In today’s briefing:
- Playmates Toys: TMNT Movie Grosses 50M+ Global Sales in Opening Week, Toy Sales to Follow
- Yakult: At Its Lowest PE Since Before the Global Financial Crisis
- Vinda International (3331 HK): Worst Is Likely Over
- Keyence (6861 JP): Higher S,G&A Takes Down Operating Margin
- KT Corp: A New CEO Nominated and Stronger Than Expected Results in 2Q 2023
- Sun Pharmaceutical (SUNP IN): Q1 Profit Falls Due to One-Off Expenses; Double-Digit Revenue Growth
- BeiGene (6160.HK/BGNE.US) 23H1 – “Accidents” Behind the Strong Growth
- Bajaj Auto Ltd (BJAUT IN) | The Market Dominance Playbook
- International Housewares Retail Co Ltd (1373 HK) – Weak End to FY23, Q1 FY24 Improving
- [ACM Research (ACMR US, BUY, TP US$30) Review]: Beat on Order Pull-In and Favorable Foreign Exchange
Playmates Toys: TMNT Movie Grosses 50M+ Global Sales in Opening Week, Toy Sales to Follow
- Teenage Mutant Ninja Turtles: Mutant Mayhem had a smash opening grossing over 50M USD at the box office in its first week of operation.
- The box office success de-risks the upside potential for Playmates Toys as successful movies have a high likelihood of driving toy sales.
- Paramount+ launching the new TMNT-inspired series will also drive Ninja Turtles’ revival even more.
Yakult: At Its Lowest PE Since Before the Global Financial Crisis
- Yakult Honsha (2267 JP)‘s OP fell short of market expectations by ¥500 million in 1QFY24, leading to a 15% drop in the company’s share price.
- With the post earnings price reaction, Yakult’s FY+2 PE has fallen to its lowest level since before the global financial crisis, currently standing at around 18.7x.
- We think this price reaction is unwarranted as the fundamentals haven’t changed. Thus, creates an opportunity for short-term gains by staying bullish on the stock.
Vinda International (3331 HK): Worst Is Likely Over
- According to various public news sources, Brazil’s Suzano SA, the world’s largest pulp maker, and a few private equity players may participate in the bidding for Vinda International (3331 HK).
- Note that the controlling shareholder Essity is looking to potentially dispose its stake, announced in April this year.
- Two major drivers of share price – pulp price and competition – likely have reached the bottom and could improve in 2H23.
Keyence (6861 JP): Higher S,G&A Takes Down Operating Margin
- 1Q sales growth was strong, but the operating margin was squeezed by the cost of overseas expansion.
- The company’s finances remains very strong, but balance sheet ratios reflect the loss of earnings momentum and the dividend payout remains low.
- Shares sold off on margin contraction, but valuations still high. A quick rebound cannot be taken for granted.
KT Corp: A New CEO Nominated and Stronger Than Expected Results in 2Q 2023
- KT Corp (030200 KS)’s shares were up 4.1% today to 32,000 won driven by better than expected results in 2Q 2023 and the nomination of a new CEO.
- KT has nominated Kim Young-Seop, the former CEO of LG CNS as the new CEO of the company.
- KT Corp has attractive valuations. It is trading at only 2.6x EV/EBITDA, 6.7x P/E, and 0.5x P/B in 2023. These valuation multiples are much cheaper than SK Telecom.
Sun Pharmaceutical (SUNP IN): Q1 Profit Falls Due to One-Off Expenses; Double-Digit Revenue Growth
- Sun Pharmaceutical Industries (SUNP IN) reported 11% YoY revenue growth to INR118B in Q1FY24, mainly driven by the U.S. business. EBITDA margin expanded 109bps to 27.9%.
- Net profit declined 2% YoY to INR20B due to certain one-off charges amounting to INR3B. Excluding the exceptional items, adjusted net profit grew 14% YoY to INR23B.
- With 26 marketed products globally, Sun Pharma is betting big on specialty products. Specialty pipeline includes 5 molecules undergoing clinical trials. Specialty R&D accounts for 35% of total R&D spends.
BeiGene (6160.HK/BGNE.US) 23H1 – “Accidents” Behind the Strong Growth
- BeiGene maintained strong product sales in 23H1 and its net loss continued to narrow. This means that BeiGene has realized the cost control problem and entered a healthy growth phase.
- Our revenue forecast indicates BeiGene is approaching the minimum threshold for turning losses into profits. A more likely scenario is revenue need to reach over US$4 billion to be breakeven
- However, regardless of the calculation, BeiGene ‘s valuation is still unreasonably high. Its potential/certainty is nowhere near that of Alnylam. Maintaining sustained high growth is not easy because “accidents” remain.
Bajaj Auto Ltd (BJAUT IN) | The Market Dominance Playbook
- Triumph-Bajaj midsize bike melds the expertise of Triumph Motorcycles and Bajaj Auto Ltd (BJAUT IN) for top-tier quality, targeting the midsize market with dual-brand prowess.
- Triumph-Bajaj sparks fervour with strong inquiries and bookings in tier-two and tier-one locations, though supply constraints present challenges.
- Triumph stands out targeting the 30+ age group seeking premium leisure riding, employing exclusive dealerships and unique pricing to enhance ownership experience.
International Housewares Retail Co Ltd (1373 HK) – Weak End to FY23, Q1 FY24 Improving
- International Housewares Retail (1373 HK) reported weaker than expected numbers, with revenues down 3% YoY and profits down 18% YoY for FY23 (down 10%/42% for H2 FY23).
- The cause for the decline was the roll-off in COVID-related subsidies worth 30 mn HKD and weak revenues in Q4 FY23 owing to a surge in outbound travel.
- The company declared a 10-cent final dividend ( Full Year: 22 cents). Post the correction in share price, it represents an 8.3% dividend yield.
[ACM Research (ACMR US, BUY, TP US$30) Review]: Beat on Order Pull-In and Favorable Foreign Exchange
- ACMR reported C2Q23 top-line, non-GAAP EBIT, and non-GAAP net profit 22%, 130%, and 209% vs. our est., and 25%, 228%, and 248%, respectively.
- As FY guidance was unchanged, we suggest that the revenue beat was due to tool delivery faster than expected (i.e., order pull-in).
- We maintain our FY23 revenue estimate, but raise our net margin estimate to reflect the better-than-expected impact of USD appreciation on profitability.
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