Daily Brief Consumer: Nissan Motor, S.M.Entertainment Co, Pinduoduo, Hesai Group, S&P 500, Burberry, Coupang, Ebiquity plc and more

• With Nissan (7201 JP) and Renault coming to a new arrangement regarding their working relationship, Renault will be left with a US$4.3bn Nissan stake that it will look to sell eventually.
• The selldown will probably take a long while to materialize.
• In this note, we talk about the announcement and take a very early look at the possible selldown.

• On 7 February, it was announced that SM Entertainment will conduct a third party rights offering and CB issue to Kakao Corp.
• Post these deals, Kakao Corp will own a 9.05% stake in SM Entertainment.
• The rights offering and the CB issue have all the hallmarks of an intermediate deal prior to an eventual takeover of SM Entertainment by the Kakao Group.

• The market seems to be expecting quite a bit from Pinduoduo (PDD US) in upcoming earnings with consensus expecting the company to make around RMB 11.4bn OP in 4Q22.
• With CCP’s anti-monopoly drive on hold, Pinduoduo may need to persuade customers and merchants a bit more than usual via sales and marketing to further improve its market position.
• TEMU was anyway going to be a significant burden on profitability. With aggressive discounting and coupons, we think that burden has gotten significantly heavier.

• Hesai Group (HSAI US) has launched a Nasdaq IPO to raise up to US$171 million at an indicative price range of US$17-19 per ADS.
• We previously discussed the IPO in Hesai Group IPO: The Bull Case and Hesai Group IPO: The Bear Case. 
• In this note, we present our forecasts and discuss valuation. Our analysis suggests that Hesai is unattractively valued at the IPO price range. We would pass on the IPO.

• Over the past two weeks, we have been steadfast in our belief that this current rally/short squeeze is likely to fizzle in the 4100-4165 area on the S&P 500.
• There has yet to be any meaningful deterioration and we cannot rule out the SPX reaching higher, potentially for 4300-4325 (August 2022 highs).
• We continue to preach caution and believe upside is limited on the market indexes. Any combination of a continued strong labor market or hotter-than-expected inflation could upset the market.

• Expectations of the new CEO Jonathan Akeroyd and the new creative director Daniel Lee uplifting the business and accelerating sales are priced in
• Resumption of Chinese outbound travel will surely happen, but it will take time
• No valuation upside at these levels. We are bearish on the stock

• We estimate that Coupang’s 4Q22’s revenue is in-line while non-GAAP net income beats cons by 29% because of the continuous cost-saving methods. 
• We cut Coupang’s TP from US$22 to US$19 because of several challenges in 2023, including inflation, barriers in international expansion, and difficulty in growth.
• Yet, our TP is still 17% above current price, so we upgrade Coupang’s rating to BUY to reflect its advantages in competitive landscape, and margin expansions.

Ebiquity’s year-end trading update confirms that revenue continued to grow strongly in H222, delivering a 20% improvement for the full year, with underlying organic growth of 9%. Management is guiding to an underlying operating margin of 12%, implying that FY22 operating profit will be just ahead of our £8.9m forecast, notwithstanding the slight undershoot on revenue. This improvement in margin reflects the two transformative acquisitions made in the year, adding operational capability and efficiency, and scaling the US reach, as well as the increase of digital in the revenue mix. The shares are priced at a substantial discount to both peers and the group’s long-term average EV/EBITDA multiple.