In today’s briefing:
- EVA Precision: Poor Mans Tesla/ EV Play/ Onwards and Upwards from H1 2022
- CALB IPO: Solid PHIP Results Offset by Further Market Downturn
- Biocon Ltd (BIOS IN): Stake Sale in Subsidiary Is a Step in Right Direction
- GULF : Expansion in the US Plant
- Modern Dental Group (3600.HK) 22H1- Share Price May Remain Tepid Due to Lack of Core Competitiveness
- Conch Venture (586 HK): An Overlooked Value Play
- Giant Biogene (巨子生物) Pre-IPO: Visits to Beauty Stores and Online Apps
- ARLO: Penalized for Growth
EVA Precision: Poor Mans Tesla/ EV Play/ Onwards and Upwards from H1 2022
- Eva Precision Industrial Holdings (838 HK) is a beneficiary of EV penetration globally and in China, trading at 9.4x /5.6x FY22/23e and 3.2%/5.3% dividend yield (30% payout ratio).
- H1 2022 was groundbreaking for the company as it commenced strategic cooperation with BYD (1211 HK) on products and bagged orders from Huwaei and Tesla, with more coming in H2.
- There is additional room for buybacks as the stock price is < 2HKD and the company only completed 3-4% of its 200 mn HKD buyback.
CALB IPO: Solid PHIP Results Offset by Further Market Downturn
- CALB’s revenue surged by 266% YoY to reach 3.9 billion RMB in 1Q 2022. Its operating profit also increased by 43.5% YoY in 1Q 2022, respectively.
- CALB also had the highest sales growth rate of 266.5% YoY in 1Q 2022 versus 154% growth YoY for CATL and 63% growth YoY for BYD in 1Q 2022.
- CALB is one of the most interesting large cap IPOs globally in 2022. Despite horrible market conditions, the company is trying to complete its IPO in the next several weeks.
Biocon Ltd (BIOS IN): Stake Sale in Subsidiary Is a Step in Right Direction
- Biocon Ltd (BIOS IN) divested 5.4% stake in Syngene International Ltd (SYNG IN) and raised INR12.2B. The proceed will be used to finance Biocon’s acquisition of biologics business of Viatris.
- Biocon is still working on the equity-debt split of Viatris deal, and a final decision on the same will be announced soon.
- The strategic deal with Viatris will transform Biocon Biologics into a leading vertically integrated global biologics company, with one of the broadest and deepest commercialized biosimilars portfolio in the industry.
GULF : Expansion in the US Plant
- We maintain the BUY call while raising the TP by 7%to Bt62.0 on the back of SOTP adjustment to factor in acquisition of new 588MWe Jackson Generation power project (US)
- 49% holding in the US project will add Bt4 in SOTP The company informs the SET about acquiring 49% stake in 1,200 MW (588MWe) Gas power plant “Jackson Generation”
- The company supplies electricity to the PJM (Pennsylvania, New Jersey, and Maryland) which is a regional transmission organization (RTO) that coordinates the movement of wholesale electricity in the US
Modern Dental Group (3600.HK) 22H1- Share Price May Remain Tepid Due to Lack of Core Competitiveness
- Due to better-than-expected VBP results, we saw a decent rally of MDG’s share price last Friday. However, all the medical products that are covered by VBP begin to lose logic.
- Backwardness in R&D is a bottleneck restricting MDG’s future growth. MDG is more like a manufacturing/processing plant relying on labor dividends than a technology company with high product added value.
- Multiple risks (e.g.pandemic, depreciation of exchange rate against US dollar, economic downturn, etc.) will add more uncertainties to MDG’s 2022 performance. MDG’s share price could remain tepid after temporary rally.
Conch Venture (586 HK): An Overlooked Value Play
- China Conch Venture Holdings (586 HK) is now at negative stub value, the low-end since 2020. This is despite a 16.4% growth in 1H22 core earnings to Rmb542m.
- The company’s waste-to-energy (WTE) capacity will increase by 25% in FY23 and its internal target calls for an earnings CAGR of 33% between FY21 and FY25 for WTE segment.
- We should not underestimate the potential from new business initiatives including cathode and anode materials and lithium battery recycling. They have good medium-to-long term exposure to China’s new energy industry.
Giant Biogene (巨子生物) Pre-IPO: Visits to Beauty Stores and Online Apps
- Giant Biogene (GB) has a large sales network of physical distributors.
- We believe GB’s large capacity packages have price advantage over domestic competitors.
- But we also believe GB should strengthen or outsource its studio for live broadcasting sales.
ARLO: Penalized for Growth
- ARLO deciding to spend more on brand awareness this year has given reason for some investors to move to the sidelines
- ARLO’s second quarter results were better than expected and we believe the third quarter has trended better than expected as well
- The timing of switching CFOs was a surprise since five months prior ARLO had established its ad spending strategy.
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