In today’s briefing:
- 2024 High Conviction Idea – High Beta and Low Risk Recommendations
- BYD (1211 HK): Largest Producer in Dramatically Expanding Market
- Short-Seller Grizzly Accuses Chinese AI Software Firm SenseTime of Inflating Revenues
- TPL: The Land of Speculative Worry
- Japan Airlines (9201 JP, BUY, TP: JPY3150): Slow, Steady, Stable Recovery
- [Miniso Group (MNSO US, BUY, TP US$31) Company Update]: Management Reassured Future Growth Prospects
- Shanghai Port’s Shipping Service Spinoff Surges 58.6% in Strong Debut
- Torrent Pharmaceuticals (TRP IN): Q2FY24 Result- Domestic Business Continued Solid Growth Path
- Empire Energy Group Ltd – A Gas Plant with Intrinsic Growth Opportunity
2024 High Conviction Idea – High Beta and Low Risk Recommendations
- We prepared high beta and low risk recommendations for 2024:
- With 2024 YE as horizon, we recommend JD.com, JD Logistics, JDHealth, Tencent and Luckin.
- With 1H24 as horizon, we recommend KE Holdings, NetEase and Kuaishou.
BYD (1211 HK): Largest Producer in Dramatically Expanding Market
- China NEV market grew by 35% YoY in first ten months and by 39% YoY in October 2023.
- BYD’s production is significantly larger than other NEV producers in China.
- We believe the stock has an upside of 80% and a price target of HKD387. Buy.
Short-Seller Grizzly Accuses Chinese AI Software Firm SenseTime of Inflating Revenues
- SenseTime Group Inc. shares plummeted nearly 5% Tuesday after U.S.-based short-seller Grizzly Research released a report accusing the Chinese AI software developer of inflating its revenues.
- Grizzly’s report, citing court documents and social media posts, alleged that SenseTime engaged in what it called round-tripping, where it provided funds to customers who in turn used the money to purchase products from SenseTime that might never have been delivered.
- Its Hong Kong-listed stock tumbled as much as 9.7% before closing 4.86% lower to HK$1.37 ($0.18), down 64% from its IPO price of HK$3.85.
TPL: The Land of Speculative Worry
- TPL has gone through a series of changes within its Board of Directors but that has not been enough to squash investor concerns
- The Delaware Court deciding in favor of TPL in a shareholder lawsuit would allow the Board to increase the number of authorized shares of common stock
- TPL’s Board now has ten members instead of nine last year. The Board has also seen three members turnover giving the Board a total of four fresh members
Japan Airlines (9201 JP, BUY, TP: JPY3150): Slow, Steady, Stable Recovery
- Japan Airlines (9201 JP) (JAL) is making a positive recovery on strong domestic and international demand
- Weak JPY is a big headwind and so is its 40% fuel hedge cover locked in at higher than-market price. These factors should reverse and unwind next year
- Target price JPY3,150 based on 1.65x FY24 P/BV – one standard deviation above its mean. Borderline attractive with 12% UPSIDE, and 2.3% dividend yield
[Miniso Group (MNSO US, BUY, TP US$31) Company Update]: Management Reassured Future Growth Prospects
- MNSO management hosted a conference call today which reiterated normal operation of business, guided C4Q23 revenue above consensus, gross margin up QoQ, and non-GAAP net profit margin stable;
- MNSO management refuted short seller’s thesis, commented distributor inventory levels at healthy levels and provided backgrounds on disclosed insider share sales;
- We welcome MNSO management’s timely communication and believe its business model to be solid. We reiterate BUY and TP.
Shanghai Port’s Shipping Service Spinoff Surges 58.6% in Strong Debut
- Shanghai Jinjiang Shipping Group Co. Ltd., the shipping business unit of Shanghai International Port Group, gained 58.6% in its trading debut in Shanghai after a 2.18 billion yuan ($306 million) initial public offering.
- The container shipping service provider finished its first day of trading at 17.84 yuan a share, giving it a market cap of 23.1 billion yuan.
- Jinjiang Shipping was spun off from the world’s largest container port operator for a separate listing on the mainboard of Shanghai stock exchange.
Torrent Pharmaceuticals (TRP IN): Q2FY24 Result- Domestic Business Continued Solid Growth Path
- Torrent Pharmaceuticals (TRP IN) reported 16% YoY revenue growth to INR26.6B in Q2FY24. Strong performance in India, Brazil, and Germany is partially offset by the revenue decline in the U.S.
- EBITDA increased 22% YoY to INR8.3, leading to 138bps YoY expansion in margin to 31%, due to cost optimization and discontinuation of the low margin business in the U.S.
- Initial bull thesis on the company regarding its domestic market strength is still intact. Further upside will be driven by superior performance in India and Brazil businesses and margin improvements.
Empire Energy Group Ltd – A Gas Plant with Intrinsic Growth Opportunity
- Empire Energy Group Limited (ASX:EEG) is an oil and gas producer/developer, with onshore Northern Territory (NT) and US oil/gas production assets.
- EEG has the largest tenement position in the highly prospective Greater McArthur Basin, which includes the Beetaloo Sub-basin.
- The investment case is building further with the acquisition of the Rosalind Park Gas Plant to provide an immediate, low-capital and operating-cost processing option with nameplate capacity above the Carpentaria Stage I development model.
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