In today’s briefing:
- Sea (SE US) – Turning Up the Investment Dial
- Amorepacific Group: SoTP Valuation and Meaning of Min-Jung Suh Taking One Year Leave of Absence
- Bajaj Finance: Strong Q1FY24 Earnings – Guidance Upgraded
- Chongqing Brewery (600132 CH) Limit Up 10% Today After Results Beat; Buy China Resources Beer
- JD Health 1H2023: Reports Operating Profits; Margin Upside Is Very Limited
- Matsui Securities – Rising Average Daily Volume & New Accounts, With Strong July Monthly Figures
- Advantest (6857 JP): High Gearing on the Downside
- Shakey’s Pizza: Q2 2023 Stellar, Increasing Guidance to 30% YoY Top/Bottomline Growth
- Jindong (JD US): We Would Stay on the Sideline
- Bilibili (9626): 2Q23, Cut Losses and Raised Growth, Upgrade to Buy
Sea (SE US) – Turning Up the Investment Dial
- Sea (SE US) 2Q2023 results reflected some underlying slowdown but beneath the surface, the company’s core marketplace business saw accelerated growth, as it stepped up investment, and margins improved concurrently.
- The company invested in live streaming, bringing on 1m influencers in 2Q2023, likely stemming the impact of TikTok. The gaming business showed meaningful signs of recovery QoQ in 2Q2023.
- Sea (SE US) grew its cash reserves in 2Q2023 to US$7.7bn signifying the success of its business model. The short-term sell-off looks overdone possibly triggered by talk of quarterly losses.
Amorepacific Group: SoTP Valuation and Meaning of Min-Jung Suh Taking One Year Leave of Absence
- About a week ago, it was announced that Chairman’s elder daughter Min-Jung Suh will take a long one year leave of absence.
- Chairman Suh is very dissatisfied with the company’s results in the past three years and wants to shake up the company to improve its operations, in our view.
- Our base case NAV valuation of Amorepacific Group (002790 KS) is 39,611 won, which is 29% higher than current price.
Bajaj Finance: Strong Q1FY24 Earnings – Guidance Upgraded
- Bajaj Finance (BAF) reported a strong Q1FY24 earnings, led by an all-time-high quarterly AUM growth of INR 22718cr. With this, BAF has upgraded its FY24 AUM growth guidance to 29-31%.
- AUM growth was aided by the highest ever new loans in a quarter. New loans booked at 9.94mm in Q1FY24 were up 34% YoY and 31%+ QoQ.
- Opex-To-NII has come down to 34.0% vs 35%+ earlier, led by operational leverage and deceleration in investments. This has helped the ROE to jump to 24.0% vs 23.1% YoY.
Chongqing Brewery (600132 CH) Limit Up 10% Today After Results Beat; Buy China Resources Beer
- Chongqing Brewery Co A (600132 CH) announced a impressive earnings beat last night, with net profit up 24% yoy in 2Q23. Stock is limit up (10%) today.
- The results confirm the premiumization thesis of the China beer sector is in tact.
- Buy China Resources Beer Holdings (291 HK); take advantage of the overall H-share market weakness and unfounded fear on deflation.
JD Health 1H2023: Reports Operating Profits; Margin Upside Is Very Limited
- JD Health reported 1H2023 results yesterday. 1H revenue increased 34.0% YoY to RMB27.1bn (vs consensus RMB27.5bn) and reported an OP of RMB943.9m (vs consensus RMB753.2m) vs RMB60.1m in 1H2022.
- Though the company made OPM of 5.7% in 1Q2023, 1H2023 OPM was 3.5% in line with our analysis that OPM in excess of 2-3% may not be possible in LT.
- There is very little upside for GPM to improve unless the company’s high-margin service business takes off at a higher rate which seems unrealistic to us.
Matsui Securities – Rising Average Daily Volume & New Accounts, With Strong July Monthly Figures
- Japan online retail stock broker, better average daily volume and rising new accounts
- Monthly data shows strong July average daily volume after an exceptional June
- Granular data on monthly new accounts is strong, now at +31% in July YoY
Advantest (6857 JP): High Gearing on the Downside
- Advantest is highly geared to changes in sales, with average contribution margins of 36% and 51% at the gross and operating profit levels, respectively.
- This works on the downside as well as the upside, something that has perhaps not received sufficient attention as optimists imagine a repeat of the recent extraordinary up-cycle.
- The share price is down 19% from its July 18 high, but at the top of its 5-year P/E range even vs historical peak EPS.
Shakey’s Pizza: Q2 2023 Stellar, Increasing Guidance to 30% YoY Top/Bottomline Growth
- We attended the Shakey’s Pizza (PIZZA PM) conference call for H1 FY23. Management was upbeat and guided 30% top/bottom line growth for FY23 ( up from 20% in Q1 FY23)
- The company reported its highest-ever quarterly systemwide sales of 4.6 bn pesos ( up 29% YoY) due to network expansion, dine-in recovery, and, to a certain extent, price hikes.
- Trading at a 12.9x/9.9x FY23e/24e PE, the stock is cheap, and growth of 20% CAGR over the next 3-4 years is not being factored in.
Jindong (JD US): We Would Stay on the Sideline
- JD reported 2Q results that were slightly better than the street expected.
- But the set of results did little to alleviate our concerns about the structural challenges JD need to combat.
- We still don’t think JD represents a viable investment case due to its lack of growth catalysts (vs. PDD) and attractive valuation (vs. Alibaba). We would stay on the sideline.
Bilibili (9626): 2Q23, Cut Losses and Raised Growth, Upgrade to Buy
- The growth rate of advertising revenue rose to 36% YoY in 2Q23 from 22% YoY in 1Q23.
- Bilibili continued to cut costs and expenses by dismissing employees in a game studio.
- The share price has fallen enough, and we believe it is time to Buy.
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