In today’s briefing:
- Anta/Li Ning/Xtep: China Sportswear 1Q24 Update
- Korea Small Cap Gem #28: Chokwang Leather – A Cheaper Way to Invest in Berkshire Hathaway
- Tesla’s Won’t Fix It’s Worst Problems With Elon Musk In Charge
- Shimano (7309) | Stuck in a Low Gear
- Why Lululemon Isn’t Under Armour
- ZEEKR IPO Valuation Update: Likely To Price IPO Below Last Round Valuation of ~$13B
- Fosun Tourism (1992 HK): A Long-Awaited Upturn
- Headlam Group – Strategy for growth in tougher market
- Meituan (3690 HK): Lack of Clear Topline Driver Remains a Concern
- BBW: Snapping the Store: Adding to the Product Mix; Reiterate Buy, $41 PT
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Anta/Li Ning/Xtep: China Sportswear 1Q24 Update
- Anta Sports Products (2020 HK), Li Ning (2331 HK), and Xtep International (1368 HK) have announced 1Q24 operational updates, with additional color given in post conference calls.
- Anta: Retail sales started to accelerate in mid-March, and March were better than January and February.
- Li Ning: offline retail sales down low-single-digit in 1Q24, driven by wholesale down mid-single-digit, while retail grew mid-single-digit. E-commerce grew 20-30% yoy.
Korea Small Cap Gem #28: Chokwang Leather – A Cheaper Way to Invest in Berkshire Hathaway
- At the end of 2023, Chokwang Leather owned 190.3 billion won worth of Berkshire Hathaway shares, which represents 56% of Chokwang Leather’s market cap.
- Chokwang Leather also has 3.1 million treasury shares (46.6% of outstanding shares). It has the highest levels of treasury shares as a percentage of outstanding shares among Korean stocks.
- Chokwang Leather is likely to be one of the key companies to be targeted to improve its corporate governance as part of the Corporate Value Up program.
Tesla’s Won’t Fix It’s Worst Problems With Elon Musk In Charge
- Plunging sales & growing losses, severe price cuts & layoffs, failed FSD, M2 dropped for Robotaxi, and more, confirm that Elon Musk won’t fix Tesla’s most serious problems—which he created.
- He still demands his “unfathomable” pay package be restored, and his feckless, captured Tesla Board is doing exactly what he wants.
- But what Tesla’s Board should do, what it should have done years ago, is fire Elon Musk, the single greatest risk to Tesla’s future.
Shimano (7309) | Stuck in a Low Gear
- Shimano continues to reel from a slowdown in bike and fishing tackle sales post Covid
- 1Q operating profit beat the analyst consensus, but the upward revision to full year is minor and falls short of street estimates
- The stock has priced in an improving outlook. However, valuations are now looking full compared to historical levels.
Why Lululemon Isn’t Under Armour
- On March 21st, Lululemon reported FY23 results. All things considered, the results were good. Guidance, however, caused some upset. Lululemon shares are down ~29% this year; after being down just 6% before the report, and is currently the 8th worst-performing stock in the S&P 500.
- Lululemon’s implied 11.5% revenue growth for 2024 is a notable deceleration from years prior; having averaged an annual revenue growth rate of 24.4% over the last 5 years.
- This year’s revenue guidance is closer to, but still behind, the 5 years before that; where Lululemon averaged 15.7% annual revenue growth.
ZEEKR IPO Valuation Update: Likely To Price IPO Below Last Round Valuation of ~$13B
- ZEEKR, a Chinese EV maker, plans to raise up to $500M in US IPO. The company put its offering on hold in 2023 due to a mismatch in valuation expectations.
- A fast-growing company will offer ADSs, and the size of the company’s potential IPO is down from their initial target of up to $1B, a negative sign for ZEEKR shares.
- EV stocks have significantly underperformed the broader market this year amid price wars, slow growth ahead and intense competition, especially in China.
Fosun Tourism (1992 HK): A Long-Awaited Upturn
- Fosun Tourism (1992 HK) saw a healthy 15.8% overall business volume growth in 1Q24, with net profit sustaining improvement. This should justify a catch-up in share price.
- The cumulative bookings for Club Med for 1H24 have increased 13% YoY, while those for 2H24 have increased 10%. Positive forward bookings indicate an encouraging outlook.
- Four new Club Med resorts to be opened in 2024 and the increase in attractiveness of Hainan after it turns into a duty-free island by 2025 are both drivers.
Headlam Group – Strategy for growth in tougher market
Headlam Group has laid out an ambitious long-term revenue target of between £900m and £1bn, as it seeks to grow its share of the UK floor coverings distributor market. Despite a challenging backdrop due to the low level of residential housing transactions, management is seeking to expand each of its sales channels: Trade Counters, Larger Customers, Regional Distribution and Europe & Other. The FY23 results reflected the more challenging environment and the group trades at a discount to its long-term average EV/sales multiple for FY24.
Meituan (3690 HK): Lack of Clear Topline Driver Remains a Concern
- Meituan has navigated through its most challenging period since IPO as competition moderates and reorg comes close to completion.
- 1Q results should kick off an upward earnings cycle through to the end of 2024 when the company’s efforts to revamp loss-making new initiative businesses gather pace.
- That said, lack of clear topline driver remains the key reason for our cautious view about the sustainability of re-rating. Maintain neutral.
BBW: Snapping the Store: Adding to the Product Mix; Reiterate Buy, $41 PT
- We are reiterating our Buy rating, projections and $41 price target for Build-A-Bear Workshop after visiting stores in Long Island and Connecticut.
- Post-Easter, Build-A-Bear has expanded the product mix both large and small, adding giant versions of key “furry friends” and rolling out new Mini Beans to drive incremental add-on purchases.
- Further, with graduation season just starting (from pre-K to college), Build-A-Bear is ready with fun and unique items for every grad.