In today’s briefing:
- Nikkei 225 Market Consultation: Stepwise Additions & Technical Listings
- JD.com (9618 HK): 1Q23, Expected Performance and Unexpected CEO Change, 92% Upside
- [Li Auto Inc. (LI US) Target Price Change]: An Emerging Powerhouse…Reiterate as Our Top Pick
- [Coupang Inc. (CPNG US) Target Price Change]: Fulfilment of 3P Orders Is Next Revenue Driver
- Shiyue Daotian Pre-IPO – Looks Good at First Sight, but Not Great if One Digs Deeper
- “TSE’s Request” Could Be a Harvest that Has Made It Easier to Compare Managers with Stock Valuations
- Heineken: Unbottelling Full Potential
Nikkei 225 Market Consultation: Stepwise Additions & Technical Listings
- Nikkei has started a market consultation on amendments to the methodology of the Nikkei 225 (NKY INDEX) focusing on the stepwise addition of lower liquidity stocks and on technical listings.
- Stocks that have relatively low ADTV compared to the expected index weight will be added at half the originally planned PAF with the full PAF implemented at the next review.
- If the proposed changes are implemented, some of the potential inclusions in September will be added at half their PAF with the increase to full PAF coming in March 2024.
JD.com (9618 HK): 1Q23, Expected Performance and Unexpected CEO Change, 92% Upside
- JD replaces its CEO, Mr. L Xu, with the former CFO, Ms. S. Xu.
- As we expect, the revenue growth slowed down and the operating margin improved in 1Q23.
- We believe the stock has an upside of 92% for 2024.
[Li Auto Inc. (LI US) Target Price Change]: An Emerging Powerhouse…Reiterate as Our Top Pick
- Li Auto reported solid 1Q23 performance, with top line in line with cons/our est., and non-GAAP net margin beating cons/our estimate by 4.0/2.7ppt.
- We reiterate Li Auto as our top pick, because of 1) positive growth outlook in 2023 driven by strong model cycle (L9/L8/L7) and channel expansion;
- 2) margin upside due to improved opex efficiency. Our TP implies 2.8x PS.
[Coupang Inc. (CPNG US) Target Price Change]: Fulfilment of 3P Orders Is Next Revenue Driver
- CPNG reported C1Q23 top-line, EBITDA, and non-GAAP net income in-line, 8.1%, and (3.7%) vs. our est., and 3.1%, 8.2%, and in-line vs. cons., respectively.
- We estimate CPNG’s penetration of its 3P marketplace fulfilment (FLC) rose 6ppts~ YoY to 20%~ in 1Q23.
- We maintain our BUY rating and raise our TP to US$21.
Shiyue Daotian Pre-IPO – Looks Good at First Sight, but Not Great if One Digs Deeper
- Shiyue Daotian (1892269D CH) is looking to raise about US$200m in its upcoming HK IPO.
- Shiyue Daotian is a pantry staple food company in China, providing consumers with pre-packaged premium rice, whole grain, bean, and dried food products.
- Shiyue Daotian’s largest revenue contributor is its rice products segment. However, the company experienced declining ASPs over the track record period while production and sales volume growth fell.
“TSE’s Request” Could Be a Harvest that Has Made It Easier to Compare Managers with Stock Valuations
- Stock price increases only at the “TSE’s request” are anticipatory, and conversely, the gap with JPX Prime 150 Index components, which attract the attention of overseas investors, may widen.
- “TSE’s Request” effect is that TSE has changed the game by making it easier to compare managers of different companies according to P/B, thereby increasing managers’ awareness of stock prices.
- Just as all companies worked to “conserve energy” and become more competitive during the oil crisis, many companies’ stock valuations will rise in environment where managers must change their mindset.
Heineken: Unbottelling Full Potential
- In 2022, Heineken delivered strong profit growth despite the challenging market environment, driven by volume recovery post pandemic, premiumization, pricing, and cost savings
- Heineken keeps working on improving and building its business for the long-term as it invests behind its brands
- We believe Heineken’s new, more balanced approach to driving shareholder value is likely to yield a period of accelerated organic and margin growth that deserves a higher-than-peer valuation
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