Daily Brief Equity Bottom-Up: Binjiang 3316 HK: >30% Profit Growth and more

• Binjiang Service Group (3316 HK) reported a solid earnings growth of 28% YoY, with revenue up 41%. Binjiang has outperformed its peers in the PMC space by a long way.
• Net cash on the balance sheet increased to 37% of the current market capitalization, led by the growth of operating profits and payables.
• The PE FY23e/24e now is a modest 11.2x FY23e/9.2x FY24e with dividend yield of 5.4%/6.5% FY23e/24e (assuming a 60% payout ratio).

• The share price has declined by 15% from its March high, perhaps on misplaced concerns about its HTM bond book and capitalization. 
• We have little concern about a collapse in the Japanese housing market and see little impact from higher defaults on capitalization. 
• We see a modest 19% downside if management continues to build up excess capital.  Hibiki’s plan points to over 20% upside. 

• We believe the following three catalysts will likely drive share price of Solus Advanced Materials’ continued outperformance relative to the market this year. 
• They include the sale of Solus Biotech, improved control of its operating costs, and rapid increase in capacity for copper foil.
• The company has already secured strong order backlog from customers including LG Energy Solution, Tesla Motors, and SK On.

• ITMG went ex-dividend yesterday, paying out a whopping 16.8% (6416 Rph/share) final dividend in addition to the interim dividend of 10.8% (4128 Rph/share), bringing the FY22 yield to >27%.
• After payment of the 474 mn USD final dividend and 223 mn USD tax liability, we estimate the company will have >1.0 bn USD net cash (~33% mkt cap). 
• At current coal prices (NEX 190 USD/ton), the Indonesian coal producer trades on a 20% dividend yield for FY23 assuming a 65% dividend payout ratio (in line with historical payout).

• Samsung is finally cutting semiconductor production while Micron makes further cuts to both production and capital spending. 
• Demand for Japanese semiconductor production equipment has stopped growing and the Japanese government plans to restrict exports in the months ahead. 
• An optimist would say that the bad news is now all in the price, but this is not good for Tokyo Electron (TEL) and its shares are not cheap.

• Dongfang Electric (1072 HK)‘s management update suggested that its outlook remains encouraging. Order backlog of Rmb87.8bn well covers the FY22 revenue at 1.57x.  
• It is positive towards pumped storage, alternative power storage and hydrogen energy. Although they may not have significant near-term contribution, DEC is well-positioned in the long term.
• While new A-shares issue will dilute EPS, this should lower gearing (including contract liabilities) to 32.1%, from 49.2%, and is positive to H-share holders as book value will be enhanced.

• Sumber Alfaria Trijaya (AMRT IJ) remains one of the most interesting proxies for retail spending in Indonesia, with a nationwide Alfamart footprint in the most popular mini-market format. 
• The company’s latest numbers confirm the momentum behind and the recovery with improving margins. Alfamart expanded its store numbers aggressively in FY2022 and will continue into 2023. 
• Sumber Alfaria Trijaya will push aggressively in expanding its Lawson convenience stores this year on top of its mini-market expansion as a future growth driver. 

• China TCM’s concentrated TCM granules business improved significantly in 22H2, and the total revenue in 22H2 also increased by 42% YoY, indicating that the decline trend has been significantly curbed.
• Due to its SOE background+ national standard setters with the largest number of national standards filed, China TCM would be the beneficiary of the industry’s transformation during this dividend period.
• Due to low base last year, China TCM’s performance would rebound this year. Considering favorable policies and large growth potential in TCM granules, we’re optimistic about its share price performance.

• Takara Bio Inc (4974 JP) has raised FY23 revenue, operating profit, and net profit guidance by 1%, 5%, and 5%, respectively, due to better-than-anticipated sales of the COVID-19 testing-related reagents.
• Takara Bio is heavily exposed to the COVID-19-related reagent revenue. However, the company is witnessing decline in general research reagent revenue in Japan.
• With the shrinking demand for the COVID-19 testing and slower-than-expected recovery in general research reagent in Japan, revenue is expected to decline 25% YoY in FY24.

Since our outlook note published on 7 July 2022, Alkane has made several important announcements. Firstly, it improved its FY23 production guidance to 62,000–70,000oz (a 17% increase) after impressive H123 production at Tomingley and now expects to reach the upper end of this range. This has resulted in our EPS forecast for FY23 increasing by 30.6% from A$0.0445/share to A$0.0582/share. This was followed by the approval of the Tomingley Gold Extension Project, permitting open-cut mining at the Roswell and San Antonio deposits (including underground mining at the former), extending the mine life at Tomingley to at least 2031. Additionally, Alkane announced an inferred mineral resource at Kaiser of 4.7Moz AuE (0.48Mt Cu, 2.05Moz Au). Finally, it reported Q323 gold production of 16,641oz, bringing the current year to date production figure to 54,431oz.