Daily Brief Equity Bottom-Up: 2023 High Conviction | Polycab: A High Quality Play on Rise of India as a Manufacturing Hub and more

In today’s briefing:

2023 High Conviction | Polycab: A High Quality Play on Rise of India as a Manufacturing Hub
Software Service (3733 JP): High Order Book Indicates Continued Stellar Performance
Nanya Technology: Consensus Numbers Likely Too High, Net Loss Potential

2023 High Conviction | Polycab: A High Quality Play on Rise of India as a Manufacturing Hub

Polycab is a high-quality wires/cables and FMEG brand, benefitting from growing domestic consumption and rising capex led by India gaining foothold in global manufacturing.
Its FMEG business is currently in nascent stage representing just 10-12% of revenues but is poised to scale up exponentially over the next 3 years.
Its Wires and Cables business, despite commanding a dominant 22%+ market share, has been gaining share and is benefitting from strong demand tailwinds, positioning it well for double-digit growth.

Software Service (3733 JP) reported in-line FY22 results, with revenue growing 9% to ¥27.6B, driven by 7–8% y/y growth in hardware and software businesses, which contributed ~70% of revenue.
The company ended FY22 with an order backlog of ¥8.7B, up 22% y/y, driven by a 26% y/y growth in hardware orders. In November, the company secured order worth ¥2.6B.
For FY23, Software Service has guided for revenue of ¥30.4 billion (+10% y/y), operating profit of ¥5.4 billion (+12% y/y), and ordinary profit of ¥5.5 billion (12% y/y).

Micron’s recent results, where it showed a major margin slide and swung to a net loss, imply weak results ahead for Nanya Tech.
We believe that Nanya’s FY2023E consensus figures are likely to be revised down.
We see more downside risk ahead for Nanya Tech shares, and will await lower levels before buying based on deep-value.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network