Daily Brief Consumer: Xingda International, Tesla Motors, OASIS Corp, ZJLD Group, Hindustan Unilever, Hyundai Motor, Takashimaya, Itochu Corp, Tata Motors Ltd and more

• Xingda International (1899 HK)’s partial offer from a management-controlled offeror at HK$1.88 per share is now open. The IFA opines it to be fair and reasonable.
• The partial offer is conditional on the offeror/concert parties, which have a 45.60% stake, hitting 50.01% voting rights and approval by the requisite majority of shareholders on the acceptance form.
• The 4.41% minimum acceptance is not onerous. Based on a proration of 8.88% and at the last close price of HK$1.59 per share, the breakeven price is HK$1.56 per share.

• Tesla reported a 6% Q4 EPS beat, but stripping out a one-off deferred revenue booking & higher than expected regulatory credits, Q4 results missed by 9%.  
• Tesla rose +5.5% post market close after Musk said YTD orders are “2x” output. None of the data we have seen implies such demand, especially weekly China sales. 
• What went unnoticed on the earnings call is that Tesla created a $7bn credit facility this month, which should dash all hopes of them doing a share buyback in 2023. 

• OASIS Corp (370190 KS) is looking to raise up to US$166m in its upcoming Korea IPO.
• Oasis Corporation is an early morning delivery service business that delivers fresh food to consumers. It runs an e-commerce platform named ‘Oasis Market’ as well as offline stores.
• In our previous notes, we looked at the company’s past performance and peer comparison. In this note, we talk about valuations.

• ZJLD Group (ZJLD HK) is looking to raise up to US$400m in its Hong Kong IPO. The deal will be run by Goldman Sachs and China Securities. 
• ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu.
• As per F&S, the firm was the fourth largest privately-owned baijiu company and ranked third among all baijiu companies with three or more aroma types in terms of FY21 sales. 

• Hindustan Unilever (HUVR IN)‘s strong quarterly performance was overshadowed by a proposed hike in royalty payments to parent Unilever PLC (ULVR LN) 
• HUVR’s historical royalty growth has been below revenue and PBT growth and hence does not generate any red flags in terms of minority shareholder protection.  
• While the impact on EPS is ~3%, we believe much of the reaction around HUVR’s Royalty is Noise. 

• Hyundai Motor’s EV sales as a percentage of total sales increased from 4.3% in 4Q 2021 to 5.7% in 4Q 2022. 
• Hyundai Motor announced that it will cancel 2.14 million common shares, representing 1% of its outstanding common shares.
• The company beat consensus sales and operating profit estimates in 4Q 2022 and the consensus is likely to revise up their earnings estimates. 

• JR Takashimaya is a newbie in the world of department store retailing but has grown to become the fourth highest selling store in the two decades since it opened. 
• As a result, it is increasingly regarded by brands as the Nagoyan version of Isetan Shinjuku in Tokyo and Hankyu Umeda in Osaka.
• The store is an example of Takashimaya’s successful strategy to surround its key stores with more shopping facilities to suit all population segments, so driving traffic to the main store.

• Three years ago, Itochu Corp made it clear it would be investing heavily in its brand business.
• It has been true to its word, adding the likes of Reebok, Under Armour and Forever 21 to its portfolio in the last year alone.
• It has now signed a deal with long-term Japan operator, L.L.Bean, while gearing up for a major relaunch of Eddie Bauer.

In our view, Tata Motors’ Q3/22-23 results were solid and much better than expected, especially in terms of profitability and cash flows. The strong performance was driven by gradual improvement in chip supply, cost savings, product mix and softer commodity prices. Guidance is also positive. The financial risk profile should improve, supported by significantly higher earnings and slightly lower debt. Liquidity, at least at Jaguar Land Rover (JLR), remains sound. JLR has no debt maturities until January 2024.

While Tata Motors will likely be able to deliver earnings improvement in H2/22-23, we believe it might be difficult for the company to achieve net-zero auto debt in two years as guided, considering the challenging operating environment. In this context, a revision of this target is warranted.