Daily Brief Consumer: Tuhu Car, L’Occitane, Cello World Limited, Japan Tobacco, Oriental Watch, Japfa Comfeed Indonesia, Garrett Motion, Dr Ing hc F Porsche , paragon AG and more

• There were only 14 new listing on the Main Board of the HKEX (388 HK) in the third quarter. Half of the listings were in the last week of September.
• Of those stocks, only Tuhu Car (9690 HK) and Keep (3650 HK) have a chance of being added to the HSCI in December and then into Southbound Stock Connect.
• Keep Inc (3650 HK) could be added to Stock Connect in early December while Tuhu Car (9690 HK) will have to wait till April for inclusion to the link.

• L’Occitane (973 HK) reported 2QFY24 operational update last night.  Sales grew 17% yoy on reported currency, and up 25% yoy on constant currency. 
• The bright spot of the release is the growth of Sol de Janeiro, the Brazilian-inspired premium body care brand, which grew 202% yoy in constant currency in the quarter.
• Sol de Janeiro has the highest EBIT margin among the 3 major brands of the company, at 24.6% in FY23, suggesting highly profitable growth.

• Cello World is looking to raise around US$240m in its upcoming India IPO.
• Cello World (CW) is an Indian consumer products company. The firm is a leading company in the consumerware market in India.
• In this note, we look at the company’s past performance.

• Despite conservative 2023 guidance last quarter, Japan Tobacco (2914 JP) is primed to exceed expectations in the 3rd quarter of 2023.
• Despite no new domestic price hikes, Japan Tobacco’s volume recovery post-hikes is expected to help sustain the revenue and profit growth momentum.
• New price increases in the Philippines and the UK, coupled with last year’s hikes spillover, are expected to boost Japan Tobacco’s earnings; and the yen’s depreciation amplifies these gains.

• Oriental Watch (398 HK) went ex-dividend on the 4th of October. The stock gapped down more than what it paid out and now trades at 6x trailing PE.  
• Cash at 1.1 bn HKD is greater than 50% of market capitalization, with a high trailing dividend yield of 16.2% and a rich history of paying chunky dividends. 
• We monitor the sales environment for HK/China, which shows a reasonably good pick-up in HK but lackluster for China.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We view Japfa Comfeed’s ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Strong”.

• GTX continued to showcase its ability to generate free cash flow even though the Euro weakened sequentially. Ahead of the results, we had reduced our estimates citing the stronger Dollar.
• GTX held an investor day following the quarterly results highlighting how the variable cost structure allows the Company to maintain profitability and generate free cash flow
• GTX has introduced several new turbochargers for the light vehicle, commercial, and industrial markets. GTX used the investor day to introduce the GT80

• Q3 revenues were strong, 4.7% ahead of consensus expectations, and EBIT margin was slightly below at 17% vs. consensus expectations of 17.8%.
• Key positives are strong revenue growth, EBITDA in Automotive and FCF generation.
• Post the cautious conference call in Q2, a weaker EBIT margin in Q3 was somewhat expected.

paragon expects extended summer breaks and anticipated year-end shutdowns of customer plants to restrict growth in H223. We have reduced our earnings expectations to reflect the disposal of the battery business and resulting lower growth trajectory, with FY23 and FY24 EPS estimates falling by 9% and 11% respectively. However, the debt reduction continues and the ownership issues have been resolved. Further news on the plan for the Eurobond redemption has yet to be communicated, but should improve the equity outlook and investor sentiment.