In today’s briefing:
- Toyota Industries Back To Covid Lows Vs. Toyota Motors
- LG Energy IN/LG Chem OUT: TIGER (WISE) Done on Feb 8 & KODEX (FnGuide) Under Progress Until Feb 22
- KOSPI Size Index Series Rebalancing Screening Results
- Alibaba: Hitting the Brakes Hard
- Toyota – In-Line 3Q Sets Up Strong 4Q Beat
- India Channel Insight #25 | Mahindra and Mahindra, Escorts
- Honda – Back and Forth OP Guidance Revisions
- Yum China (YUMC.US/9987.HK): Zero-COVID Policy Weighted on Earnings
- SPA: Expect Earnings to Turn Positive from 4Q22 Onwards
- RS: Strengthening Entertainmerce Portfolio
Toyota Industries Back To Covid Lows Vs. Toyota Motors
- Toyota Industries (6201 JP)‘s implied stub and simple ratio with 8.5%-held Toyota Motor (7203 JP) has significantly bifurcated in the last 12 months.
- Yet recent and forward earnings at the stub level indicate this dislocation is unjustified.
- Toyota Industries is a set up at this current level.
LG Energy IN/LG Chem OUT: TIGER (WISE) Done on Feb 8 & KODEX (FnGuide) Under Progress Until Feb 22
- For KODEX (FnGuide), the actual rebalancing trading must have begun yesterday, Feb 8, and runs until Feb 22, presumably at an equal daily weighting.
- TIGER (WISE) announced that its implementation of LG Energy IN/LG Chem OUT was completed as of the end of yesterday.
- As for the daily passive impact from KODEX until Feb 22, LG Energy is expected to receive an inflow of 0.03x DTV, whereas LG Chem’s outflow should be -0.10x ADTV.
KOSPI Size Index Series Rebalancing Screening Results
- KOSPI Size Index Series rebalances twice a year in March and September. The base date is February 28. It is a three-month review, so, from December 1 to February 28.
- In the KOSPI size index rebalancing, an increase in the buying volume of local institutions for stocks moving from LargeCap to MidCap is generally detected.
- 14 new MidCap entrants are expected to have a sizable passive impact.
Alibaba: Hitting the Brakes Hard
- Even though the third quarter was seasonal historically, we are expecting the impact of seasonality to fade in future due to changes to Alibaba’s Core Commerce revenue composition.
- Therefore, it seems like the market is expecting too much from Alibaba Group (9988 HK) in the third quarter with a consensus EBITDA estimate of RMB 51.7bn.
- With equity markets near a breaking point and no change in investor sentiment towards Alibaba, an earnings miss in 3QFY22 could be potentially more price-sensitive than the last time.
Toyota – In-Line 3Q Sets Up Strong 4Q Beat
- Toyota’s 3Q results were in-line with revenue and OP 2% above consensus and a slight QoQ improvement.
- The FY production plan was revised down as expected though we see slight upside to the 8.25m unit plan.
- Toyota has now averaged ¥853bn in OP over the last six pandemic driven quarters.
India Channel Insight #25 | Mahindra and Mahindra, Escorts
- We interact with two dealers of Mahindra & Mahindra (MM IN) & Escorts Ltd (ESC IN)
- High pressure on billing is denting dealer profitability leading to dealership closures
- Weddings and changing spending patterns suggest a weak demand environment likely to continue.
Honda – Back and Forth OP Guidance Revisions
- When Honda reported its 2QFY22 results it revised OP guidance down and we said that unnecessary.
- Indeed, with 3Q now out they revised guidance UP, above where it was at 3Q, making the revision pattern look like ¥660bn > ¥ 780bn > ¥660bn > ¥800bn.
- That remains conservative and the company should beat though we still see limited upside until next year’s prospects start to be priced in.
Yum China (YUMC.US/9987.HK): Zero-COVID Policy Weighted on Earnings
- Yum China Holdings, Inc (YUMC US) reported below-expectation 4Q21 earnings. Same store sale growth was down 11% year-over-year due to recent resurging of COVID cases in several regions of China.
- Yum China has leveraged its digital orders and delivery service to alleviate the impacts. Based on its operation in 1Q20, we believe Yum China could recover quickly from current outbreak.
- We think risk/reward is more compelling to own Yum China Holdings, Inc (YUMC US) as it has resilient business model and proven records to navigate through pandemic.
SPA: Expect Earnings to Turn Positive from 4Q22 Onwards
- We expect SPA to incur the seven consecutive loss quarter in 4Q21 at Bt69m due to its operation below EBIT breakeven level.
- We expect operating loss to be lower both YoY and QoQ due to more efficient cost and expense management.
- Meanwhile, we expect 4Q21 revenue at Bt40m (-51%YoY, +209%QoQ), which will be affected by weak domestic demand.
RS: Strengthening Entertainmerce Portfolio
- We have a positive view toward the acquisition of Unilever’s direct sales business as it align with the company’s business strategy to strengthen Entertainmerce business especially on outbound sales. Excluding
- Our expectation over earnings recovery in 2022E will be driven by 1.) 35% revenue growth supported by recovery of existing MPC segments and consolidation of ULife,2.) an absence of heavy
- We expect RS to post 4Q21 net loss at Bt10m (compared with Bt0.9m loss in 3Q21 and Bt103m profit in 4Q20).
Before it’s here, it’s on Smartkarma
