In today’s briefing:
- Alibaba (BABA US): Margin Pressure Overstated
- Taiwan Dual-Listings: TSMC Spread Slumps Then Fully Rebounds; Shorts Spiking Ahead of IMOS Results
- KLAC. Priced For Perfection In 2025 & Beyond
- Mitsubishi Heavy (7011) | Flying High
- Flagging a potentially interesting situation: IMAX China (HKG: 1970)
- Ferrari Q1 FY24: Another Beat, Conservative Guidance And High-Quality Growth
- Exxon Mobil Corporation: The Pioneer Expansion & The Expansion of ExxonMobil’s Guyana Operations! – Major Drivers
- WuXi AppTec (2359.HK/603259.CH) – The Pain of 2024 Has Just Begun
- Earnings Playbook | Shoppers Stop (SHOP IN) | Target of Quadrupling Network
- China Bluechemical Ltd (3983.HK) – Fertiliser Pricing on the Up
Alibaba (BABA US): Margin Pressure Overstated
- We feel consensus overstates margin pressure for Alibaba’s March quarter results. We expect its group adjusted EBITA to deliver single-digit growth vs. investors’ concern about earnings retreat.
- March quarter should mark start of an earnings recovery cycle in our view, as improving China macro and well-executed business revamp plan put Alibaba back on growth track.
- This also means an end to its multiple contraction which lasted for five quarters. We see 50% upside on double-digit earnings growth and multiple expansion over next 12 months.
Taiwan Dual-Listings: TSMC Spread Slumps Then Fully Rebounds; Shorts Spiking Ahead of IMOS Results
- TSMC: Premium Fell and Then Rebounded, Now +15.6%; Can Consider Shorting Again
- ASE: Falls to +12.3%; Wait for Higher Level Before Considering a New Short Again
- ChipMOS: -0.6% Discount; Massing of Short Interest Right Ahead of Earnings
KLAC. Priced For Perfection In 2025 & Beyond
- Q124 revenues of 2.36 billion, $60 million above the guided midpoint, down 5% QoQ and down 3% YoY.
- Current quarter revenue guidance of $2.5 billion representing a ~6% QoQ increase and about the same YoY.
- Share price close to record highs yet CY2024 outlook is tepid while the massive over reliance on China just keeps on going
Mitsubishi Heavy (7011) | Flying High
- MHI’s stock fell 7% following the announcement of results. Guidance for FY3/25 missed analyst expectations
- Even so, MHI remains a key beneficiary of the global shift to clean energy and national policies aimed at bolstering national security
- We remain bullish. The stock has performed well this year and but 13x EV/EBIT seems reasonable given the structural drivers
Flagging a potentially interesting situation: IMAX China (HKG: 1970)
IMAX Corp, listed on the NYSE, is a 71% shareholder of IMAX China, a HKEX listed subsidiary – in charge of the release of IMAX films in Greater China.
IMAX HK is rather illiquid – 7.15 HK is a mere $0.93 USD – with no investor presentations, no earnings calls – again, as is common with ideas in this blog, we are dealing with a company that is more or less “unownable” for most, flies under the radar, and therefore sports a, for a lack of a better word, shite valuation.
- Whilst IMAX Corp, the parent company, trades at ~8x EBITDA, the “backwater” subsidiary IMAX HK, trades at a mere ~5x EBITDA, despite margins being more than 10 pts higher.
Ferrari Q1 FY24: Another Beat, Conservative Guidance And High-Quality Growth
- Ferrari N.V. (RACE US) reported yet another high-quality quarter with 11%/18% YoY revenue/net profit growth on a flat YoY(%) volume quarter driven by mix improvement.
- Although there seems to be earnings upside, and the street was literally searching for it in the concall, management stuck to their 6.5%/9% revenue/net profit growth guidance for FY24.
- Trading at 50x FY24, the stock seems expensive, but the strong branding and order book implies very visible earnings growth into the future.
Exxon Mobil Corporation: The Pioneer Expansion & The Expansion of ExxonMobil’s Guyana Operations! – Major Drivers
- ExxonMobil’s latest performance paints a promising picture, powered by strategic decisions, cost-saving measures, and a focus on long-term growth avenues.
- In Q1 2024, ExxonMobil delivered $8.2 billion in earnings and $14.7 billion in cash flow, demonstrating ongoing efforts to enhance the company’s earnings power.
- The company made big strides in cost savings, achieving $10.1 billion in Q1 compared to 2019, on track to reach their goal of $15 billion in savings by 2027.
WuXi AppTec (2359.HK/603259.CH) – The Pain of 2024 Has Just Begun
- The growth of TIDES business slowed down, and revenue decreased QoQ despite increasing production capacity.As the main growth point of WuXi AppTec’s future performance, this is not a good signal.
- Due to BIOSECURE Act, US companies have been negotiating with other contract manufacturers so as to reduce reliance on WuXi AppTec.Let’s see the situation of new orders in following quarters.
- WuXi AppTec’s performance recovery is closely related to the pace of Fed’s interest rate cuts. From the perspective of growth outlook/macro environment/geopolitical conflicts, WuXi AppTec is still in “dangerous period”.
Earnings Playbook | Shoppers Stop (SHOP IN) | Target of Quadrupling Network
- As we progress in earnings season in line with our previous Playbook, this one focuses on select consumer names.
- Names discussed include Titan Co Ltd (TTAN IN), Vedant Fashions (MANYAVAR IN) , Go Fashion India (GOCOLORS IN) & Shoppers Stop (SHOP IN).
- Most names expect a soft Q1, and SHOP is targeting the most aggressive expansion.
China Bluechemical Ltd (3983.HK) – Fertiliser Pricing on the Up
- A play on higher food and energy prices going forward
- Natural Gas moving up from multi-year lows will support fertiliser prices going forward
- A Low valuation with a solid balance sheet lowers the risk
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