In today’s briefing:
- Long 7747 Asahi Intec | Short 7733 Olympus
- Alibaba (9988 HK/BABA): 1Q25, Growth Lower Than Expectation, But Many Expansion Plans Following
- Warren Buffett Invests in Ulta Beauty – Positive Impact on CJ Corp?
- Aarti Industries Q1 FY2025 Update
- Sea Ltd (SE US) – Take Rate Tiger
- Freee 4Q: Significant Decline in Losses; Soon to Turn Profitable
- Indian Banks Screener 1QFYE25: Positive Focus on Value Based Smaller Caps
- 2024 High Conviction Update: Asahi Intecc (7747 JP)- FY24 Result Tops Guidance; Positive Outlook
- Istyle: Mid-Term Success Could Drive 200% Share Price Surge
- [Earnings Review] Saudi Aramco’s Earnings Dip as Lower Output and Refining Margins Bite
Long 7747 Asahi Intec | Short 7733 Olympus
- 7747 Asahi Intec announced FY06/25 OP guidance of Y25.2bn, close to street expectations, pointing to substantial upside. GPM guidance has increased and continuation of strong 4Q YoY sales is expected.
- Seven days of short interest outstanding could lead to a short squeeze; Earnings briefing tomorrow reinforcing these trends should be a further catalyst for upside.
- With short interest now low and limited potential for further gains after the recent rebound, 7733 Olympus appears to be losing momentum, especially with China sales continuing to flag.
Alibaba (9988 HK/BABA): 1Q25, Growth Lower Than Expectation, But Many Expansion Plans Following
- Alibaba’s revenue grew by 4% YoY in 1Q25 due to the stagnancy in e-commerce.
- However, many expansion plans follow, including overseas market, physical stores, and fresh food wholesale.
- We set an upside of 51% and a price target of HK$115 for March 2025.
Warren Buffett Invests in Ulta Beauty – Positive Impact on CJ Corp?
- In this insight, we discuss how Warren Buffett’s recent investment in Ulta Beauty is likely to have a positive impact on CJ Corp’s valuation.
- CJ Olive Young (largest shareholder is CJ Corp) is the dominant health & beauty cosmetics chain in Korea. CJ Olive Young has a similar business model to Ulta Beauty.
- Our NAV analysis suggests an implied market cap of 4.7 trillion won or implied price of 160,977 won per share for CJ Corp, representing a 38% upside from current levels.
Aarti Industries Q1 FY2025 Update
- New CEO Suyog appointed in Q1 FY2025, who held leadership roles at Reliance Industries (RIL IN) and McKinsey & Company.
- Aarti Industries (ARTO IN) reported 28% revenue growth, 52% EBITDA growth and 95% PAT growth on YoY basis.
- Company become cautious about its FY25 EBITDA guidance of Rs. 1,450-1,700 crore, given global headwinds such as the Red Sea crisis and Chinese dumping.
Sea Ltd (SE US) – Take Rate Tiger
- Sea Ltd‘s 2Q2024 results reflected both the success of its bold strategies to drive growth in areas such as live-streaming whilst at the same time increasing take rates and profitability.
- Its core focus on competitive pricing, content, logistics, and especially advertising will help to drive growth, retention, and profitability as unit economics improve, whilst it rolls out its lending products.
- Competitive intensity has stabilised which should allow for take rates to rise higher, whilst Shopee is well positioned to further increase its lead. Valuations look reasonable given Sea Ltd’s profitable status.
Freee 4Q: Significant Decline in Losses; Soon to Turn Profitable
- Freee KK (4478 JP) reported 4QFY06/2024 and full-year results today. Earnings were in line with guidance, but operating losses have declined significantly beating consensus by a huge margin.
- The company has issued guidance which calls for a break-even or an adj. OPM of 3% for FY06/2025E suggesting freee’s investments in marketing and client acquisition have finally paid off.
- Freee’s share price has moved up slightly during the last few weeks, but still trading at a discount to its own multiples and at a steep discount to Money Forward.
Indian Banks Screener 1QFYE25: Positive Focus on Value Based Smaller Caps
- Our positive focus remains on smaller cap Indian banks, with buys on value plays Bandhan, Baroda and UBI; we are negative on richly valued ICICI Bank and Kotak Mahindra
- UBI shares have been poor performers, but its returns to 1QFYE25 have improved and it is a value stand-out; Baroda remains a favourite and Bandhan has delivered better profitability
- Kotak Mahindra is the peer group’s highest return bank post credit costs, but returns are declining; ICICI also has attractive returns but we believe its credit costs are unsustainably low
2024 High Conviction Update: Asahi Intecc (7747 JP)- FY24 Result Tops Guidance; Positive Outlook
- Asahi Intecc (7747 JP) reported strong FY24 result, with all key parameters beating estimates. FY24 revenue exceeds ¥100B, a significant milestone of the mid-term management plan.
- For FY25, Asahi Intecc has guided for revenue of ¥117B (up 9% YoY), operating profit of ¥25B (up 14% YoY), and net profit of ¥19B (up 19% YoY).
- Growth will be driven by increase in overseas revenue in medical division despite the impact of stronger yen. Positive environment and strong demand enhance conviction on the long-term growth prospect.
Istyle: Mid-Term Success Could Drive 200% Share Price Surge
- Istyle Inc (3660 JP)’s share price surged 17% after strong FQ4 results, surpassing expectations and signaling a potential turnaround.
- Despite past challenges, iStyle’s ambitious mid-term plan promises increased monetization and stronger growth ahead.
- With mid-term revenue and profit far exceeding expectations, istyle’s future looks brighter, with it’s share price potentially rising by more than 200%.
[Earnings Review] Saudi Aramco’s Earnings Dip as Lower Output and Refining Margins Bite
- Aramco’s Q2 operating revenue grew 5.7% YoY but missed estimates by 0.3%. Meanwhile, net profit fell by 3.4% YoY but its EPS edged past estimates by 0.8%.
- Total hydrocarbon production fell 8.9% YoY to 12.3 mboepd while crude oil realisations rose 8.8% YoY.
- In Q2, Aramco declared dividends totalling USD 31.1 billion, despite an 18.1% YoY decline in free cash flow to USD 19 billion.
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