In today’s briefing:
- Keisei Electric Rail (9009): For Relative Value Trade
- HDFC Bank (HDFCB): Looking Beyond Short-Term Headwinds
- Sumitomo Chemical (4005): Up Is Down
- Astra International (ASII IJ) – Striking a Balance with Finance
- Shin-Etsu (4063) – Too High, Too Fast
- Tech Supply Chain Tracker (30-Apr-2024): AI server cooling: liquid & air solutions
- Deep Dive Into Samsung’s Memory & Foundry Results: TSMC, AI PC, Server, AI Phone Implications
- PC Monitor: The Next Version of MSFT CoPilot Will Be the Killer App for a Global AI PC Upgrade Cycle
- Mohit Joshi: The Man Behind Tech Mahindra’s Strategic Shift
- Tesla Inc.: Growth As An AI Company And Its Future in Power Generation and Distributed Computing! – Major Drivers
Keisei Electric Rail (9009): For Relative Value Trade
- The activist investor is back and has demanded further action to unlock value from Keisei Electric Railway Co (9009 JP) management.
- Operational numbers are still healthy, but growth is not as large due to the high base.
- Immediate pressure to divest Oriental Land thus short Oriental Land (4661 JP) and long Keisei.
HDFC Bank (HDFCB): Looking Beyond Short-Term Headwinds
- While HDFCB’s results have been somewhat lackluster over the past couple of quarters, this has been largely due to merger-related drags, tight liquidity and irrational competition in the marketplace.
- From a medium-to-long-term perspective, the growth prospects for HDFCB remain tremendously attractive despite its large size, as evident from its consistent market share gains in deposits.
- Q4FY24 earnings came largely in line with the expectation in terms of core earnings, except for one-off gain from an asset sale that was more than offset by floating provisions.
Sumitomo Chemical (4005): Up Is Down
- Sumitomo issued new guidance for the year to 3/25 that was 40% higher than consensus estimates, but the stock cratered almost 5%.
- We were able to think of at least 6 explanations for this odd reaction – all of them irrational.
- A reasonable person listening to the call should have been pleased by almost all that was new information.
Astra International (ASII IJ) – Striking a Balance with Finance
- Astra International (ASII IJ) just released 1Q2024 results, which reflected the softer auto and heavy equipment markets, although buoyed by better earnings for its finance arm,
- The company’s headline net profit was down -14% YoY but stripping out value adjustments was only down -5% YoY, with management optimistic over the longer term.
- Astra continues to mirror the Indonesian economy, with its latest investment in geothermal but its nickel businesses also growing. Valuations attractive on 6.6x FY2024E PER and a 7.2% dividend yield.
Shin-Etsu (4063) – Too High, Too Fast
- On April 24, Shin-Etsu (4063) posted its fifth consecutive OP decline and guided for a sixth, but the stock has outperformed Topix by 22% in the past 12 months.
- OP for the year ended March 2024 was JPY141.5bn, vs. consensus estimates of JPY168.9bn. This was the fifth consecutive miss, and the fourth of more than 10%.
- The Chinese economy is killing the company’s core core Polyvinyl Chloride Resins business and seemingly interminable inventory issues are holding back a recovery in the semiconductor materials business.
Tech Supply Chain Tracker (30-Apr-2024): AI server cooling: liquid & air solutions
- AI server cooling options include liquid & air solutions to improve efficiency and performance.
- India is set to introduce a new chip incentive package to boost its semiconductor industry.
- Apple’s supply chain expansion in Southeast Asia, especially Vietnam, has been significant, while MediaTek aims for 30% market share in China with upcoming flagship SoC.
Deep Dive Into Samsung’s Memory & Foundry Results: TSMC, AI PC, Server, AI Phone Implications
- Samsung 1Q24 results beat consensus by a wide margin and the company gave strong guidance for its Memory segment, guiding for further strength driven by servers, PCs, & phones needs.
- Guided strong demand for PC/Mobile Memory in 2H24E driven by on-device AI, which supports the case of edge AI hardware beginning to drive demand in addition to cloud/server-based AI hardware.
- Foundry segment’s losses reduced, but still loss-making? Samsung’s order backlog is at an all-time high but Samsung Foundry results suggest manufacturing yield performance likely well behind TSMC.
PC Monitor: The Next Version of MSFT CoPilot Will Be the Killer App for a Global AI PC Upgrade Cycle
- Branded PC makers’ shares have been mostly lower in April, however Intel and Microsoft developments are providing strong signals for a future PC upgrade cycle into AI PCs.
- Over 60% of Fortune 500 companies are now using Microsoft’s CoPilot AI assistant; Intel expects the industry to exceed its prior forecast for AI PC shipments in 2024E.
- CoPilot is the killer app that will trigger a global enterprise PC upgrade cycle; The next generation of CoPilot will be an edge AI app that will require powerful hardware.
Mohit Joshi: The Man Behind Tech Mahindra’s Strategic Shift
- Under Mohit Joshi’s leadership, Tech Mahindra (TECHM IN) targets a 15%+ EBIT margin and revenue growth surpassing industry averages by FY2027, with a focus on operational reform and portfolio integration.
- Project Fortius aims to achieve $250 million annual cost savings over 3 years, emphasizing high-margin services and organic growth, signaling a departure from reliance on traditional acquisitions.
- This strategic shift towards operational efficiency and organic growth alters the company’s outlook, positioning Tech Mahindra for sustainable growth and shareholder returns, underlining a commitment to long-term value creation.
Tesla Inc.: Growth As An AI Company And Its Future in Power Generation and Distributed Computing! – Major Drivers
- Tesla Inc.’s first-quarter earnings for 2024 offered a critical and insightful update on the electric vehicle manufacturer’s strategy and financial performance.
- Tesla appears committed to its strategic focus on vehicle autonomy and digitisation, with CEO Elon Musk stating that the company should be viewed primarily as an AI (Artificial Intelligence) and robotics firm, underlining its commitment to Full Self-Driving (FSD) as a key future revenue stream.
- Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.
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