Industrials

• Toshiba Corp (6502 JP)‘s Board is clearly giving this to shareholders and saying “We did our job. Now it’s up to you.”
• Toyota Industries (6201 JP) admits to falsifying some engine emission tests. But the market dinging the company ~20% is excessive. 
• US$16bn of Meituan (3690 HK) shares from Tencent (700 HK) got delivered on 24 March 2023. That’s a lot.

• Toshiba Corp (6502 JP)‘s Board is clearly giving this to shareholders and saying “We did our job. Now it’s up to you.”
• Toyota Industries (6201 JP) admits to falsifying some engine emission tests. But the market dinging the company ~20% is excessive. 
• US$16bn of Meituan (3690 HK) shares from Tencent (700 HK) got delivered on 24 March 2023. That’s a lot.

• Toshiba released documents on the tender and a notice that the FY end dividend would be cancelled shortly after our last report was published. 
• They are interesting in that the Special Committee’s opinions are relatively frank but details on the valuation process are almost non-existent. 
• In addition, the information regarding other bids and alternatives was a little surprising to us.

• After peaking in H122, container rates have tumbled back to pre-Covid levels in Q123
• We believe core profitability has also declined to pre-Covid levels for some carriers
• Evergreen Marine Corp (2603 TT) no longer looks expensive, trading at 70-75% of replacement  cost.

• The pullback in global equities continues with the MSCI ACWI (ACWI-US) testing 1.5-month downtrend resistance while the STOXX Europe 50 tests resistance at 3800-3840.
• We expect a rejection at the 1.5-month downtrend and for the stair-step lower to continue, with our targets being $84 (December 2022 low) and potentially $75-77 (the 2022 lows).
• If ACWI-US is able to reverse above the 1.5-month downtrend, we still expect $93 to cap upside in 2023. Remain overweight Europe. Also highlighting individual stock buys on pullbacks.

• Cintas Corporation is a specialized provider of uniform rental services and has a leading market position in its domain.
• The Uniform Rental and Facility Services operational segment, which is its core business, has been growing well, particularly through organic means although the company does carry out the occasional acquisition from time to time.
• Baptista Research looks to evaluate the different credit strengths and credit risks of the company as well as a line-by-line analysis of the financial statements of the company for the past four years.

• Net profit up 3% on higher toll revenue and operating margin expansion.
• Longer term concerns remain, maintain IDR4,900 TP.
• With 62% of Indonesia’s toll roads by length, JSMR offers exposure to Indonesia’s ongoing urbanisation and infrastructure spending plans. Near term, government intervention in toll tariffs will likely weigh on the stock.

• Steelcase reported 4QFY23 on March 22 after the close, with a beat on adjusted EPS and revenues. Guidance for FY24 beat estimates, then in print.
• 4QFY23 adjusted EPS was $0.19, above our estimate of $0.12 and consensus of $0.11. GAAP EPS was $0.13, above our estimate of $0.06. 4QFY23 revenue of $802 million was a ~$50 million positive surprise.
• The positive earnings and revenue surprises were due primarily to core corporate business in the Americas and EMEA segments.

• This is our first report on Cintas Corporation, a specialized provider of uniform rental services.
• Its revenue increased 13.1% to $2.17 billion in the second quarter and each segment experienced double-digit revenue growth.
• The Uniform Rental and Facility Services operational segment’s revenue increased from $1.54 billion to $1.71 billion.

• Toshiba released documents on the tender and a notice that the FY end dividend would be cancelled shortly after our last report was published. 
• They are interesting in that the Special Committee’s opinions are relatively frank but details on the valuation process are almost non-existent. 
• In addition, the information regarding other bids and alternatives was a little surprising to us.

• After peaking in H122, container rates have tumbled back to pre-Covid levels in Q123
• We believe core profitability has also declined to pre-Covid levels for some carriers
• Evergreen Marine Corp (2603 TT) no longer looks expensive, trading at 70-75% of replacement  cost.

• The pullback in global equities continues with the MSCI ACWI (ACWI-US) testing 1.5-month downtrend resistance while the STOXX Europe 50 tests resistance at 3800-3840.
• We expect a rejection at the 1.5-month downtrend and for the stair-step lower to continue, with our targets being $84 (December 2022 low) and potentially $75-77 (the 2022 lows).
• If ACWI-US is able to reverse above the 1.5-month downtrend, we still expect $93 to cap upside in 2023. Remain overweight Europe. Also highlighting individual stock buys on pullbacks.

• Cintas Corporation is a specialized provider of uniform rental services and has a leading market position in its domain.
• The Uniform Rental and Facility Services operational segment, which is its core business, has been growing well, particularly through organic means although the company does carry out the occasional acquisition from time to time.
• Baptista Research looks to evaluate the different credit strengths and credit risks of the company as well as a line-by-line analysis of the financial statements of the company for the past four years.

• Net profit up 3% on higher toll revenue and operating margin expansion.
• Longer term concerns remain, maintain IDR4,900 TP.
• With 62% of Indonesia’s toll roads by length, JSMR offers exposure to Indonesia’s ongoing urbanisation and infrastructure spending plans. Near term, government intervention in toll tariffs will likely weigh on the stock.

• Steelcase reported 4QFY23 on March 22 after the close, with a beat on adjusted EPS and revenues. Guidance for FY24 beat estimates, then in print.
• 4QFY23 adjusted EPS was $0.19, above our estimate of $0.12 and consensus of $0.11. GAAP EPS was $0.13, above our estimate of $0.06. 4QFY23 revenue of $802 million was a ~$50 million positive surprise.
• The positive earnings and revenue surprises were due primarily to core corporate business in the Americas and EMEA segments.

• This is our first report on Cintas Corporation, a specialized provider of uniform rental services.
• Its revenue increased 13.1% to $2.17 billion in the second quarter and each segment experienced double-digit revenue growth.
• The Uniform Rental and Facility Services operational segment’s revenue increased from $1.54 billion to $1.71 billion.

• Just post-close, the Nikkei reported Toshiba’s Board had agreed a JIP deal at “around ¥2trln.” Toshiba confirmed HOURS later indicating language was still being hashed out. And the dividend cancelled.
• Toshiba “supports” the deal because it aligns a single shareholder with management goals. They cannot recommend to general shareholders because it is too low. But JIP was the only bidder. 
• It raises the question of whether activists will submit to “Toshiba Fatigue” at what the Board admits is too low a price, or whether there is still fight left.

• The Nikkei reported today that Toshiba’s board had chosen to accept JIP’s buyout offer. 
• The purported pricing of ¥2trn is a relatively modest premium but is not a surprise and no surprise is a positive here in our view. 
• All that remains is shareholder approval and while we doubt there will be too many celebrations on that front, there is likely to be relief.

• Toshiba Corp (6502 JP) announced a pre-conditional tender offer by Japan Industrial Partners (JIP), the preferred bidder at JPY4,620 per share, a 9.7% premium to the last close price.
• The special committee opines that the offer is the best price that can be expected today, which sounds like we are recommending the offer as it is the only one.
• The offer has several negatives: a 14% price reduction during the process, below the undisturbed price, below the mid-point IFA DCF range and no serious effort on Plan B. 

• The Government of India (GoI) aims to raise around US$372m (INR30.7bn) via an offer for sale of Hindustan Aeronautics Ltd (HNAL IN) stock. 
• The floor price of INR2,450 / share is set at approximately 6.7% to Wednesday’s (22nd Mar 2023) last close. The deal represents 10.5 days of ADV. 
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• On 14 February 2023 we published a bearish recommendation in  Xinjiang Goldwind Science & Technology (2208 HK), targeting a 9.1% multi-week decline in Q1 2023.
• 2208 HK declined from 7.62 on 14 February to 6.94 on 10 March (19 trading days), a decline of 9.1%. 

• According to our NAV analysis, it suggests a base case valuation of 70,272 won per share for HD Hyundai, representing a 23% upside from current levels.
• The expected dividend yield of HD Hyundai in 2023 is 7.8% which is attractive.
• Hyundai Oilbank generated record results in the past year and this has been a key boost to the NAV of HD Hyundai. 

• 9.5% YoY growth in net profit in 1H22. Valuations undemanding but share price performance also depends on investors’ style preferences 
• Monitoring deleveraging efforts
• Aided by the rotation to value/cyclical stocks and more positive newsflow in the infrastructure sector, the stock of China Railway Construction (CRCC) has also risen in tandem, though at a smaller magnitude versus other peers.

• Green and Smart Mobility (GSM) said it will back ride-hailer Be Group‘s efforts to use electric vehicles in Vietnam.

• GSM was just launched earlier this month by Vingroup chairman Pham Nhat Vuong. 

• In the first phase of their collaboration, Be Group and GSM will partner with Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) to offer exclusive policy deals for Be drivers to rent or purchase VinFast electric cars and motorbikes.

• Just post-close, the Nikkei reported Toshiba’s Board had agreed a JIP deal at “around ¥2trln.” Toshiba confirmed HOURS later indicating language was still being hashed out. And the dividend cancelled.
• Toshiba “supports” the deal because it aligns a single shareholder with management goals. They cannot recommend to general shareholders because it is too low. But JIP was the only bidder. 
• It raises the question of whether activists will submit to “Toshiba Fatigue” at what the Board admits is too low a price, or whether there is still fight left.

• The Nikkei reported today that Toshiba’s board had chosen to accept JIP’s buyout offer. 
• The purported pricing of ¥2trn is a relatively modest premium but is not a surprise and no surprise is a positive here in our view. 
• All that remains is shareholder approval and while we doubt there will be too many celebrations on that front, there is likely to be relief.

• Toshiba Corp (6502 JP) announced a pre-conditional tender offer by Japan Industrial Partners (JIP), the preferred bidder at JPY4,620 per share, a 9.7% premium to the last close price.
• The special committee opines that the offer is the best price that can be expected today, which sounds like we are recommending the offer as it is the only one.
• The offer has several negatives: a 14% price reduction during the process, below the undisturbed price, below the mid-point IFA DCF range and no serious effort on Plan B. 

• The Government of India (GoI) aims to raise around US$372m (INR30.7bn) via an offer for sale of Hindustan Aeronautics Ltd (HNAL IN) stock. 
• The floor price of INR2,450 / share is set at approximately 6.7% to Wednesday’s (22nd Mar 2023) last close. The deal represents 10.5 days of ADV. 
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• On 14 February 2023 we published a bearish recommendation in  Xinjiang Goldwind Science & Technology (2208 HK), targeting a 9.1% multi-week decline in Q1 2023.
• 2208 HK declined from 7.62 on 14 February to 6.94 on 10 March (19 trading days), a decline of 9.1%. 

• According to our NAV analysis, it suggests a base case valuation of 70,272 won per share for HD Hyundai, representing a 23% upside from current levels.
• The expected dividend yield of HD Hyundai in 2023 is 7.8% which is attractive.
• Hyundai Oilbank generated record results in the past year and this has been a key boost to the NAV of HD Hyundai. 

• 9.5% YoY growth in net profit in 1H22. Valuations undemanding but share price performance also depends on investors’ style preferences 
• Monitoring deleveraging efforts
• Aided by the rotation to value/cyclical stocks and more positive newsflow in the infrastructure sector, the stock of China Railway Construction (CRCC) has also risen in tandem, though at a smaller magnitude versus other peers.

• Green and Smart Mobility (GSM) said it will back ride-hailer Be Group‘s efforts to use electric vehicles in Vietnam.

• GSM was just launched earlier this month by Vingroup chairman Pham Nhat Vuong. 

• In the first phase of their collaboration, Be Group and GSM will partner with Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) to offer exclusive policy deals for Be drivers to rent or purchase VinFast electric cars and motorbikes.

• ZKH Group (ZKH US), a leading MRO (maintenance, repair, and operations) procurement service platform in China, is pre-marketing an NYSE IPO to raise US$200-300 million.
• In ZKH Group IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The key elements of the bear case rest on market share losses, slowing top-line growth, declining take rates and persistent cash burn.

• The shareholder with a blocking stake has provided an irrevocable to accept Mr Chu Hui (Chairman and CEO)’s offer to privatise Jiangnan (1366 HK) at HK$0.40 per share
• Key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). There are no other shareholders with a blocking stake. 
• The price is final and attractive in the context of historical prices and multiples. At the last close, the gross spread is 8.1%. Scheme document likely despatched in mid-April.

• The Government of India is looking to sell up to 3.5% of Hindustan Aeronautics Ltd (HNAL) to meet the minimum public shareholding and will raise US$350m at the floor price.
• Hindustan Aeronautics Ltd (HNAL IN) is a potential inclusion to the MSCI India Index at the May QCIR and there will be buyers at the placement.
• Hindustan Aeronautics Ltd (HNAL IN) trades cheaper than its peers and there could be a move higher over the next few weeks.

• ACCO Brands Corporation’s stock is relatively undervalued and presents a lucrative dividend yield worth more than 6%.
• The company’s recent woes were a consequence of elevated raw material costs.
• However, key metrics imply that ACCO’s cost base is set to improve.

• This is our first report on Snap-on Incorporated, a well-known manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions in the U.S.
• The company’s last result was an all-around beat and its organic sales growth was in the double-digits with a particularly strong performance in the Repair Systems & Information Group, high single-digit gains in the Snap-on Tools Group, and low single-digit gains in the Commercial and Industrial Group.
• Snap-on Tools Group sales were $542.7 million, up from $504.8 million a year ago, with a 9.6% increase in organic sales.

• ZKH Group (ZKH US), a leading MRO (maintenance, repair, and operations) procurement service platform in China, is pre-marketing an NYSE IPO to raise US$200-300 million.
• In ZKH Group IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The key elements of the bear case rest on market share losses, slowing top-line growth, declining take rates and persistent cash burn.

• The shareholder with a blocking stake has provided an irrevocable to accept Mr Chu Hui (Chairman and CEO)’s offer to privatise Jiangnan (1366 HK) at HK$0.40 per share
• Key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). There are no other shareholders with a blocking stake. 
• The price is final and attractive in the context of historical prices and multiples. At the last close, the gross spread is 8.1%. Scheme document likely despatched in mid-April.

• The Government of India is looking to sell up to 3.5% of Hindustan Aeronautics Ltd (HNAL) to meet the minimum public shareholding and will raise US$350m at the floor price.
• Hindustan Aeronautics Ltd (HNAL IN) is a potential inclusion to the MSCI India Index at the May QCIR and there will be buyers at the placement.
• Hindustan Aeronautics Ltd (HNAL IN) trades cheaper than its peers and there could be a move higher over the next few weeks.

• ACCO Brands Corporation’s stock is relatively undervalued and presents a lucrative dividend yield worth more than 6%.
• The company’s recent woes were a consequence of elevated raw material costs.
• However, key metrics imply that ACCO’s cost base is set to improve.

• This is our first report on Snap-on Incorporated, a well-known manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions in the U.S.
• The company’s last result was an all-around beat and its organic sales growth was in the double-digits with a particularly strong performance in the Repair Systems & Information Group, high single-digit gains in the Snap-on Tools Group, and low single-digit gains in the Commercial and Industrial Group.
• Snap-on Tools Group sales were $542.7 million, up from $504.8 million a year ago, with a 9.6% increase in organic sales.

• This is our first report on a renowned energy technology player, Generac Holdings.
• Sales of C&I products climbed significantly, with strong core sales growth across all domestic channels and all overseas areas.
• We initiate coverage on the stock of Generac Holdings Inc. with a ‘Hold’ rating.

• Generac Holdings is a major energy technology player with a reasonable amount of debt on its balance sheet and showing ongoing growth in its commercial and industrial product categories.
• Its weaker residential product sales have been a point of concern for the management.
• Sales of C&I products have climbed significantly, with strong core sales growth across all domestic channels and all overseas areas.

• Growatt Technology (1833969D CH) is looking to raise about US$1bn in its upcoming Hong Kong IPO. 
• Growatt Technology is a global distributed energy solution provider, specializing in sustainable energy generation, storage and consumption, as well as energy digitalization. 
• In our previous notes, we looked at the company’s past performance, peer comparison and shared our thoughts on valuation. In this note, we will talk about its refiling updates.

We are raising our earnings estimates for Mytilineos and increasing our valuation 29% from €28/share to €36/share. Cyclical factors helped earnings acceleration in 2022, but we see underlying organic growth (particularly in Energy) resetting earnings to €1bn/year from FY24. Mytilineos is simplifying its story around two key activities in a roughly 70/30 earnings mix: Energy (renewables, generation and natural gas supply) and Metallurgy (aluminium smelting). Its renewables business is particularly well positioned to benefit from European policy initiatives.

• Parker-Hannifin Corporation is among the market leader in motion and control technologies across the globe.
• Parker-Hannifin has also benefited from a positive net impact of the aircraft Wheel and Brake sale and the Meggitt acquisition.
• Baptista Research looks to evaluate the different credit strengths and credit risks of the company as well as a line-by-line analysis of the financial statements of the company for the past four years.

• Rockwell Automation is a major provider of digital transformation and industrial automation solutions across the world.
• Its backlog orders continue to increased sequentially with order cancellation rates staying in the low single digits as per recent results.
• Baptista Research looks to evaluate the different credit strengths and credit risks of the company as well as a line-by-line analysis of the financial statements of the company for the past four years.

• W.W.
• Grainger, Inc is among the major global distribution players of MRO materials and other related products and services.
• The management has continued to invest in its strategic objectives and its margin profile appears strong.

• This is our first report on a renowned energy technology player, Generac Holdings.
• Sales of C&I products climbed significantly, with strong core sales growth across all domestic channels and all overseas areas.
• We initiate coverage on the stock of Generac Holdings Inc. with a ‘Hold’ rating.

• Generac Holdings is a major energy technology player with a reasonable amount of debt on its balance sheet and showing ongoing growth in its commercial and industrial product categories.
• Its weaker residential product sales have been a point of concern for the management.
• Sales of C&I products have climbed significantly, with strong core sales growth across all domestic channels and all overseas areas.

• Growatt Technology (1833969D CH) is looking to raise about US$1bn in its upcoming Hong Kong IPO. 
• Growatt Technology is a global distributed energy solution provider, specializing in sustainable energy generation, storage and consumption, as well as energy digitalization. 
• In our previous notes, we looked at the company’s past performance, peer comparison and shared our thoughts on valuation. In this note, we will talk about its refiling updates.

We are raising our earnings estimates for Mytilineos and increasing our valuation 29% from €28/share to €36/share. Cyclical factors helped earnings acceleration in 2022, but we see underlying organic growth (particularly in Energy) resetting earnings to €1bn/year from FY24. Mytilineos is simplifying its story around two key activities in a roughly 70/30 earnings mix: Energy (renewables, generation and natural gas supply) and Metallurgy (aluminium smelting). Its renewables business is particularly well positioned to benefit from European policy initiatives.

• Parker-Hannifin Corporation is among the market leader in motion and control technologies across the globe.
• Parker-Hannifin has also benefited from a positive net impact of the aircraft Wheel and Brake sale and the Meggitt acquisition.
• Baptista Research looks to evaluate the different credit strengths and credit risks of the company as well as a line-by-line analysis of the financial statements of the company for the past four years.

• Rockwell Automation is a major provider of digital transformation and industrial automation solutions across the world.
• Its backlog orders continue to increased sequentially with order cancellation rates staying in the low single digits as per recent results.
• Baptista Research looks to evaluate the different credit strengths and credit risks of the company as well as a line-by-line analysis of the financial statements of the company for the past four years.

• W.W.
• Grainger, Inc is among the major global distribution players of MRO materials and other related products and services.
• The management has continued to invest in its strategic objectives and its margin profile appears strong.