Daily Brief Equity Bottom-Up: Fast Retailing (9983) | Q1 Preview – Slight Miss and more

• We anticipate a sluggish beginning to the fiscal year with 1Q8/24 earnings reflecting slower growth in Japan, China, and Southeast Asia.
• Our forecast for 1Q24 operating profit stands at ¥130 billion, slightly below the consensus estimate of ¥138 billion. Assuming our estimates are accurate, we anticipate a slightly negative share-price reaction.
• Our bearish stance on the stock persists, driven by the fact that it trades at a premium to our DCF and at a premium compared to global peers

• Steady and strong profit is the key features of Power Finance and this is improving during FY24.
• ROA expansion can continue to reach and possibly surpass the peaks of FY15 and FY16 with loan volume, contained costs, better credit metrics.
• Recent quarterly data shows better loan volume and financial assets expanding more than financial liabilities, with credit costs in reverse.

• Oriental Watch (398 HK)  went ex-dividend on the 4th of January and has settled at an appetizing valuation of 6.8x PE with 60% of the market cap in cash.
• The market post-golden week and into the new year has been tepid.
• We expect the company to continue paying out 100% of its profits as dividends, based on which the dividend yield is close to 14% at the current share price.

• Our conviction long Shift Inc (3697 JP) ‘s share price went up by more than 50% in 2023 driven by strong growth in top line alongside further improvement in margins.
• The company’s margins fell in 2022 due to unprofitable projects, however, as these projects came to an end and the company being careful with projects, margins began to recover.
• Shift’s share price has declined over the last few days which we think is temporary and offers an  opportunity to make an entry.  

• PDD diversified into ‘local life’ businesses in December 2023, but stopped these businesses within two weeks.
• We believe PDD’s low price advantage does not work in Meituan-like ‘local life’ and the top performer Meituan is hard to fight.
• We believe the stock price has an upside of 88% for year end 2024.

• We revisit FY24 prospects by highlighting that historical full service carrier (FSC) earnings seasonality suggests group EBIT guidance of ¥130bn is very conservative.
• FSC FY24 EBIT guidance of ¥80bn implies only ¥9bn in 2H, 12% of 1H’s ¥71bn, whereas historically 2H has represented 74-83% of 1H. We model ¥59bn or 84% in 2H.
• Our ¥176.5bn group EBIT for FY24 is 36% above guidance but also 27% above Visible Alpha consensus, largely due to lower costs, which position JAL strongly for the long-term.

• Ferrotec shares have dropped by a third since last July and are now selling at 8.2x EPS guidance and 0.6x book value.
• Sales and operating should start to recover in 2H of FY Mar-24, led by power semiconductor substrates.
• Buy for the upturn in the semiconductor cycle and capacity expansion in Japan, China and Malaysia. No significant damage from the Noto Peninsula earthquake has been reported.

• Through November 2023, Bora Pharmaceuticals (6472 TT) reported revenue of NT$13.2B, up 50% YoY. Going ahead, we are upbeat on both CDMO and pharmaceutical businesses of the company.
• Bora’s foray into branded pharmaceutical market in U.S. should add a new revenue driver and improve margins. Generic portfolio should benefit from new launches amid better pricing environment.
• Through the first nine months of 2023, Bora has added 13 new customers and 28 new products to its CDMO business. Both the numbers are way above full-year 2023 forecast.

Edison Investment Research is terminating coverage on Kinarus Therapeutics (KNRS), Numis Corporation (NUM), EMIS Group (EMIS), Pixium Vision (PIX) and Treatt (TET). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant. Previously published reports can still be accessed via website

Edison Investment Research is terminating coverage on Kinarus Therapeutics (KNRS), Numis Corporation (NUM), EMIS Group (EMIS), Pixium Vision (PIX) and Treatt (TET). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant. Previously published reports can still be accessed via website