Daily Brief Equity Bottom-Up: BYD (1211 HK): All NEV Stocks Plunged After Strong Industry Data – Opportunity Coming and more

• NEV sales volume grew by 47% YoY in December 2023 and 36% in 2023.
• BYD’s sale volume grew by 62%, higher than the industry average, 36%, in 2023.
• All NEV stocks plunged, but we still believe BYD has an upside of 61%.

• We expect BABA to report CY4Q23 top-line, adjusted EBITA and non-GAAP net income (3.2%), (7.1%) and (3.0%) vs. consensus. 
• We estimate Taobao/Tmall GMV grew 2.4%, but was offset by lower take-rate, we expect;
• BABA’s “Return to Taobao” strategy tilts traffic to low-priced Taobao products to fight PDD for low-priced mindset.

• Fast Retailing (9983 JP) announced its 1QFY24 results today, surpassing the consensus OP estimate by approximately 7%.
• Notably, Uniqlo International demonstrated robust growth, even from regions (North America & Europe) that were anticipated to underperform in this quarter. 
• The domestic business OP also managed to top consensus expectations as they managed to improve the gross margin by 2.7% YoY.

• We had thought that Fast Retailing may just miss Q1 numbers due to the warm weather; it beat on strong November and 270bps improvement in gross margin. 
• Following the slightly better results, we maintain our sales forecast at 3.1 trillion yen, but revise our operating profit estimate from 439 billion yen to 455 billion yen.
• Overall, we do not think the market will be overly surprised by the results and we maintain our view that the stock is over priced.

• Polycab India (POLYCAB IN) is in the limelight on the back of Income Tax investigation carried in December 2023 which revealed several accounted transactions.
• In a circular, it is hinted that the IT department has detected unaccounted cash sales worth INR 10 bn, unaccounted cash payments made by distributors, and some non-genuine expenses.
• However our forensics framework does not hint at any alarming red flags, apart from low FA turnover ratio, stock with third parties and board composition.

• The local media have started to provide some concrete figures of the amount of losses related to HSCEI related ELS products sold by major Korean banks and securities firms.
• If HSCEI continues to remain at about 5,450 to the end of March 2024, the total losses could rise to nearly 1.6 trillion won, impacting more than 45,000 investors. 
• Concerns about HSCEI index related ELS losses have negatively impacted both the major Korean banks and securities companies in Korea in the past 1-2 months. 

• Taiwan High Speed Rail (2633 TT) (THSR) solid traffic growth and high utilization rate are driving strong profits and cashflows which will be mostly paid out as dividends       
• We view THSR as a government-backed perpetual bond masked as equity as it has a minimum profit guarantee, a firm dividend mandate, and impetus to disperse excess cash to shareholders 
• The current yield margin against the 10-year bond is the widest since its IPO and is forecasted to widen further with strong profit growth. Attractive for alternative fixed-income investors 

• The UK Post Office “Horizon Scandal” has blown up, putting Fujitsu’s computer system failure on the front pages and on the agenda of Parliament and Prime Minister Sunak.
• Fujitsu UK has been awarded £6.8bn in public contracts since 2012. The Justice Secretary is  now talking about compensation for the enormous financial and personal damage caused.
• Fujitsu’s share price is coming off a new all-time high reached in December. The amount of compensation and loss of potential future contracts is substantial but uncertain.

Key points (machine generated)

• FLEX is undergoing a strategic shift towards higher-margin markets, which is expected to improve its operating margins and free cash flow.
• The potential spin-off of NEXTracker gives FLEX an opportunity to repurchase shares and enhance shareholder value.
• FLEX’s outstanding shares are expected to further increase shareholder value.

This article is sourced from an online content aggregator through publicly available sources and is displayed below for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Taiwan PC names have been the top losers over the recent period, after having previously been the top winners. Our Long Dell vs. Short Acer trade is doing well.
• Nanya Tech was a top loser, falling along with its international Memory peers. Nevertheless, we note it underperformed Micron and SK Hynix. We continue to prefer SK Hynix for Memory.
• CES is happening now and will be wrapping up Friday. We like our Dell vs. Taiwan PC names through the CES event. TSMC will be reporting results January 18th.