Daily Brief Consumer: PDD Holdings Inc, Yakult Honsha, China Resources Beer Holdings, Ace Hardware Indonesia, United Arrows, Foot Locker Inc, Capri Holdings, Lennar Corp A, NagaCorp Ltd, STAG Vietnam and more

• We think the tailwinds of China’s consumption downgrade for PDD are overblown, while TEMU will be more of a drag than a support for bottom-line in quarters ahead.
• 2Q results to be announced next month will finally validate our thesis on the company’s earnings risk which we flagged back in last December.  
• The markets have been pricing in a sharp slowdown after a short-lived euphoria around its seemingly strong 1Q results, yet downside surprises could still catch investors off guard. Stay neutral.

• Market expectations for Yakult’s 1QFY24 earnings seem weak, with consensus looking light, and the share price currently lingering near the lower boundary of the minus 2x trend channel.
• Therefore, we believe that even a minor earnings beat next week could potentially drive Yakult Honsha (2267 JP)‘s share price back up to the ¥10,000 level.
• We anticipate that Yakult 1000 has the potential to drive that earnings beat, as it is projected to grow by as much as 65% YoY this quarter.

• China Resources Beer Holdings (291 HK) is a USD21bn red-chip company, and the largest beer company in China in terms of sales volume.
• The company is a perfect fit for the GARP (growth at a reasonable price) strategy, and visibility in earnings is also high for the next 3-5 years.
• Weak sentiment in H-share stocks and in overall China macro/consumption numbers provide a good entry opportunity for the stock.  

• Ace Hardware‘s June SSSG confirmed very strong growth momentum and the positive impact of its BOOM sale, with headline SSSG at +10.7% YoY, after a flat post-Lebaran performance in May.
• The company’s strategy of using influencers to promote the company has been a great success for its #Bisakejadian campaign, and BOOM sale with foot traffic continuing to improve at stores.
• Ace Hardware plans to step up its store expansion and ramp up new store formats to drive growth, with up to 15 new stores this year. Valuations are attractive.

• United Arrows (7606 JP) is a bellwether retailer for the premium fashion sector.
• Its slow initial recovery after the pandemic worried many but the last year saw a solid improvement, even if sales are still well below the peak.
• Following rationalisation, the fashion firm has now put in place plans to double sales to ¥250 billion in the next decade and we expect a return to 10% OPM.

• Foot Locker delivered a disappointing set of results as the company was unable to meet the revenue and earnings expectations of Wall Street.
• The company remained optimistic about the back half of the year, with several key launches and brand collaborations planned.
• Despite challenges, Foot Locker continues to focus on its omni-connected retail experience, with plans to open new prototype stores next year.

• Capri Holdings delivered an all-around beat in the previous quarter as earnings per share and revenue both climbed by high single digits.
• All its houses saw an increase in revenue, with Versace, Jimmy Choo, and Michael Kors all experiencing double-digit growth.
• They kept growing footwear sales across all brands, with Versace, Michael Kors, and Jimmy Choo all seeing increases in the low double digits and Jimmy Choo in the high single digits for women’s footwear retail sales.

• Lennar managed to exceed analyst expectations in terms of revenue as well as earnings.
• The last quarter proved to be successful as the company maintained its focus on production, cash flow, and inventory management.
• Additionally, Lennar diligently managed its operating costs, keeping SG&A at significant lows while maintaining a sharp focus on cash flow and bottom-line results.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• NagaCorp Ltd
• Sands China

• Vietnam-based financial education startup Stag announced that it had been selected to participate in the inaugural Entrepreneur-in-Residence (EIR) programme managed by Viet Capital Ventures (VCV) which also includes an investment in the startup.
• Alongside VCV, NH Securities Vietnam Co. Ltd. (NHSV) and Singapore-based Resolution Ventures also invest in a seed funding round for the company.
• This year, with the funding, Stag plans to continue enhancing financial education features while also launching new value-added products for retail and corporate users. It also plans to enhance KYC and security features and complete technology integrations with key strategic partners.