In today’s briefing:
- Mengniu Dairy (2319 HK): Solid Value Play
- Bank of Ningbo – Doubtful Loans +59%, Loss Loans +38%, Impairment Costs -16%, With Falling LLR/Loans
- Next Era Energy: Investments into Clean & Green Energy, and the IRA, to Drive Outperformance
- LianBio (LIAN US): Lead Asset Is Approaching Commercialization; Satisfactory Cash Runway
- R&F Properties Outlines Looming Debt Crisis
- Culp, Inc. – Revising Estimates to Reflect Continued Demand Weakness and Margin Improvement
Mengniu Dairy (2319 HK): Solid Value Play
- China Mengniu Dairy Co (2319 HK) is a good pick for those seeking value in the China consumer sector.
- The company currently trades at 15x 2024E PE, compared to over 20x forward PE in the last 5 years, as the industry growth stagnated.
- We can still expect above 10% net profit growth over the next three years, with the company looking to return more cash to shareholders.
Bank of Ningbo – Doubtful Loans +59%, Loss Loans +38%, Impairment Costs -16%, With Falling LLR/Loans
- Despite worsening doubtful, loss loans, the bank opted to lower impairment costs in 2Q23 YoY
- There is almost no profit growth without the bank’s provision cost decline, in 1H23 and 2Q23
- Loans more than doubled since FY19, but against this LLR/loans continues to decline
Next Era Energy: Investments into Clean & Green Energy, and the IRA, to Drive Outperformance
- A 100-year-old firm, Next Era Energy is America’s largest utility firm and the world’s largest renewable energy producer commanding a market cap of USD 136.6B.
- Significant capex into Next Era Energy Resources combined with the benefits of the Inflation Reduction Act to drive stock outperformance.
- Downside exposure remains from idiosyncratic risks, weather shocks and an economic recovery which warrants risk management considerations.
LianBio (LIAN US): Lead Asset Is Approaching Commercialization; Satisfactory Cash Runway
- LianBio (LIAN US)‘s new drug application for its lead asset mavacamten is under priority review in China for the treatment of symptomatic obstructive hypertrophic cardiomyopathy, with approval expected in mid-2024.
- The company is expected to start commercialize mavacamten in Singapore and Macau this year. As of June 30, 2023, LianBio has cash balance of $267M, with runway into H1 2025.
- LianBio is currently conducting phase 3 trial to evaluate the efficacy and safety of TP-03 in Chinese adult patients with Demodex blepharitis. Topline data is expected in 4Q23.
R&F Properties Outlines Looming Debt Crisis
- Guangzhou R&F Properties Co. Ltd. has 48.1 billion yuan ($6.6 billion) of debt due within a year with less than 10 billion yuan on hand as of the end of June, the southern China property developer disclosed.
- Even though R&F extended some debt last year, its first-half financial report showed that it is still mired in a liquidity crisis. R&F Properties delayed payment of 46.7 billion yuan of domestic and offshore bonds in 2022 for three to four years.
- The developer reported a net first-half loss of 5.1 billion yuan, 26% narrower than a year ago.
Culp, Inc. – Revising Estimates to Reflect Continued Demand Weakness and Margin Improvement
- Herein we revise our estimates for Culp, which reported 1QFY24 results and issued guidance in the face of continued weak demand juxtaposed against improving and better-than-expected margins.
- Gross margin for CHF, Culp’s mattress fabrics segment, is recovering faster than expected (up ~700 bps in 1QFY24 versus 1QFY23).
- For CUF, Culp’s upholstery fabrics segment, management grew 1QFY24 gross margin by 667 bps despite a significantly down Y/Y sales comparison (~ -17.4%).
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