In today’s briefing:
- Popmart (9992 HK): Long Term Constraints Cloud Near Term Recovery
- ZJLD Group Pre-IPO – Thoughts on Valuation
- ROE up Modestly, but ROE Plus DOE Is Expected to Reach a Record High This Fiscal Year
- Keurig Dr Pepper: The Recent Share Price Drop Might Not Last For Long
Popmart (9992 HK): Long Term Constraints Cloud Near Term Recovery
- Markets expect Popmart to deliver fast growth for years to come, yet we are skeptical because the pop toy business, by definition, is a niche market.
- Blaming COVID for Popmart’s weak results risks focusing too much on near-term cyclical recovery but overlooking structural bottlenecks to growth.
- While we are cautious for long term, continued improvement in business and news flow leading to 1H results will likely result in share price rebound and provide tactical trading opportunity.
ZJLD Group Pre-IPO – Thoughts on Valuation
- ZJLD Group (ZJLD HK) is looking to raise up to US$500m in its upcoming Hong Kong IPO.
- ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu.
- In this note, we discuss our earnings assumptions and share our thoughts on ZJLD’s valuation.
ROE up Modestly, but ROE Plus DOE Is Expected to Reach a Record High This Fiscal Year
- ROE has not risen at the pace expected, but dividends have begun to increase, and in FY2021 DOE rose to the 3% range for the first time.
- While ROE alone will not surpass the record high of FY2017, ROE plus DOE (ROE+DOE) is expected to slightly surpass the record high of FY2017 in FY2022.
- Even in FY2021, when DOE increased, Equity Ratio increased (and total assets also increased), so there is still room to increase shareholder returns, given that cash on hand increased.
Keurig Dr Pepper: The Recent Share Price Drop Might Not Last For Long
- Keurig Dr Pepper share price has been under pressure over the recent months due to higher than expected drop in profitability.
- Beverage segments, however, continue to perform well and would most likely offset weaknesses in coffee.
- Investors should not expect a quick rebound in the company’s free cash flow.
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