Daily Brief Equity Bottom-Up: Alibaba (9988 HK): 2Q24 and more

• Alibaba’s operating margin rose to 15% in 2Q24 versus 12% in 2Q23.
• Every expense as percentage of total revenue decreased and EBITDA of every business line increased.
• We believe the reorganization is going smoothly and the stock has an upside of 82%. Buy.

• Sea Ltd (SE US) saw its 3Q2023 result swing back to a loss after turning on investment at Shopee during 3Q2023 in the face of competition.
• The company was open about its renewed investment in growth during the previous quarter in the face of threats from TikTok Shop, which may have lessened post its Indonesia expulsion. 
• Sea Ltd may not have engendered itself with investors impressed with its ability to pivot like no other to actual profitability, now introducing an element of uncertainty. Valuations reflect this.

• Nippon Paint Holdings (4612 JP) announced a better-than-expected 3Q23 results this week, mainly driven by a resilient China decorative paint business. 
• The company also raised 2023 operating profit guidance, expecting around 6% higher operating profit (Y168bn from Y158bn previously).
• At 21x forward PE, the company is attractively valued given the growth profile and strong market share position in most end-markets. 

• ROE is now 24.4% in 1H24 compared with 18.0% last year. ROE consistently rising well, from 15.9% in FY21.
• Quarterly net profit up 47% YoY in 2Q24. On an annualized basis, net profit in FY24 can show considerable delta from FY23, a year when returns and profit were good.
• Costs are well-contained. SG&A to assets was 23.7% at its recent peak and now it’s 20.8%. SG&A to revenue is now 55.5% compared with 65.3% at its recent peak.

• In Q2FY24, Max Healthcare Institute (MAXHEALT IN) reported revenue growth of 17% YoY and 6% QoQ to INR18.3B, driven by higher ARPOB and occupied bed days.
• EBITDA grew 21% YoY and 14% QoQ to INR4.5B, leading to a 100 basis point YoY and 190 basis point QoQ margin expansion to 28.7%.
• MHIL expect greenfield 300 bed hospital in Dwarka, South-west Delhi will be commissioned in later half of Q4FY24. It was originally expected to be commissioned in Q2FY24.

• Q1-2 FY3/2024 results demonstrated robust growth by Geniee with sales growth of 23.7% YoY and operating profit growth of 99.9% YoY.
• The Marketing SaaS segment has seen robust sales growth and margin improvement YoY, paving the way for a resilient earnings stream going forward.
• However, given a weaker-than-expected outlook for the advertising market both domestically and overseas, the company has lowered FY3/2024 guidance whilst maintaining its medium-term guidance range for FY3/2026.

• In H1FY24, Takara Bio Inc (4974 JP) reported 41% YoY decline in revenue to ¥19.1B, dragged by 46% YoY decrease in revenue from reagents, which contributed 78% of total revenue.
• Operating profit plunged 87% YoY to ¥1.4B, 28% ahead of guidance, due to lower-than-expected R&D expenses. Net profit decreased 87% YoY to ¥1.1B, 67% higher than the guidance.
• Takara Bio has cut FY24 sales, operating profit, and net profit guidance by 15%, 63%, and 64%, respectively, as the company is anticipating a sluggish life science R&D market globally.

• BayMedica registers strong Y/Y growth. Although BayMedica reported a 61% decline in sequential revenue in the opening quarter of its new fiscal year ending June 30, 2024, the $902K in sales reported for 1QFY24 was nevertheless almost triple the $321K generated in the year-ago quarter.
• The immaturity of rare cannabinoids ingredients market for health & wellness products makes it difficult to determine definitively any seasonality in the business.
• However, it should not go unnoticed that the sequential sales drop in the latest summer quarter does repeat the pattern reported in 1QFY23 when sequential sales at BayMedica declined by almost 40%. 

With indexed rental growth continuing and rent collection recovering, Triple Point Social Housing REIT’s (SOHO’s) Q323 dividend was fully covered, and we expect this to continue. Meanwhile, while the board continues its focus on closing the share price discount to NAV, it has concluded that any further capital return is dependent on significant additional liquidity being generated through property sales.

• iPower reported $26.5 million in revenue in 1QFY24, its highest quarterly revenue ever, compared with $26.0 million in 1QFY23.
• The company’s performance was helped by business generated by its SuperSuite supply chain partnerships, currently on a $7 million annual run rate.
• The company’s TikTok Shop sales also contributed to the solid sales results.