In today’s briefing:
- Meilan Airport (357 HK): Takeaway from Recent Passenger Throughput
- Kolte Patil: Q4FY23 Is All Set to Bring a Strong Close to FY23
- RPPL: Q3FY23 Was Seasonally Weak As Expected, But Q4FY23 Is On Track To Be Strong
- Nesco: Business Is Now As Usual Similar to Pre-COVID Level
- Classys (214150 KS): Record-High Sales and Profit in 2022; Geography Expansion to Accelerate Growth
- Fresenius Medical Care (FME GR): Look Before You Leap; Uncertainty & Cost Pressure Continue to Bite
- President Yoon Calls for Greater Competition and Social Contribution by the Korean Banks
- The Clorox Co: Major Drivers
- The Estee Lauder Companies Inc.: Major Drivers
- Nubank (NU US); Strong Execution to Drive Premium ROE into 2023 and Beyond
Meilan Airport (357 HK): Takeaway from Recent Passenger Throughput
- Strong passenger traffic year-to-date indicates that full-year passenger throughput for 2023 will be on par with 2019.
- Concerns that China resuming outbound travel could turn domestic tourists away from Hainan are overblown, overlooking the huge pent-up leisure travel demand over last three years.
- We expect investors will focus on pace and sustainability of the recovery when company announces 2022 results. Being eligible for Stock Connect Program in 2023 will be a key catalyst.
Kolte Patil: Q4FY23 Is All Set to Bring a Strong Close to FY23
- Kolte Patil reported weaker than expected Q3FY23 accounting earnings due to slight delay in arrival of OC for some projects. However, sales velocity and business development activity was robust.
- Reported Q3FY23 earnings had weak margins due to revenue contribution from two low-margin projects.
- Q4FY23 is on track to be strong both in terms of reported earnings (which depends on the timing of OC) and sales velocity.
RPPL: Q3FY23 Was Seasonally Weak As Expected, But Q4FY23 Is On Track To Be Strong
- Q3FY23 tends to be the weakest quarter seasonally. Volume de-growth was -10% QoQ, in line with the expectation as per historical seasonality trend.
- Q4FY23 is all set to be a strong quarter. Management is confident of closing FY23 as per the previously stated revenue and margin guidance.
- The new value-added segment, Barrier Packaging, has started to contribute meaningfully to the revenue. Tube Laminates, another value-added segment, will also start to contribute soon.
Nesco: Business Is Now As Usual Similar to Pre-COVID Level
- BEC revenues continue to match the pre-COVID level suggesting that the business has now normalized fully post-COVID. COVID led shift in working habits has had no structural impact.
- IT Office Leasing revenues grew 6%+ QoQ, led by the improvement in occupancy rates. Profitability also improved led by operating efficiencies.
- BEC’s EBIT margin came in significantly lower than expected due to one-off expense of INR 15cr for demolition of a factory shed to build a new exhibition hall.
Classys (214150 KS): Record-High Sales and Profit in 2022; Geography Expansion to Accelerate Growth
- Classys (214150 KS) reported strong performance in 2022, with highest ever revenue and profit, driven by increased sales of equipment and consumables due to increased global awareness of major products.
- Revenue from export recorded a CAGR of 30% during 2017–2022, mainly driven by strong growth in Brazil. Classys launched Shrink Universe in Korea and Ultraformer MPT in global market.
- For 2023, Classys has guided for revenue of KRW170B (+20% YoY), driven by Shrink Universe’s expansion into the global market, full-fledged domestic sales of Volumemers, and increasing volume of consumables.
Fresenius Medical Care (FME GR): Look Before You Leap; Uncertainty & Cost Pressure Continue to Bite
- Fresenius Medical Care Ag & Co (FME GR) is reporting decelerating organic revenue growth and earnings decline. The company has revised 2022 revenue and earnings guidance twice in last year.
- Earnings are heavily impacted by the unprecedented US labor market situation constraining capacity and accelerating wage inflation, and worsening macroeconomic environment driving cost inflation and supply chain disruptions.
- For 2022, the company expects low single-digit percentage revenue growth and high teens to mid-twenties percentage decline in net income. CEO has stepped down within two months of taking charge.
President Yoon Calls for Greater Competition and Social Contribution by the Korean Banks
- We discuss the increasing likelihood of formation of another Internet bank, challenger banks, and other measures to foster competition and increase social contribution on the Korean banking sector in 2023.
- The Korean banks underperformed in the past week due to President Yoon pointing out “banks and telcos need to share the increasing living costs.”
- We believe Kakao Bank is likely to underperform the market in the next several months as investors fear about greater competitive pressure, especially on the existing Internet banks.
The Clorox Co: Major Drivers
- Clorox delivered a solid set of results in the previous quarter with organic sales growth in 3 to 4 segments, double-digit earnings growth, and gross margin expansion, despite the challenges in the market due to an unstable global operating environment.
- The company delivered an all-around beat and continued to work on the enhancement of its brand equity.
- Clorox has been encountering different challenges in the macro environment for the past few quarters especially after the Covid-19 tailwinds have receded.
The Estee Lauder Companies Inc.: Major Drivers
- Estee Lauder delivered a highly disappointing result despite surpassing Wall Street expectations in terms of revenues as well as earnings.
- With its business continuing to be pressured by external headwinds resulting from the pandemic, the organic net sales and the earnings per share decreased in the quarter for Estee Lauder.
- Estee Lauder should also benefit from the acquisition of Tom Ford in competing with L’Oréal.
Nubank (NU US); Strong Execution to Drive Premium ROE into 2023 and Beyond
- 4Q22 results confirm that Nubank is the benchmark among EM neobanks in terms of activity rates, as well as trends in revenues and costs per client and digital efficiencies
- We see further potential for broadening and deepening the product offer to customers, at little incremental cost especially in Brazil, to drive cost effective revenue growth
- Our proprietary Nubank model forecasts are broadly in sync with positive consensus estimates; we forecast group ROE of close to 30% in FY 2025, despite high cost of credit assumptions
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