The shares have dropped back 10% since mid-December, providing an entry point. 3Q results are scheduled to be announced on February 9.

• Hyundai Hyms is getting ready to complete its IPO in KOSDAQ in January. The total IPO offering amount is 43.5 billion to 54.9 billion won. 
• The company is offering 8.7 million shares in this IPO, of which 40% are old shares and 60% are new shares. 
• Hyundai Hyms specializes in shipbuilding equipment. Hyundai Hyms’s main business includes shipbuilding equipment and related services. 

• In this insight, we take a look at the names leading the race to become ADDs/DELs for the T50 and T100 Indices for the March 2024 Index Rebalance.
• As things stand, I see one change for the T50 index and one more change for the T100 index.
• TDIV member Bizlink Holding (3665 TT) is very close to getting deleted from the T100 index and that could have significant TDIV flow implications too.

• We discuss the end of the mandatory lock-up periods for 41 stocks in Korea in January 2024, among which 4 are in KOSPI and 37 are in KOSDAQ.
• These 41 stocks on average could be subject to further selling pressures in January and could underperform relative to the market.
• Among these 41 stocks, top five market cap stocks include Posco International, Doosan Robotics, Rainbow Robotics, Qualitas Semiconductor, and PhilEnergy.

Cyclical weakness in Carr’s Group’s Speciality Agriculture business has affected the company’s fortunes of late. However, the new management team, a strong net cash balance sheet and a record order book in the Engineering division offer optimism. Operational progress, particularly a reversal of fortunes in Speciality Agriculture, should rebuild confidence and a reduction in the current discount to our view of the underlying value.

• In this insight we preview J&T’s maiden earnings report as a listed company
• We focus on revenue growth & margin trends in the China & SE Asia businesses
• We fear slowing organic growth & margin deterioration could spook investors

• Japan Airline’s Flight JL516 operated by a two-year-old Airbus A350-900 burst into flames upon landing at Haneda Airport, apparently hitting a small Japanese Coast Guard aircraft  
• 379 passengers and crew were safely evacuated, but five of six crew on a Japanese coast guard aircraft were unaccounted for
• Haneda Airport runaways are all closed, aircraft heading to Haneda are diverted to other airports or flights aborted altogether   

• Ushio has tied up with Applied Materials (AMAT) to develop lithography systems for package substrates using AMAT’s Digital Lithography Technology.
• This should keep the focus on Ushio’s more advanced technologies (which also include EUV mask inspection light sources) and its potential to rebound with the semiconductor cycle.
• The shares have dropped back 10% since mid-December, providing an entry point. 3Q results are scheduled to be announced on February 9.

• Hyundai Hyms is getting ready to complete its IPO in KOSDAQ in January. The total IPO offering amount is 43.5 billion to 54.9 billion won. 
• The company is offering 8.7 million shares in this IPO, of which 40% are old shares and 60% are new shares. 
• Hyundai Hyms specializes in shipbuilding equipment. Hyundai Hyms’s main business includes shipbuilding equipment and related services. 

• In this insight, we take a look at the names leading the race to become ADDs/DELs for the T50 and T100 Indices for the March 2024 Index Rebalance.
• As things stand, I see one change for the T50 index and one more change for the T100 index.
• TDIV member Bizlink Holding (3665 TT) is very close to getting deleted from the T100 index and that could have significant TDIV flow implications too.

• We discuss the end of the mandatory lock-up periods for 41 stocks in Korea in January 2024, among which 4 are in KOSPI and 37 are in KOSDAQ.
• These 41 stocks on average could be subject to further selling pressures in January and could underperform relative to the market.
• Among these 41 stocks, top five market cap stocks include Posco International, Doosan Robotics, Rainbow Robotics, Qualitas Semiconductor, and PhilEnergy.

Cyclical weakness in Carr’s Group’s Speciality Agriculture business has affected the company’s fortunes of late. However, the new management team, a strong net cash balance sheet and a record order book in the Engineering division offer optimism. Operational progress, particularly a reversal of fortunes in Speciality Agriculture, should rebuild confidence and a reduction in the current discount to our view of the underlying value.

• In this insight we preview J&T’s maiden earnings report as a listed company
• We focus on revenue growth & margin trends in the China & SE Asia businesses
• We fear slowing organic growth & margin deterioration could spook investors

• Our estimations for FY 2023 annual revenue range at around £24,234 million and for 2024 at around £26,415 million.
• The company’s annual revenue reached £21,258 million in 2022 compared to £19,521 million in 2021, posting an increase by 8.9%. BAE Systems operating profit for FY 2022 was £1,989 million, increased by 11.87% compared to £1,778 million for the corresponding period of 2021.
• In addition, EBITDA amounted to £3,151 million in 2022, while EBT and EATAM amounted to £1,989 million and £1,591 million respectively.

• CIMC Enric Holdings (3899 HK) has applied for its liquid food segment, under CLTP, to be quoted on the NEEQ. Subsequently, it plans to be listed on the BSE.
• The move will not only provide an additional funding channel for this business but also enhance the valuations of CIMC Enric. BSE’s IPOs have historically performed very well.
• Upon successful listing, the attributable market cap of its two listed subsidiaries will be greater than its current market cap. This means its clean energy business is free.

• Our estimations for FY 2023 annual revenue range at around £24,234 million and for 2024 at around £26,415 million.
• The company’s annual revenue reached £21,258 million in 2022 compared to £19,521 million in 2021, posting an increase by 8.9%. BAE Systems operating profit for FY 2022 was £1,989 million, increased by 11.87% compared to £1,778 million for the corresponding period of 2021.
• In addition, EBITDA amounted to £3,151 million in 2022, while EBT and EATAM amounted to £1,989 million and £1,591 million respectively.

• CIMC Enric Holdings (3899 HK) has applied for its liquid food segment, under CLTP, to be quoted on the NEEQ. Subsequently, it plans to be listed on the BSE.
• The move will not only provide an additional funding channel for this business but also enhance the valuations of CIMC Enric. BSE’s IPOs have historically performed very well.
• Upon successful listing, the attributable market cap of its two listed subsidiaries will be greater than its current market cap. This means its clean energy business is free.

• The gradual upward trend in monthly sales, which has continued through November, has further to go in our estimation. 
• At 22x EPS guidance for FY Mar-24, the shares are at the low end of their 5-year P/E range.
• Guidance remains unchanged. 3Q results are due to be announced at the end of January

• Deere & Co delivered an all-around beat in the previous quarter, with operating margins nearly reaching 22%, resulting in an impressive operating cash flow of nearly $12 billion.
• This success was attributed to robust market demand, effective operational execution, and improved production costs across the various business sectors.
• In small ag and turf, net sales in the fourth quarter were down 13%, totaling $3.094 billion, driven by lower shipment volumes.

• Emerson Electric’s results were disappointing as they could not meet Wall Street’s revenue and earnings expectations.
• Operational excellence was evident through the execution of the Emerson management system, driving remarkable results.
• The underlying sales for 2023 grew by 10%, gross profit expanded by 330 basis points to 49%, and adjusted segment EBITA expanded by 220 basis points to 25%.

• J.B.
• Hunt Transport Services delivered a disappointing set of results as it was unable to meet Wall Street’s revenue and earnings expectations.
• Demand is slightly increasing in some end markets, focusing on delivering big and bulky items to customers’ homes.

• Jacobs Solution Inc. delivered a mixed set of results in its most recent quarter with revenues above Wall Street expectations but below-par earnings.
• Emphasizing the strategic synergies and shared operational benefits, the combination aims to be tax-efficient for Jacobs’ shareholders, with an estimated $13 billion in annual revenue and significant cost synergies.
• Post-transaction, Jacobs anticipates emerging as a well-capitalized critical infrastructure and sustainability leader, building on the records set in fiscal year 2023 for revenue and free cash flow generation.

• Lyft, Inc. delivered mixed results for the previous quarter, with revenues above the analyst consensus.
• A pivotal development in the quarter was the significant rise in drivers opting for Lyft, resulting in an impressive 45% year-over-year surge in the hours spent using the platform, particularly in non-incentivized hours.
• The emphasis on simplifying the earning process for drivers proved successful, maintaining a stable conversion rate even as rider demand escalated.

• Uber Technologies delivered a mixed result in the third quarter, with revenues below market expectations, but it surpassed the analyst consensus regarding earnings.
• The company reported a notable acceleration in year-on-year trip growth, reaching 25% in Q3, surpassing the growth in gross bookings for the third consecutive quarter.
• Additionally, adjusted EBITDA exceeded Q3 expectations, marking the first instance of the adjusted EBITDA margin surpassing 3%.

• Cummins delivered a mixed result in the recent quarter, with revenues above market expectations, but it failed to surpass the analyst consensus in terms of earnings.
• Cummins reported strong demand across key markets and regions, with revenues reaching $8.4 billion, a 15% increase from the previous year.
• In the quarter, Cummins successfully concluded the acquisition of two Faurecia commercial vehicle manufacturing plants in Columbus, Indiana, and Roermond, Netherlands.

• We are reiterating our Buy rating, projections and $8 price target after meeting with urban-gro management at the MJBizCon show in Las Vegas.
• As such, we remain excited over the potential for urban-gro to continue to materially grow and to begin registering positive EBITDA going forward.
• As such, we reiterate our Buy rating and $8 price target for UGRO.

• The gradual upward trend in monthly sales, which has continued through November, has further to go in our estimation. 
• At 22x EPS guidance for FY Mar-24, the shares are at the low end of their 5-year P/E range.
• Guidance remains unchanged. 3Q results are due to be announced at the end of January

• Deere & Co delivered an all-around beat in the previous quarter, with operating margins nearly reaching 22%, resulting in an impressive operating cash flow of nearly $12 billion.
• This success was attributed to robust market demand, effective operational execution, and improved production costs across the various business sectors.
• In small ag and turf, net sales in the fourth quarter were down 13%, totaling $3.094 billion, driven by lower shipment volumes.

• Emerson Electric’s results were disappointing as they could not meet Wall Street’s revenue and earnings expectations.
• Operational excellence was evident through the execution of the Emerson management system, driving remarkable results.
• The underlying sales for 2023 grew by 10%, gross profit expanded by 330 basis points to 49%, and adjusted segment EBITA expanded by 220 basis points to 25%.

• J.B.
• Hunt Transport Services delivered a disappointing set of results as it was unable to meet Wall Street’s revenue and earnings expectations.
• Demand is slightly increasing in some end markets, focusing on delivering big and bulky items to customers’ homes.

• Jacobs Solution Inc. delivered a mixed set of results in its most recent quarter with revenues above Wall Street expectations but below-par earnings.
• Emphasizing the strategic synergies and shared operational benefits, the combination aims to be tax-efficient for Jacobs’ shareholders, with an estimated $13 billion in annual revenue and significant cost synergies.
• Post-transaction, Jacobs anticipates emerging as a well-capitalized critical infrastructure and sustainability leader, building on the records set in fiscal year 2023 for revenue and free cash flow generation.

• Lyft, Inc. delivered mixed results for the previous quarter, with revenues above the analyst consensus.
• A pivotal development in the quarter was the significant rise in drivers opting for Lyft, resulting in an impressive 45% year-over-year surge in the hours spent using the platform, particularly in non-incentivized hours.
• The emphasis on simplifying the earning process for drivers proved successful, maintaining a stable conversion rate even as rider demand escalated.

• Uber Technologies delivered a mixed result in the third quarter, with revenues below market expectations, but it surpassed the analyst consensus regarding earnings.
• The company reported a notable acceleration in year-on-year trip growth, reaching 25% in Q3, surpassing the growth in gross bookings for the third consecutive quarter.
• Additionally, adjusted EBITDA exceeded Q3 expectations, marking the first instance of the adjusted EBITDA margin surpassing 3%.

• Cummins delivered a mixed result in the recent quarter, with revenues above market expectations, but it failed to surpass the analyst consensus in terms of earnings.
• Cummins reported strong demand across key markets and regions, with revenues reaching $8.4 billion, a 15% increase from the previous year.
• In the quarter, Cummins successfully concluded the acquisition of two Faurecia commercial vehicle manufacturing plants in Columbus, Indiana, and Roermond, Netherlands.

• We are reiterating our Buy rating, projections and $8 price target after meeting with urban-gro management at the MJBizCon show in Las Vegas.
• As such, we remain excited over the potential for urban-gro to continue to materially grow and to begin registering positive EBITDA going forward.
• As such, we reiterate our Buy rating and $8 price target for UGRO.

• Drilling services company Boart Longyear (BLY AU) has agreed to a takeover by American Industrial Partners. Boart’s five largest shareholders – collectively holding 98.86% of shares out – are supportive.
• Highly-Leveraged Boart copped the brunt of the GFC, and never fully recovered. American Industrial Partners’ Offer values Boart at A$543mn against its 2007 IPO value of A$2.3bn.
• The takeover is expected to be completed in the first quarter of 2024. This is done.

• Drilling services company Boart Longyear (BLY AU) has agreed to a takeover by American Industrial Partners. Boart’s five largest shareholders – collectively holding 98.86% of shares out – are supportive.
• Highly-Leveraged Boart copped the brunt of the GFC, and never fully recovered. American Industrial Partners’ Offer values Boart at A$543mn against its 2007 IPO value of A$2.3bn.
• The takeover is expected to be completed in the first quarter of 2024. This is done.