Daily Brief Equity Bottom-Up: Hero Motocorp (HMCL IN) | The “HOG” Wash and more

• Hero Motocorp (HMCL IN)  & Harley Davidson (HOG US) launched their collaborative creation, the Harley-Davidson X440, in India.
• While this is a step in the right and anticipated direction, there are potentially grave mistakes that need to be corrected.
• For HOG, there is more to lose than to gain from this development. Additionally, Eicher Motors (EIM IN) moat around the brand and a strong riding culture is likely underrated.

• We are bullish on Lawson and see fair value at Y7,500 per share based on 3% FY2/25 DPS of Y225/share
• The domestic convenience store business is recovering post pandemic leading to a possible earnings beat
• The market remains sceptical of mid-term growth drivers like Seijo Ishii and China expansion plans

• kopi-C with CEO of PropNex: ‘We’ve built a culture that can’t be replicated’ So firmly ingrained is this belief in informed decision-making that PropNex’s CEO Mohamed Ismail Gafoor has been advocating consumer education in the last ten years.
• As an integrated real estate services group, PropNex’s key business segments include real estate brokerage, training, property management and real estate consultancy.

• Macrotech Developers (LODHA IN) had several issues on the balance sheet and governance front earlier. While, the debt levels have significantly come down since the time, governance however needs improvement. 
• Flat sales and margin contraction, driven by some bizzarre expenses needs attention including some elongated debtors.
• We suggest investors should remain cautious about future uncertainty, as impairment of loans and adverse outcome of contingent liabilities may have a dent on the balance sheet. 

• SKC announced aggressive plans to expand its rechargeable battery, semiconductor, and ecofriendly materials and it plans to invest about 5 trillion to 6 trillion won in these businesses by 2027. 
• We believe that the company will use a combination of asset sales, sale of its treasury shares, and additional debt and equity raising in the next 3-5 years. 
• While the market welcomes sale of non-core businesses such as SK Pucore and sale of treasury shares, it is likely to have greater concerns about additional debt and equity raising. 

• Today’s post will be an interview with Tony Pialis, founder and CEO of Alphawave.

• Alphawave recently got the all-clear from their KPMG auditor, and shares have been unsuspended.

• This interview is lightly edited for readability. I have some thoughts at the end as well.

• United Rentals continues to perform well as the risk of a recession grows.
• The share price is not expensive as profitability and utilization rates remain strong.
• United Renters remains a sold long-term opportunity, but near-term risks should not be ignored, but United Rental remains a selling long- term opportunity.

Paradigm has announced the completion of patient recruitment for stage one (dose selection) of its pivotal Phase III trial, PARA_OA_002, a multi-centre (US/Australia/UK/EU/Canada), two-stage, adaptive, randomised, double-blind, placebo-controlled study to assess injectable pentosan polysulfate (iPPS) in patients with knee osteoarthritis (kOA) pain. Paradigm has efficiently recruited participants for the trial through various initiatives, such as through its partnership with NFL Alumni Health. Management expects stage one to be complete in Q3 CY23, and for stage two to commence with the most effective dose later in H2 CY23. The selected dose will also be used in the initiation of the separate confirmatory Phase III trial in H2 CY23. These events represent key milestones for Paradigm, in our view.

• Sido Muncul (SIDO IJ) performance during COVID was stellar and posted record high revenues and earnings without sacrificing margins. 
• FY 22’s result was the first time in many years that both revenue and net income decelerated. 
• Current valuations at 19x PER and 7x PBR are not cheap, historically or relative to their peers. 

Ahead of its H123 results and an anticipated period of increased business activity in the second half of the year, we present a preview of SIGA Technologies, which continues to have strong fundamentals (despite the bearish macro environment) with several potential inflection points on the horizon. The nearest catalysts, in our opinion, are the upcoming TPOXX deliveries to the US strategic national stockpile (which we expect in Q3/Q423) and data readouts from the post-exposure prophylactic (PEP) label expansion trials, anticipated in Q323, positive results from which could materially expand SIGA’s addressable market. With a strong balance sheet and potential incremental income generation for shareholders (via dividends and buybacks), we believe that SIGA has a resilient business case in the biotech space.