Daily Brief Consumer: Leapmotor, Ace Hardware Indonesia, Pinduoduo, Health And Happiness (H&H), Nike, Tokyo Stock Exchange Tokyo Price Index Topix and more

• Leapmotor (2007699D HK) is said to be looking to raise between US$1bn-US$1.5bn by selling 290.9m shares in its IPO. At the top end, the company will be valued at HK$53bn.
• The performance of its peers over the last year leaves a lot to be desired and could lead to lower demand in the IPO.
• Leapmotor (2007699D HK) should be added to the HSCI and the Hang Seng Tech Index, though timing depends on when the stock lists on the HKEX (388 HK). 

• Leapmotor (2007699D HK), a Chinese EV manufacturer, is pre-marketing a US$1.5 billion HKEx IPO, according to press reports.
• We previously discussed the IPO in Leapmotor IPO: The Bull Case and Leapmotor IPO: The Bear Case. This note updates our view for the PHIP and recent developments.
• While the 1Q and truncated 1H numbers outline rapid growth and declining loss margin, key metrics continue to lag peers over comparable periods. We would pass on the IPO. 

• Ace Hardware Indonesia (ACES IJ) 1H2022 results continued to reflect a hangover from COVID-19 in terms of slower growth although the company continues to demonstrate its resilience.
• The company’s store expansion continues with plans for 15 stores in total for 2022, whilst SSSG have seen a sharp recovery recently bringing YTD SSSG into positive territory.
• Ace Hardware is one of Indonesia’s top quality retailers with the potential for a sharp recovery and valuation looks attractive on 15x FY2023E PER versus 27x 5-year average PER.

• Pinduoduo (PDD US)’s 2Q22 was rather strong with revenue of RMB 31.4bn (consensus: RMB 23.6bn) and OP of RMB 8.7bn (consensus: RMB 3.6bn).
• However, the management was quick to dismiss the pretence that piduoduo would be able to maintain these elevated growth/margin numbers throughout the rest of the year and over the medium-term.
• This creates a lot of downside to consensus 2H22 and medium-term revenue and OP estimates in a time when valuation multiples have expanded over 70% from the March 2022 bottom.

H&H International’s H1/22 results were adequate in our view, despite the challenging operating conditions in China. The company is gradually diversifying its businesses, with ANC and PNC accounting for 48% of total H1/22 revenue. Moreover, demand for PNC products is increasing, and H&H is focused on leveraging this to expand in the US and China. The Swiss brand under ANC is also growing steadily. Going forward, these would allow the company to balance any revenue decline from the intensified BNC business. H&H has a moderate financial risk profile overall, with sound liquidity.

• Leapmotor (LM) aims to raise around US$1.5bn in its Hong Kong IPO. LM is a smart EV company based in China, founded in 2015.
• As of end Jun 22, it had delivered a total of 104,829 cars with most of its sales coming from its mini units, T03.
• In our previous notes, we spoke about the company’s past performance and its PHIP updates. In this note, we will undertake a peer comparison.

• The NFT bubble has popped. You only have to look at the volumes to know this is true.
• But regardless of the bubble popping — I can tell you for certain — NFTs are still a HUGE talking point at almost every consumer facing company.
• CMOs and strategy directors will be asked in boardrooms; what is our Web3 strategy?

• If stock price is high, then a stock split is the way to go, and stockbrokers have provided a mechanism for trading shares in less than single-unit in the past.
• The issue isn’t “the trading unit should be lowered because people can’t buy shares with high stock prices” but “let’s improve so that people can become shareholders with one share.
• If Japanese companies are reluctant to increase the number of diverse shareholders, this would be in line with their slower progress in solving issues: diversity, human rights, and environment.