In today’s briefing:
- Shift (3697): Profitability Rebound Underway
- Taiwan Dual-Listings Monitor: TSMC Maintaining Strong Premium; UMC Headroom Continues to Decrease
- Hogy Medical (3593) | New Strategy Sparks Investor Confidence
- SoftBank Group (9984 JP): A Bigger Bounty Awaits with Swiggy’s Upcoming IPO
- Yadea (1585): Ready for New Standard
- China Power International (2380 HK): Firing on All Cylinders
- China Consumption Weekly (26Aug2024): 2Q24 Rev Up By – PopMart 62%, Zeekr 58%, Tongcheng 48%, Etc.
- Consumer Tales Aug Wk#4: Beer in China, Ola’s Path to Profits, Kalyan Jewellers’ Quiet Confidence
- CIMC Enric (3899 HK): Things Are Getting Better
- Uchi Technologies (UCHI MK): Q2 2024 Profitability Resilient, Guidance Weak
Shift (3697): Profitability Rebound Underway
- A massive shortage of IT professionals combined with Shift’s overwhelming dominance of the labor market should drive 20% annual revenue growth through 2030.
- But Shift missed consensus profitability estimates 3 consecutive quarters, and the share price is down 67% in 12 months, compared to an 18% rise in the median peer.
- In our view, a recovery in profitability is already underway, and shares are at least 45% undervalued
Taiwan Dual-Listings Monitor: TSMC Maintaining Strong Premium; UMC Headroom Continues to Decrease
- TSMC: +15.4% Premium; Wait for Closer to 20% Before Opening Fresh Short
- UMC: +1.2% Premium; Can Consider Shorting at 1.5% or Higher; Headroom Continues to Decrease
- ASE: +5.2% Premium; Wait for More Extreme Levels Before New Trade
Hogy Medical (3593) | New Strategy Sparks Investor Confidence
- Dalton & Co. increased their stake in Hogy Medical to 19.15%, signaling confidence in the new Medium-Term Business Plan.
- Hogy Medical’s new plan aims to boost ROE above 6%, drive revenue to ¥46 billion, and enhance shareholder returns.
- Potential M&A activity in Japan’s med-tech sector and the new plan could unlock significant shareholder value, with a possible 50% upside in share price.
SoftBank Group (9984 JP): A Bigger Bounty Awaits with Swiggy’s Upcoming IPO
- Softbank Group (9984 JP) could see its USD450 million investment in India food delivery player, Swiggy , triple in value with the upcoming IPO, reportedly valuing it at USD15 bn.
- SoftBank Group, generated a total return, net of investments, of USD1.4 billion with the listing of Ola Electric (OLAELEC IN) , Unicommerce (UNIECOM IN), and BrainBees Solutions, this month.
- If Swiggy’s IPO reaches valuations closer to Zomato’s, SoftBank could reap even greater rewards than from its recent portfolio company listings.
Yadea (1585): Ready for New Standard
- The 1H result was poor due to the inventory clearance from the new product standards, which rendered older products less desirable.
- Management has proven to be able to manage costs carefully during a down cycle.
- Yadea Group Holdings (1585 HK) used to trade around 35x PER; now it is only 10x PER.
China Power International (2380 HK): Firing on All Cylinders
- China Power International (2380 HK) kicked off FY24 with an impressive 51.5% surge in 1H24 net profit. All business segments improved YoY, with hydropower being the best.
- Both volume growth and cost reduction are the key drivers, supporting a 7.2pp gross margin expansion. The 5pp increase in the proportion of hydropower sold also lifted profitability.
- CPI will grow its capacity to 52GW by end FY24, a 15.5% YoY and 7.8% HoH increase. Moreover, the upside will come from more asset injection from its parent.
China Consumption Weekly (26Aug2024): 2Q24 Rev Up By – PopMart 62%, Zeekr 58%, Tongcheng 48%, Etc.
- Pop Mart’s total revenue increased by 62% YoY due to the promising overseas market.
- Tongcheng’ revenue grew by 48% YoY in 2Q24, as new businesses are successful.
- Alibaba’s Freshippo plans to set up frontline warehouses, which is a way back to online.
Consumer Tales Aug Wk#4: Beer in China, Ola’s Path to Profits, Kalyan Jewellers’ Quiet Confidence
- Welcome to Consumer Tales & Trends, your weekly roundup of the latest corporate developments, investment reports and sector events in the consumer industry.
- With fewer young people and a growing number of older adults, the target market for alcoholic beverages is shrinking in many markets including China.
- Upsides from vertical integration could give Ola Electric (OLAELEC IN) a significant cost advantage over local competitors. Strong pricing power can allow it to decide whether to prioritize growth or margins.
CIMC Enric (3899 HK): Things Are Getting Better
- CIMC Enric Holdings (3899 HK)‘s 1H24 result is below expectations, but the growth outlook is promising. Management also guided for a solid recovery in 2H24.
- Backlog and new orders rose 42.5% and 29.4%, respectively, with chemical and environmental orders rebounded sharply QoQ. The overall margin will be better in 2H24.
- Hydrogen revenue should reach Rmb1bn in FY24 (1H24: Rmb450m). New coke oven gas (COG) to hydrogen projects may generate Rmb10bn revenue by FY27, or 43% of FY23 revenue.
Uchi Technologies (UCHI MK): Q2 2024 Profitability Resilient, Guidance Weak
- Uchi Technologies (UCHI MK) reported Q2 2024 revenue/profit up 2.2%/13.4% YoY. In USD terms, revenue declined 3% YoY.
- Aided by the strengthening of the USD/MYR in Q2 (which has reversed slightly), EBITDA margins improved by 250 bps to 65.7% and net margins by 540 bps to 54.5%.
- The company maintained guidance of a high single-digit revenue decline (in USD). The stock trades at 13x PE with a 7.8% dividend yield.
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