In today’s briefing:
- Keyence(6861 JP) | The Rise of the Phoenix – A Company like No Other
- Seiko Epson(6724 JP)| Neutral 2Q Earnings; Negative Outlook – Remain Bearish
- Intel Vs. TSMC/UMC Long/Short Monitor: Intel Results Drive Share Spike, Still Can Re-Rate
- Dongfang Electric (1072 HK): Surge in 3Q22 Profit and Acceleration of New Orders
- Delta Taiwan Vs. Thailand Monitor: Delta Taiwan Reports Better Margin Trend, Rel Valuation Reverts
- Aeon: Making Omnichannel a Reality
- Mediatek Results Takeaways — Inventory Correction Bottom Potential 4Q22, Mobile, TV Recovery 1H23?
- Chipotle Mexican Grill: Major Drivers
- Moody’s Corporation: ESG Insurance Underwriting Solutions & Other Drivers
- China Internet Weekly (31Oct2022): Alibaba, Tencent, Meituan, Kuaishou, S.F.
Keyence(6861 JP) | The Rise of the Phoenix – A Company like No Other
- Keyence reported record 2Q Sales and OP, thoroughly beating street expectations. The company recorded high double-digit growth in all regions – even in Europe.
- Pricing power is on display 10-35% price hikes to shore up the dip in GPM to 81.3%, depressed on higher raw material costs. Sets up for future earnings growth.
- The share price has underperformed the TOPIX -26%YTD. Valuations at the bottom of the recent range. We expect a share price recovery and are bullish.
Seiko Epson(6724 JP)| Neutral 2Q Earnings; Negative Outlook – Remain Bearish
- 2Q Earnings Neutral; Mainly FX driven. The company sidestepped the worse of what we are seeing in broader printer market (See XEROX; Canon)
- The outlook remains Negative. Macro conditions set to be worse in H2 vs H1. Core Home & Office Printing Business key IJP unit sales struggling with severe margin pressures.
- Ongoing share buyback mildly supportive but unlikely to be a game changer with falling earnings. Target-based 0.8x PBR implying ¥1700 TP.
Intel Vs. TSMC/UMC Long/Short Monitor: Intel Results Drive Share Spike, Still Can Re-Rate
- Intel’s 3Q22 earnings beat expectations, and the shares reacted positively, rising 10.7%.
- The company announced $3bn of cost savings for 2023E and $8-10bn in annual cost savings by 2025E. 2023E earnings guidance will be provided at the company’s February Investor Day.
- Intel has outperformed TSMC and UMC since our pre-Intel Innovation Conference catalyst piece. Intel could still re-rate further relative to the companies into its next earnings.
Dongfang Electric (1072 HK): Surge in 3Q22 Profit and Acceleration of New Orders
- Dongfang Electric (1072 HK) logged a 40.1% growth in reported profit and a 36.5% increase in new orders in 3Q22, both represent excellent sequential momentum.
- A 0.5pp 3Q22 gross margin expansion demonstrated order execution and cost control strengths. We also forecast end-FY22 backlog at 1.8x FY22F revenue, well securing outlook.
- DEC is set to see accelerated growth momentum from rising power storage, particularly pumped storage, demand in the medium term. Yet, it only trades on cheap 8.1x FY23F PER.
Delta Taiwan Vs. Thailand Monitor: Delta Taiwan Reports Better Margin Trend, Rel Valuation Reverts
- Delta Electronics (2308 TT) reported its earnings on October 28th, after its subsidiary Delta Electronics Thai (DELTA TB) had reported on October 25th.
- Sales grew 33% YoY and gross margin expanded sequentially, which outperformed Delta Thailand’s margin performance.
- Delta Taiwan shares have outperformed Delta Thailand since having dropped to a historically-extreme relative market cap below 1.0x. However, Delta Taiwan remains historically cheap on a relative basis.
Aeon: Making Omnichannel a Reality
- In search of ¥1 trillion in ‘digital-related’ sales by 2026, Aeon opened its first, built-from-scratch online-offline marketing store in Yokohama this month.
- The new Aeon SC introduces a range of features and processes to make e-commerce a natural supplement to the store and the shopping experience.
- Aeon has a way to go to reach its targets for e-commerce but is moving in the right direction and has a clearer direction than rival, Seven & I.
Mediatek Results Takeaways — Inventory Correction Bottom Potential 4Q22, Mobile, TV Recovery 1H23?
- Mediatek’s business continues to grow YoY, albeit slower than earlier expected. Management comments provided insight into the inventory cycle.
- Management expects to see the worst impact of the inventory correction cycle in 4Q22E, but then in 1H23E sees potential for a turn around.
- We are still developing a conviction view, however we see the latest results as net-positive for the shares given signs of a turn around ahead and the stock’s laggard status.
Chipotle Mexican Grill: Major Drivers
- Chipotle Mexican Grill delivered a mixed set of results.
- In the quarter, Chipotle continues to view broadening trends by the income levels with the consumers with lower income reducing frequency.
- We provide the stock of Chipotle Mexican Grill with a ‘Hold’ rating and a revision in the target price.
Moody’s Corporation: ESG Insurance Underwriting Solutions & Other Drivers
- Moody’s Corporation delivered a disappointing result, failing to meet Wall Street expectations with respect to both, revenues as well as earnings.
- The Moody’s Analytics business continued to perform quite well with strong revenue growth and an increase in the annualized recurring revenue.
- We provide the stock of Moody’s with a ‘Hold’ rating with a revision in the target price.
China Internet Weekly (31Oct2022): Alibaba, Tencent, Meituan, Kuaishou, S.F.
- In 3Q22, S. F. Holdings’s revenue grew by 45% YoY and net profit increased by 89% YoY.
- Alibaba resumed its link on Kuaishou’s live streaming sales before Singles’ Day.
- Tencent denied the rumor that it would be acquired by China Mobile.
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