In today’s briefing:
- Rohm (6963): Investment in Toshiba Rounds Out Long-Term Plans
- TSMC: 2023 Guidance Reduction Excuse To Take Profit? Guidance Also Affirmed Long-Term Bullishness
- [Kuaishou (1024 HK, SELL, TP HK$50) Preview]: Monetization Is On-Track Amid Competitive Pressure
- Itau Unibanco Holding S.A.: Initiation of Coverage – Business Strategy & Key Drivers
- Monolithic Power Systems Inc.: Initiation of Coverage – Product Portfolio
- HDFC Bank: Seasonality Impacts Q1 Growth, But All Is Well
- 2023 High Conviction Update | Polycab: Played Out As Anticipated, Now Time to Exit
- China Healthcare Weekly (Jul.21) – New Growth Points by NDRC, License-In Model Isn’t Outdated, Intco
- Discover Financial Services: Initiation of Coverage – Business Strategy & Key Drivers
- America Movil ADR: Initiation of Coverage – Business Strategy & Key Drivers
Rohm (6963): Investment in Toshiba Rounds Out Long-Term Plans
- As expected, Rohm has decided to invest ¥300 billion in the JIP-led buyout of Toshiba: ¥100 billion in voting equity shares and ¥200 billion in non-voting preferred shares.
- This would make Toshiba an equity-method affiliate of Rohm, facilitating synergetic cooperation in power semiconductors. The investment is large, but Rohm would still have a sound balance sheet.
- Rohm also plans to buy Solar Frontier’s Kunitomi factory to meet SiC power device capacity requirements through 2030. Investors can now focus on profit growth, which should resume next year.
TSMC: 2023 Guidance Reduction Excuse To Take Profit? Guidance Also Affirmed Long-Term Bullishness
- TSMC reduced 2023 revenue guidance when it reported results during the week. A weaker than expected economy in China and general economic weakness was blamed.
- However, the company’s results beat Street expectations and management maintained its long-term gross margin guidance of 53%+, which implies the company maintaining a structurally higher margin.
- Shares fell after results on a profit taking excuse — We however note that latest guidance also reaffirmed multi-year strength ahead. Structural Long.
[Kuaishou (1024 HK, SELL, TP HK$50) Preview]: Monetization Is On-Track Amid Competitive Pressure
- We expect Kuaishou to report C2Q23 revenue and non-IFRS net income that are in-line and 27% vs consensus, respectively.
- We slightly cut our revenue forecast for live streaming but increased our revenue forecast for online ads. Kuaishou’s margin beat is mainly due to efficient cost control, especially in overseas.
- Kuaishou still has several minor positive catalysts, but WeChat Video Accounts is the major short thesis in the long run. We raise EPS forecasts, but maintain SELL.
Itau Unibanco Holding S.A.: Initiation of Coverage – Business Strategy & Key Drivers
- This is our first report on one of the largest private sector banks in Brazil, Itau Unibanco.
- The loan portfolio showcased growth despite signs of a slowdown, with the SMEs loan portfolio registering an increase of 9.2% for Q1 2023 compared to Q1 2022.
- We initiate coverage on the stock of Itau Unibanco Holding S.A. with a ‘Hold’ rating.
Monolithic Power Systems Inc.: Initiation of Coverage – Product Portfolio
- This is our first report on Monolithic Power Systems, one of the largest semiconductor-based equipment companies.
- Revenue from communications also increased due to a slight increase in revenue from the 5G infrastructure.
- We initiate coverage on the stock of Monolithic Power Systems, Inc. with a ‘Hold’ rating.
HDFC Bank: Seasonality Impacts Q1 Growth, But All Is Well
- HDFC Bank (HDFCB IN) reported weak QoQ growth in deposits and advances. This is however temporary due to seasonality. The growth trajectory for rest of the year remains intact.
- HDFCB continues to invest aggressively into expanding its geographical presence to drive growth. Benign credit cost enables investments without impacting the ROA.
- HDFC Ltd (“HDFC”) has been also merged into HDFCB effective Jul 1. The merged entity is carrying sufficient liquidity at 120%+ LCR to meet the additional CRR and SLR needs.
2023 High Conviction Update | Polycab: Played Out As Anticipated, Now Time to Exit
- We published on Polycab as our 2023 high conviction idea on Dec 25 2022. Since then, the stock has been up 75%+, exceeding our 65%+ upside FY26 target.
- The steep rise was probably driven by strong earnings growth on the back of upbeat demand environment led by healthy domestic capex, rising exports and robust housing demand.
- At the current valuation, Polycab is richly valued and we assign a “SELL” rating. Polycab’s current market cap at INR 68700cr+ is well above our FY26 projection of INR 63500cr+.
China Healthcare Weekly (Jul.21) – New Growth Points by NDRC, License-In Model Isn’t Outdated, Intco
- NDRC issued “Guiding Catalogue for Industrial Structure Adjustment“. The newly proposed adjustments deserve investors’ attention, because they are the areas where investors could receive excess returns in China healthcare.
- Obtaining assets from external sources remains paramount for MNCs. License-in mode isn’t outdated. As long as companies can make money, the ways to acquire assets can be diversified.
- Intco’s performance/stock price has bottomed out, and would gradually resume growth/rebound afterwards. Its market value would return to RMB20-30 billion. Intco would achieve a distress reversal, with attractive investment value.
Discover Financial Services: Initiation of Coverage – Business Strategy & Key Drivers
- This is our first report on Discover Financial Services, a prominent consumer finance company.
- Net interest income grew significantly, supported by an expanding net interest margin driven by higher prime rates.
- Additionally, the company introduced Discover Financial Health Improvement Fund to improve the financial well-being of low- and middle-income individuals, communities, and small enterprises.
America Movil ADR: Initiation of Coverage – Business Strategy & Key Drivers
- This is our first report on Latin American telecom major, America Movil.
- Growth in prepaid and postpaid subscriptions remained steady, contributing to an 8.3% expansion in the postpaid base and a 5.3% increase in the prepaid base.
- Despite a 4.6% year-on-year decrease in Q2 revenue due to the Mexican peso’s appreciation against other currencies, the company still posted MXN 203 billion in revenue, with service revenues declining by 4.2%.
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