Industrials

• We had a chance talking to the company about key topics about outlook of passenger traffic, recovery of duty-free sales and details about the arbitration.
• The takeaway is mixed as we see both positives and negatives relative to our expectations.
• We cut our forecast of 2023 net profit from RMB400 million to RMB300 million and expect the earnings to be back-end loaded.

• There were no surprises and Inflexion launched the offer for DWF Group (DWF LN) well ahead of the 7 August PUSU deadline. DWF shares increased by c. 15%.
• The final proposal maintains what was announced: 97p in cash plus a 3p dividend,8.0x EV/Fwd NTM EBIT and 8.2x Fwd P/E, and an 18% discount to the IPO price.
• The closing share price pre-first announcement was 56.5p, taking it as break, the market is pricing a 94% chance to complete the deal. Spread is 2.6%/6.2% (gross/annualised). Long.

• Rates remain depressed but stable, and easier Y/Y comps will arrive in late Summer
• Fuel costs should be a tailwind in Q2 results; Danish giant Maersk reports on August 4th
• We expect Q2/H1 results to support our view that the worst of the storm has passed

• In the past several years, the agricultural market has been subject to escalating uncertainty, catalyzed by a triad of disruptive forces, including a global pandemic, the geopolitical uncertainty exemplified by the ongoing war in Ukraine, and unpredictable climatic events leading to droughts and diminished yields.
• These factors have injected volatility into the market, causing prices to move unpredictably due to periods of shortages and excess supply. 
• Despite the volatility, however, prices remain on a long-term upward trajectory.

• We had a chance talking to the company about key topics about outlook of passenger traffic, recovery of duty-free sales and details about the arbitration.
• The takeaway is mixed as we see both positives and negatives relative to our expectations.
• We cut our forecast of 2023 net profit from RMB400 million to RMB300 million and expect the earnings to be back-end loaded.

• There were no surprises and Inflexion launched the offer for DWF Group (DWF LN) well ahead of the 7 August PUSU deadline. DWF shares increased by c. 15%.
• The final proposal maintains what was announced: 97p in cash plus a 3p dividend,8.0x EV/Fwd NTM EBIT and 8.2x Fwd P/E, and an 18% discount to the IPO price.
• The closing share price pre-first announcement was 56.5p, taking it as break, the market is pricing a 94% chance to complete the deal. Spread is 2.6%/6.2% (gross/annualised). Long.

• Rates remain depressed but stable, and easier Y/Y comps will arrive in late Summer
• Fuel costs should be a tailwind in Q2 results; Danish giant Maersk reports on August 4th
• We expect Q2/H1 results to support our view that the worst of the storm has passed

• In the past several years, the agricultural market has been subject to escalating uncertainty, catalyzed by a triad of disruptive forces, including a global pandemic, the geopolitical uncertainty exemplified by the ongoing war in Ukraine, and unpredictable climatic events leading to droughts and diminished yields.
• These factors have injected volatility into the market, causing prices to move unpredictably due to periods of shortages and excess supply. 
• Despite the volatility, however, prices remain on a long-term upward trajectory.

• Tryt Inc (9164 JP) priced its IPO at JPY1,200 per share to raise gross proceeds of US$339 million. The shares will start trading on 24 July.
• We previously discussed the IPO in TRYT IPO: The Bull Case, TRYT IPO: The Bear Case, TRYT IPO: Valuation Insights and TRYT IPO: Revised IPO Price Range Remains Unattractive. 
• The market sentiment on the sector has broadly remained unchanged since the release of the prospectus. Our analysis suggests that Tryt is, at best, fully priced at the IPO price.

• As expected, Rohm has decided to invest ¥300 billion in the JIP-led buyout of Toshiba: ¥100 billion in voting equity shares and ¥200 billion in non-voting preferred shares. 
• This would make Toshiba an equity-method affiliate of Rohm, facilitating synergetic cooperation in power semiconductors. The investment is large, but Rohm would still have a sound balance sheet.
• Rohm also plans to buy Solar Frontier’s Kunitomi factory to meet SiC power device capacity requirements through 2030. Investors can now focus on profit growth, which should resume next year.

• Keisei Electric (9009 JP)‘s valuation has deviated from Oriental Land (4661 JP)‘s since the proposed expansion of Tokyo Disney Sea, Fantasy Springs. That bifurcation should now reverse. 
• Don’t expect a serious fight in Nidec (6594 JP)‘s hostile for Takisawa Machine Tool (6121 JP).  Fanuc could counter. It is possible others could step up but we wouldn’t know. 
• On the back of the news to spin off and list some logistics ops, Shenzhen International (152 HK) is probably a buy on weakness vs Stub Ops Peers. 

• We published on Polycab as our 2023 high conviction idea on Dec 25 2022. Since then, the stock has been up 75%+, exceeding our 65%+ upside FY26 target.
• The steep rise was probably driven by strong earnings growth on the back of upbeat demand environment led by healthy domestic capex, rising exports and robust housing demand.
• At the current valuation, Polycab is richly valued and we assign a “SELL” rating. Polycab’s current market cap at INR 68700cr+ is well above our FY26 projection of INR 63500cr+.

• Tryt Inc (9164 JP) priced its IPO at JPY1,200 per share to raise gross proceeds of US$339 million. The shares will start trading on 24 July.
• We previously discussed the IPO in TRYT IPO: The Bull Case, TRYT IPO: The Bear Case, TRYT IPO: Valuation Insights and TRYT IPO: Revised IPO Price Range Remains Unattractive. 
• The market sentiment on the sector has broadly remained unchanged since the release of the prospectus. Our analysis suggests that Tryt is, at best, fully priced at the IPO price.

• As expected, Rohm has decided to invest ¥300 billion in the JIP-led buyout of Toshiba: ¥100 billion in voting equity shares and ¥200 billion in non-voting preferred shares. 
• This would make Toshiba an equity-method affiliate of Rohm, facilitating synergetic cooperation in power semiconductors. The investment is large, but Rohm would still have a sound balance sheet.
• Rohm also plans to buy Solar Frontier’s Kunitomi factory to meet SiC power device capacity requirements through 2030. Investors can now focus on profit growth, which should resume next year.

• Keisei Electric (9009 JP)‘s valuation has deviated from Oriental Land (4661 JP)‘s since the proposed expansion of Tokyo Disney Sea, Fantasy Springs. That bifurcation should now reverse. 
• Don’t expect a serious fight in Nidec (6594 JP)‘s hostile for Takisawa Machine Tool (6121 JP).  Fanuc could counter. It is possible others could step up but we wouldn’t know. 
• On the back of the news to spin off and list some logistics ops, Shenzhen International (152 HK) is probably a buy on weakness vs Stub Ops Peers. 

• We published on Polycab as our 2023 high conviction idea on Dec 25 2022. Since then, the stock has been up 75%+, exceeding our 65%+ upside FY26 target.
• The steep rise was probably driven by strong earnings growth on the back of upbeat demand environment led by healthy domestic capex, rising exports and robust housing demand.
• At the current valuation, Polycab is richly valued and we assign a “SELL” rating. Polycab’s current market cap at INR 68700cr+ is well above our FY26 projection of INR 63500cr+.

• The Korean government has initiated the M&A privatization of HMM, the largest container shipping company in Korea. 
• We are Negative on the shares of HMM Co., Ltd. (011200 KS) in the next 6-12 months. We expect additional 20% to 30%+ downside risk on HMM in this period.
• Although HMM has a strong balance sheet, more investors are likely to emphasize on the negatives including excessive share dilution risk and worsening environment for the global shipping industry.

• Ownership levels in Voltronic Power Technology rise as EM funds open new positions.
• A record 15.7% of EM long-only funds own a position, with Wasatch and Morgan Stanley among the high conviction holders.
• Voltronic Power Technology is now the 12th most widely owned stock in Taiwan and the 7th most overweighted company.  

• The Korean government has initiated the M&A privatization of HMM, the largest container shipping company in Korea. 
• We are Negative on the shares of HMM Co., Ltd. (011200 KS) in the next 6-12 months. We expect additional 20% to 30%+ downside risk on HMM in this period.
• Although HMM has a strong balance sheet, more investors are likely to emphasize on the negatives including excessive share dilution risk and worsening environment for the global shipping industry.

• Ownership levels in Voltronic Power Technology rise as EM funds open new positions.
• A record 15.7% of EM long-only funds own a position, with Wasatch and Morgan Stanley among the high conviction holders.
• Voltronic Power Technology is now the 12th most widely owned stock in Taiwan and the 7th most overweighted company.  

• Nidec reported strong Q1 results – operating profit of ¥60.2 billion (+35% YoY), significantly above Street expectations of ¥45 billion
• The big positive was a rebound in profitability following successful structural cost cuts last year. The key negative is a cut to unit shipments for key growth driver, E-axles. 
• We remain bearish for now given valuation of 25x EV/EBIT.  We are not sure that the new growth driver in Motion & Energy will offset lowered expectations for EVs. 

• CSI 300 represents the 300 largest stocks by market capitalization and liquidity from the entire universe of Shanghai and Shenzhen Stock Exchanges. CSI 500 represents the next largest 500 names.
• During the periodic index rebalance events, a large number of stocks move into or out of these indices giving rise to significant flow events and attractive trading opportunities.
• In this insight, we take a brief look at the index selection methodology and the historical price and volume performance of the CSI 300/500 index rebalance baskets.

• Tryt Inc (9164 JP) raised around US$344m in its Japan IPO. The IPO consisted of 100% secondary shares.
• Tryt Inc (Tryt) offers employee placement services and temporary staffing services for the elderly care, nursing care and childcare workers segments.
• In this note we will talk about the trading dynamics.

• FedEx Corporation delivered a mixed set of results for the previous quarter, with revenues well below analyst expectations but managed earnings beat.
• Though total revenue declined due to soft demand and yield pressure in international markets, the company maintained revenue quality with disciplined pricing.
• In the quarter, they launched FedEx Sustainability Insights to improve consumer access to emissions information.

• Expeditors International of Washington delivered a mixed set of results in its most recent result, with revenues falling short of Wall Street expectations but above-par earnings.
• In addition to their impressive brokerage operations, Expeditors has successfully leveraged technology and digital solutions to streamline their processes and enhance customer experience.
• We give Expeditors International of Washington a ‘Underperform’ rating with a revised target price.

• Fastenal had a disappointing second quarter of 2023 as it failed to meet the revenue expectations of analysts despite a 5.9% increase in daily sales.
• Its overall business activity has moderated since March, culminating in June with a 4.7% daily sales growth.
• We give Fastenal Company a ‘Hold’ rating with a revised target price.

• Nidec reported strong Q1 results – operating profit of ¥60.2 billion (+35% YoY), significantly above Street expectations of ¥45 billion
• The big positive was a rebound in profitability following successful structural cost cuts last year. The key negative is a cut to unit shipments for key growth driver, E-axles. 
• We remain bearish for now given valuation of 25x EV/EBIT.  We are not sure that the new growth driver in Motion & Energy will offset lowered expectations for EVs. 

• CSI 300 represents the 300 largest stocks by market capitalization and liquidity from the entire universe of Shanghai and Shenzhen Stock Exchanges. CSI 500 represents the next largest 500 names.
• During the periodic index rebalance events, a large number of stocks move into or out of these indices giving rise to significant flow events and attractive trading opportunities.
• In this insight, we take a brief look at the index selection methodology and the historical price and volume performance of the CSI 300/500 index rebalance baskets.

• Tryt Inc (9164 JP) raised around US$344m in its Japan IPO. The IPO consisted of 100% secondary shares.
• Tryt Inc (Tryt) offers employee placement services and temporary staffing services for the elderly care, nursing care and childcare workers segments.
• In this note we will talk about the trading dynamics.

• FedEx Corporation delivered a mixed set of results for the previous quarter, with revenues well below analyst expectations but managed earnings beat.
• Though total revenue declined due to soft demand and yield pressure in international markets, the company maintained revenue quality with disciplined pricing.
• In the quarter, they launched FedEx Sustainability Insights to improve consumer access to emissions information.

• Expeditors International of Washington delivered a mixed set of results in its most recent result, with revenues falling short of Wall Street expectations but above-par earnings.
• In addition to their impressive brokerage operations, Expeditors has successfully leveraged technology and digital solutions to streamline their processes and enhance customer experience.
• We give Expeditors International of Washington a ‘Underperform’ rating with a revised target price.

• Fastenal had a disappointing second quarter of 2023 as it failed to meet the revenue expectations of analysts despite a 5.9% increase in daily sales.
• Its overall business activity has moderated since March, culminating in June with a 4.7% daily sales growth.
• We give Fastenal Company a ‘Hold’ rating with a revised target price.

• Using data from the close on 19 July, there could be 5 changes to the Yuanta/​P-Shares Taiwan Top 50 ETF and 2 deletions for the Yuanta/​P-Shares Taiwan Dividend Plus ETF.
• Stocks that are expected to benefit from the AI revolution could gain ETF inclusion while shipping stocks are the ones expected to be deleted from the ETF.
• There has been a huge increase in shorts on some of the potential inclusions and on most of the potential deletions. That will affect how stocks trade near term.

• 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 September 2023 Rebalance.
• Some semiconductor/electronic component stocks have seen their share prices skyrocket in recent months due to AI-related excitement causing drastic shifts in Leaderboard rankings.
• In my last insight, I expected two T50 changes and one T100 change. Now I expect five T50 changes and three T100 changes.

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

• The Ministry of Land, Infrastructure and Transport’s investigation revealed that the collapse of GS E&C’s underground parking lot was due to deficiencies in design, construction, and supervision.
• As a response, GS E&C will undergo a comprehensive reconstruction of the entire apartment complex, costing approximately KRW 300 billion, which is equivalent to approximately USD 264 million.
• ESG risks have risen due to consumer relations regarding occupational health and safety and risk oversight, with GS E&C’s company risk rating at a ‘very high’ level of 3.1.

• Herein we revise and update MLKN estimates following MillerKnoll’s FY23 earnings report and FY24 guidance.

• Our 1QFY24 diluted non-GAAP EPS estimate is now $0.20, down $0.10 from our previous (reduced) $0.30 estimate.

• Our FY24 annual estimate is now $1.82 (down from $2.00), below the midpoint of the $1.70-$2.00 management outlook.

• Using data from the close on 19 July, there could be 5 changes to the Yuanta/​P-Shares Taiwan Top 50 ETF and 2 deletions for the Yuanta/​P-Shares Taiwan Dividend Plus ETF.
• Stocks that are expected to benefit from the AI revolution could gain ETF inclusion while shipping stocks are the ones expected to be deleted from the ETF.
• There has been a huge increase in shorts on some of the potential inclusions and on most of the potential deletions. That will affect how stocks trade near term.

• 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 September 2023 Rebalance.
• Some semiconductor/electronic component stocks have seen their share prices skyrocket in recent months due to AI-related excitement causing drastic shifts in Leaderboard rankings.
• In my last insight, I expected two T50 changes and one T100 change. Now I expect five T50 changes and three T100 changes.

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

• The Ministry of Land, Infrastructure and Transport’s investigation revealed that the collapse of GS E&C’s underground parking lot was due to deficiencies in design, construction, and supervision.
• As a response, GS E&C will undergo a comprehensive reconstruction of the entire apartment complex, costing approximately KRW 300 billion, which is equivalent to approximately USD 264 million.
• ESG risks have risen due to consumer relations regarding occupational health and safety and risk oversight, with GS E&C’s company risk rating at a ‘very high’ level of 3.1.

• Herein we revise and update MLKN estimates following MillerKnoll’s FY23 earnings report and FY24 guidance.

• Our 1QFY24 diluted non-GAAP EPS estimate is now $0.20, down $0.10 from our previous (reduced) $0.30 estimate.

• Our FY24 annual estimate is now $1.82 (down from $2.00), below the midpoint of the $1.70-$2.00 management outlook.