In today’s briefing:
- 2024 High Conviction Idea: More Downside for Meituan
- Water Oasis ( 1161 HK ) FY23 Results: Resilient Set Up For a >10% Yield in FY24
- Haier Smart Home (6690 HK): Further Expansion of Footprint
- WuXi AppTec (2359.HK/603259.CH) – How Bad Things Could Be?
- LICHF: H2FY24 Guided to Be Strong
- Marvell Industry Analyst Day
2024 High Conviction Idea: More Downside for Meituan
- We don’t consider Douyin an existential threat to Meituan, but we see the company’s growth increasingly be constrained by its business model itself.
- We believe Meituan will disappoint the market with regard to its bottom line growth in 2024, barring major overhaul of its new initiative businesses.
- Meituan will have to make tough choice between growth and profitability and either scenario won’t bode well for its valuation. We value the company at RMB410 billion, meaning 18% downside.
Water Oasis ( 1161 HK ) FY23 Results: Resilient Set Up For a >10% Yield in FY24
- Water Oasis (1161 HK) reported 16%/65% YoY revenue/PAT growth for FY23. For H2 FY23 revenue/PAT decelerated to 7% YoY/31% YoY. The company guided a positive outlook for FY24.
- Net cash increased to 271 mn HKD, representing 28% of market capitalization (990 mn HKD), as the company benefitted from positive working capital cycle changes.
- Water Oasis (1161 HK) declared a 7-cent dividend for H2 FY23, bringing the overall dividend for FY23 to 14 cents (9.6% div yield).
Haier Smart Home (6690 HK): Further Expansion of Footprint
- Haier Smart Home (6690 HK)‘s acquisition of Carrier commercial refrigeration business is earnings accretive. It will also be strategically positive to its growth outlook.
- With net cash of Rmb17.3bn, HSH has no problem funding the deal internally. Instead of earning a single-digit return on cash, the business’ 9% earnings yield is attractive.
- The transaction will extend HSH’s application scenarios from household to commercial while elevating its competitiveness in Europe and allowing it to capture the B-end customers.
WuXi AppTec (2359.HK/603259.CH) – How Bad Things Could Be?
- Recent business updates of WuXi Bio led to a decline in WuXi AppTec’s share price and changed investors’ expectations for CXO. Now is the time to adjust forecasts.
- We analyzed the growth rate of various business of WuXi AppTec in 2024. In a neutral scenario, growth next year could fall short of management’s guidance.Reversal in 2025 is uncertain.
- If WuXi AppTec “unexpectedly” receives blockbuster orders, which are large enough to hedge against the downward trend of WuXi AppTec’s other businesses, then it will help to change performance expectations.
LICHF: H2FY24 Guided to Be Strong
- LICHF reported a decent Q2FY24 led by a strong NIM (3.04%). Growth has been somewhat subdued due to technical issues, however, these have been resolved and October is tracking well.
- LICHF reiterated its full-year FY24 NIM guidance at 2.6-2.8%. Credit cost, except for one-off item of INR 104cr in Q2FY24, continues to be below 50bp annualized.
- Despite a subdued H1FY24, LICHF has maintained its FY24 AUM growth guidance to 10%+. This implies that LICHF can grow AUM at 5%+ QoQ over the next two quarters.
Marvell Industry Analyst Day
Marvell reported earnings recently, and I wanted to mention that at least before I continued onwards because that is a good context-setting event for the industry day.
Revenue exceeded expectations, but the mix beneath the results was illustrative.
- Datacenter revenue grew 20% QoQ, cloud over 30% QoQ; while networking was strong, they guided for a 40% QoQ decline, consistent with networking OEM results.
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