In today’s briefing:
- Japan Tobacco High Conviction Update: Russia Is Less Than Markets Feared & There’s Upside to DPS Est
- Selected European Holdcos and DLCs: April ‘22 Report
- BGF Retail & GS Retail: Korean CVS Plays Likely to Better Withstand Higher Inflation
- Trent – On an Aggressive Growth Path; Earnings to Post a Sharp Revival
- Bajaj Auto – Exports Growing on Strong Footing; Focus Shifting to EVs
- Trent Ltd – Earnings Upgrade Continues
- Hindustan Unilever – Near-Term Headwinds Temper Earnings Expectations
- Indian Hotels – Business Travel Rebounds; FTAs to Provide Further Boost…
Japan Tobacco High Conviction Update: Russia Is Less Than Markets Feared & There’s Upside to DPS Est
- Japan Tobacco (2914 JP)’s 1Q22 was stronger than expected with revenue and OP surpassing consensus by 5.2% and 20.0% respectively despite the Russia Ukraine war situation.
- Although the company has maintained the semi-annual dividend at ¥75.0 per share, we predict there could be an upside to the DPS guidance during the next three quarters.
- With OP guidance of ¥534.0bn next year, we think Japan Tobacco should trade around ¥4,000-4,500 per share, indicating an upside of around 82-104%.
Selected European Holdcos and DLCs: April ‘22 Report
- Discounts to NAV of holdcos have generally widened during April: Alba, tightened to 37.4%; GBL widened to 31.8%; Heineken Holdings widened to 20%; Industrivärden C widened to 12.1%;
- Investor B widened to 11.5%; Porsche Automobile Holding widened to 29.9%. There is just one DLC left in this report, Rio Tinto, which widened to 11.8%.
- Recommended trades: GBL vs. listed assets, Industrivärden C vs. listed assets, Investor B vs. listed assets; Porsche vs. VW (long 1 PAH3 GR/short 0.5136 VOW GR), Rio Tinto (DLC).
BGF Retail & GS Retail: Korean CVS Plays Likely to Better Withstand Higher Inflation
- We believe BGF Retail and GS Retail are strong turnaround plays amid the end of the social distancing policies in Korea.
- These CVS plays are well positioned to withstand higher inflation rates and higher product price increases among the various retail channels in Korea.
- Valuation multiples of GS Retail have declined significantly in the past five years. Their valuations have become more attractive as compared to lofty levels 4-5 years ago.
Trent – On an Aggressive Growth Path; Earnings to Post a Sharp Revival
- Trent’s aggressive footprint expansion and strong LTL growth of 16% YoY translated into a robust 53% YoY revenue growth; however, the back- ended store additions increased the costs disproportionately thereby reducing EBITDA growth to a mere 12% YoY.
- Westside and Zudio’s store-level economics remains healthy as evident from: a) the strong LTL growth, b) Westside’s annualized revenue run-rate which was almost double its FY22 level ( >INR50b) and c) our channel checks.
- We expect revenue/EBITDA growth of 45%/58% over FY22-24, respectively, on continued aggressive store additions and healthy LTL growth.
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.
Bajaj Auto – Exports Growing on Strong Footing; Focus Shifting to EVs
- Results beat expectations; gross margin ahead of our estimate: Reported revenue at Rs79.7bn was ahead of broader expectations.
- Initial signs of demand recovery in 2Ws; Management remains cautious
- Valuation and outlook: At CMP, the company is trading at 16x FY24E core EPS, which is broadly in line with its long-term mean multiple.
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.
Trent Ltd – Earnings Upgrade Continues
- Standalone revenue grew 53% YoY to Rs11.9bn on low base and robust store additions, but dipped 12% QoQ as business was impacted in Jan/Feb’22 by the third wave of the pandemic.
- Online revenue grew 74% YoY in FY22, with 7% of Westside revenue coming through online channels.
- Accelerated store expansion plans: The company added 26 Westside stores in FY22, taking the total Westside store count to 200.
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.
Hindustan Unilever – Near-Term Headwinds Temper Earnings Expectations
- While4QFY22resultswereaboveexpectations, management did highlight the likely sequential margin pressures over the next 2-3 quarters.
- Two factors that constrained HUVR’s earnings growth (ex-GSK) over the past two years were escalating material costs and lower-than-expected premiumization.
- Nevertheless, positive factors can emerge from rural recovery fueled by: a) good Rabi crop, b) good monsoon, and c) sustained agri commodity inflation, unless offset by input cost pressures for farmers.
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.
Indian Hotels – Business Travel Rebounds; FTAs to Provide Further Boost…
- About the stock: With room inventory of 20,581 rooms, Indian Hotels is a diversified player in the hotel industry through brands such as Taj, Vivanta, SeleQtions and Ginger brands.
- Q4FY22 Results: IHCL’s operational performance for Q4FY22 remained below estimates, impacted by the omicron wave.
- What should investors do? Along with the improved outlook, the company is also focusing on driving more efficiencies through cost optimisation.
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.
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