In today’s briefing:
- Country Garden Services (6098 HK): 1H23 Profit Warning A Good Read-Across For The Sector
- [Luckin Coffee (LKNCY US, BUY, TP US$43) TP Change]: Economies of Scale Brings Margin Improvement
- [Hua Hong (1347 HK, BUY, TP HK$34) TP Change]: Valuation Is Attractive Post-Shanghai Listing
- Korea Small Cap Gem #23: Hanwha Galleria (Deep Value + Five Guys + Chairman’s Son Buying)
- ANA (9202) | How Much Will It Cost to Capture Carbon Emissions?
- HSBC – Realized/Unrealized Gains Oversized To Profit, Soaring Credit Costs
- WuXi AppTec (2359.HK/603259.CH) 23H1 – Is It Time to Start Being Optimistic?
- Taste Gourmet: Q1 FY24 Preview, Another Strong Quarter in the Making
- Intel. PC Recovery Nigh As Incentives No Longer Required To Shift Client CPUs
- Teradyne Inc.: Can The New Archimedes Analytics Solution Be A Game Changer? – Key Drivers
Country Garden Services (6098 HK): 1H23 Profit Warning A Good Read-Across For The Sector
- Country Garden Services (6098 HK) announced a profit warning for 1H23 last night, expecting sales to increase by 3-4% yoy and net profit to see a 0-10% drop yoy.
- The company also announced the intention to repurchase up to 10% of total shares outstanding.
- Share price up +18% following the profit warning and share buyback announcement – a good read-across for the rest of the sector that will report interim results later this month.
[Luckin Coffee (LKNCY US, BUY, TP US$43) TP Change]: Economies of Scale Brings Margin Improvement
- Luckin Coffee reported 2Q23 revenue beat our est. by 7.5%, and non-GAAP NI beat our estimate by 84.1%.
- The top-line beat is driven by stronger product sold on average store sales, the bottom-line beat is driven by economies of scale and less than estimated sales promotion.
- We maintain the stock as BUY rating and raise TP by US$5.5 to US$43/ADS (27x PE in 2023) to factor in the outlook of sustainable margin improvement.
[Hua Hong (1347 HK, BUY, TP HK$34) TP Change]: Valuation Is Attractive Post-Shanghai Listing
- We expect Hua Hong to report C1Q23 top-line and non-IFRS net income in-line and (24%) vs. cons., respectively, missing mainly due to one-time costs.
- Hua Hong’s post-A share IPO valuation is cheap at 0.7x P/B, but we expect that weakening industrials demand and a slow recovery to hamper shipments.
- We maintain BUY but cut Hua Hong’s TP to HK$ 34 reflecting lowered wafer shipments estimates for FY24/25. Our TP implies 15x FY24 PE.
Korea Small Cap Gem #23: Hanwha Galleria (Deep Value + Five Guys + Chairman’s Son Buying)
- Hanwha Galleria (452260 KS) is the 23rd company in our Korea Small Cap Gems series.
- Hanwha Galleria is a spun-off company from Hanwha Solution. Hanwha Galleria’s shares have declined 39% since being relisted on 31 May 2023.
- Hanwha Galleria is a deep value stock with undervalued real estate assets. Chairman’s son is also buying aggressively and there is a big catalyst for Five Guys launch in Korea.
ANA (9202) | How Much Will It Cost to Capture Carbon Emissions?
- ANA has just announced that it will purchase carbon removal credits underpinned by Direct Air Capture (DAC)
- The purchase of 30,000 credits over 3 years is virtually nothing compared to the company’s annual CO2 emissions over 12 million tons
- Assuming that DAC is expected to remove just 10% of emissions, we estimate that it could wipe out over 70% of operating profit
HSBC – Realized/Unrealized Gains Oversized To Profit, Soaring Credit Costs
- Realized/Unrealized gains on securities are increasingly oversized relative to profit
- In the latest quarter these are USD10.1bn compared with net profit of USD7.0bn
- HSBC’s credit costs rose over 100% both YoY and QoQ
WuXi AppTec (2359.HK/603259.CH) 23H1 – Is It Time to Start Being Optimistic?
- The market’s reaction to WuXi AppTec’s 23H1 report was positive due to some improvements in performance, but we don’t think WuXi AppTec has reversed its predicament completely if look closely.
- We deep dive the challenges/risks in macro environment faced by US/Europe. The orders WuXi AppTec received from MNCs can’t guarantee future growth momentum if the US cannot achieve “soft landing”.
- We advise investors not to be blinded by the high growth of CXO in the past since the prosperity of CXO industry may face continuous downward pressure in the future.
Taste Gourmet: Q1 FY24 Preview, Another Strong Quarter in the Making
- We estimate Taste Gourmet (8371 HK) to deliver 39% YoY revenue growth and about 13% YoY profit growth (adj 350% YoY) for Q1 FY24e, to be declared on August 10th.
- The company is expected to go ex-dividend on the 4th of August and pay out a 5.2-HK cent final dividend by the 24th of August for FY23.
- Trading at 6x FY24e PE /20% of the market capitalization in cash and a 9-10% dividend yield ( based on a 50-60% payout ratio) represents a great investment opportunity.
Intel. PC Recovery Nigh As Incentives No Longer Required To Shift Client CPUs
- Q2’23 revenues of $12.9 billion, down 15% YoY but up ~10% QoQ and handily beating the guided midpoint of $12 billion.
- Q3 outlook for $13.4 billion at the midpoint, up 3.8% sequentially
- Mr Gelsinger envisages a centrino-like era of AI-enabled PCs, starting with Meteor Lake in H2’23. Is this realistic?
Teradyne Inc.: Can The New Archimedes Analytics Solution Be A Game Changer? – Key Drivers
- Teradyne delivered an all-around beat in the previous quarter.
- The company’s performance met expectations, but segment-wise, the test business showed more strength, while robotics faced challenges with softer demand.
- Teradyne also recently introduced the Teradyne Archimedes analytics solution, an open architecture that brings real-time analytics to semiconductor testing.
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