In today’s briefing:
- Is Samsung M&A About to Happen?
- Wuxi Biologics (2269 HK): Mixed 1H23 Result; Strong Non-COVID Business Momentum Enhances Visibility
- MT (Meituan 3690 HK): 2Q23, Record High Op Profit, 38% Buy
- India Industrials | Quarterly Update – ABB India, Siemens, Polycab and Havells
- Daikin (6367) | Cooling on Heat Pumps
- Nvidia: Better than Dreamed
- VIPShop (VIPS US): Attractive Value Play Underappreciated by Investors Looking for Growth
- [iQIYI, Lnc. (IQ US, BUY, TP US$6.25) Review]: Ads Revenue Will Continue to Have Fair Growth
- Western Digital Corporation: How Cloud is Redefining Their Revenue Streams! – Major Drivers
- Memory Monitor: SK Hynix Appearing Prescient; Relative Value in Micron
Is Samsung M&A About to Happen?
- Local press states that Samsung Electronics Pref Shares (005935 KS)sold shares as they look to invest in their future capex
- The capex amount for 2023 will be around 40-50 trillion KRW and it doesn’t seem like W3 trillion is a needle mover
- With a new 3 year shareholder return plan, I would think maybe cash is needed to secure ammunition for M&A
Wuxi Biologics (2269 HK): Mixed 1H23 Result; Strong Non-COVID Business Momentum Enhances Visibility
- Wuxi Biologics (2269 HK) recorded 8% YoY revenue growth to RMB8.5B in 1H23. Strong momentum continued in the base business, with the non-COVID revenue achieving a 60% YoY growth.
- Ramping up of new manufacturing facilities, maintenance shutdown of existing facilities, slowdown in funding environment in China, and increasing expenses have negatively impacted the profitability.
- Total number of integrated projects reached a new record of 621 with 46 integrated projects added to the pipeline. As of June 30, backlog increased 9% YoY to $20.1B.
MT (Meituan 3690 HK): 2Q23, Record High Op Profit, 38% Buy
- Total revenue grew by 33% YoY, which is the highest growth rate in the past seven quarters.
- The company achieved a higher operating profit in 2Q23 after turned the profit positive in 1Q23.
- The stock price has risen by 20% since our last buy rating, but we believe there will be still 38% upside for yearend 2024.
India Industrials | Quarterly Update – ABB India, Siemens, Polycab and Havells
- In this Insight, we review the recent performance of ABB India Ltd (ABB IN), Siemens Ltd (SIEM IN), Polycab India (POLYCAB IN) and Havells India (HAVL IN)
- Most companies have performed in line with our expectations, except for Polycab, which has exceeded our performance expectations.
- We continue to favour ABB over Siemens (ABB/SIEM), Polycab over Havells (POLYCAB/HAVL)
Daikin (6367) | Cooling on Heat Pumps
- Daikin’s air conditioning business continues to benefit from the secular trends of urbanization, climate change, and rising incomes.
- However, the same logic might not apply to heat pumps, which face far more “structural” issues, warranting a lower valuation.
- Overall, we believe that Daikin deserves to trade at its historical multiple of 15x EV/EBIT and see 20% downside from here.
Nvidia: Better than Dreamed
- Nvidia, in characteristic fashion, murdered EPS estimates.
- Revenue was $2 billion ahead of the guide, and the guide was another $4 billion ahead of consensus for the next quarter.
- Going into the print, many people were concerned that positioning was bad, i.e., everyone was bullish and expectations were too high. Well, they did not disappoint.
VIPShop (VIPS US): Attractive Value Play Underappreciated by Investors Looking for Growth
- Over the last decade, VIPShop proved it is the undisputed leader in China’s online discount retail business with the longest streak of profitability and impressive ROE among China internet names.
- Investors are misplaced to look to the stock for growth. Rather, it is cash cow in mature business with deep moat and run by disciplined management who cares about shareholders.
- Trading at 4.5x our FY23 earnings excluding net cash, it valuation is attractive even compared to depressed sector comps. Expect 20% CAGR of return by 2025 driven by intrinsic value.
[iQIYI, Lnc. (IQ US, BUY, TP US$6.25) Review]: Ads Revenue Will Continue to Have Fair Growth
- IQ reported 2Q23 revenue and non-GAAP net income 0.2%/28.5% vs cons.
- We cut our projections for 3Q23’s membership services revenue, but increased estimations for online ads services revenue, and raised margin forecasts for 2023.
- We maintain our US$ 6.25 TP, implying 16.2X PE in 2023.
Western Digital Corporation: How Cloud is Redefining Their Revenue Streams! – Major Drivers
- Western Digital Corporation delivered an all-around beat in the quarter, with total revenue of $2.7 billion.
- In the fourth quarter, cloud comprised 37% of all revenue at $1 billion, down 18% from the previous quarter and 53% from the previous year.
- Shipments of nearline bits were 59 exabytes, a 26% sequential decline driven by persistent difficulties among cloud clients.
Memory Monitor: SK Hynix Appearing Prescient; Relative Value in Micron
- Major memory names have fallen with the recent market concerns and only staged a small reboound due to Nvidia’s bullish results.
- NAND and DRAM price declines have stabilized. Demand for DRAM from servers is expected to exceed that from mobile devices, driven by AI usage.
- We see relative value in Micron vs. Nanya Technology and SK Hynix. SK Hynix is ahead of the game for AI, and Nanya offers focused DRAM exposure however.
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