In today’s briefing:
- Sumitomo Chemical (4005): To Believe Or Not To Believe, That Is the Question
- Mitsubishi Heavy Industries (7011 JP): Orders Momentum Has Peaked
- China Healthcare Weekly (May12)-Policy Catalyst in Medical Device, GLP-1 Overvaluation, Pientzehuang
- Himax: Signs of Automotive Demand Rebound; Why Demand Strength Is Different Than NXP and Infineon
- BeiGene (6160.HK/BGNE.US/688235.CH) 24Q1- A Breakeven Point Is on the Horizon, but It Is Not Stable
- China Port Pair Opportunity: COSCO Shipping Ports Vs. China Merchants Port
- Dream International (1126 HK) Management Concall: 4x PE,11.4% Div Yield,40% of Mkt Cap in Cash
- Paycloud Holdings (4015 JP)
Sumitomo Chemical (4005): To Believe Or Not To Believe, That Is the Question
- Sumitomo Chemical issued new guidance in-line for 3/24 and xx% ahead of consensus for 3/25 EBIT, yet, the shares promptly declined by 10%.
- Traders were probably spooked by the company’s booking of ¥340bn in impairments that was ¥200bn more than published consensus, but we argue that this was more than already priced in.
- The only reasonable explanation for the reaction is that the market doesn’t believe the new guidance for 3/25. This could prove to be a huge mistake.
Mitsubishi Heavy Industries (7011 JP): Orders Momentum Has Peaked
- MHI was sold off last week as FY Mar-24 operating profit fell short of guidance and management guided for a decline in new orders this fiscal year.
- Orders momentum has peaked. Sales and profits will follow. But the latter are still rising and guidance could once again be conservative.
- Consolidation of the share price is likely to continue until orders and profit trends are confirmed.
China Healthcare Weekly (May12)-Policy Catalyst in Medical Device, GLP-1 Overvaluation, Pientzehuang
- The National Health Commission and eight other departments issued “Opinions on strengthening the capacity building of critical care medical services”. New policy catalysts in the medical device sector arrives.
- Current valuations of weight-loss drug companies have “large bubble”, which have basically priced in all the potential of GLP-1s even based on optimistic assumptions. We advise investors to be rational.
- The price of core raw materials is showing a continuous upward trend, which will inevitably cause certain difficulties for Pientzehuang’s performance growth in 2024. Valuation has more downside ahead.
Himax: Signs of Automotive Demand Rebound; Why Demand Strength Is Different Than NXP and Infineon
- Automotive display driver IC leader Himax reported 1Q24 results last week that were ahead of guidance. The company also guided for rising margins.
- Management believes 1Q24 represents a cyclical bottom for the company’s financial performance and expects automotive demand to rise in 2H24E.
- Himax rallied but remains 55% below its 2021 highs, yet its market opportunity larger than ever. Himax could be benefitting from different positioning within automotive chips than NXP & Infineon.
BeiGene (6160.HK/BGNE.US/688235.CH) 24Q1- A Breakeven Point Is on the Horizon, but It Is Not Stable
- The market is satisfied with BeiGene’s 24Q1 performance. The major reason for BeiGene to narrow net loss in 24Q1 was based on strong product revenue growth rather than cost control.
- Given the varying pace of product promotion/R&D expenditure and the changes of product sales growth, BeiGene’s adjusted loss may achieve breakeven in a certain quarter of this year (e.g. 24Q4).
- BeiGene (6160 HK) is hard to cut costs largely. Sustained overall profitability may not be achieved until 2026 or 2027. But at least, we still see hope for a turnaround.
China Port Pair Opportunity: COSCO Shipping Ports Vs. China Merchants Port
- China’s two national port companies China Merchants Port (144 HK) and Cosco Shipping Ports (1199 HK) have underperformed, but exports have picked up. We see an opportunity here.
- With a 9.2% increase in container throughput, CSPL even down by 4.8% YTD, underperformed CMPH by 12.9pp. There is room for it to catch up.
- CSPL is also cheaper at 7x and 6.3x PERs for the next two years, making it more attractive on a relative basis.
Dream International (1126 HK) Management Concall: 4x PE,11.4% Div Yield,40% of Mkt Cap in Cash
- We summarize our gleanings from the conference call with Dream International (1126 HK) to better understand growth opportunities and future expansion plans.
- The company is expanding in Indonesia to increase its capacity by 30 million USD ( over 830 million USD). (capacity utilization for FY23:83%).
- Trading at 4x FY24e PE, with an 11.4% dividend yield and a 15-year average ROE of 20%, this is a stock worth exploring.
Paycloud Holdings (4015 JP)
- 1H Results: On April 12, 2024, Paycloud Holdings Inc. announced its 2Q FY2024/8 earnings, its first earnings announcement since becoming a holding company and changing its name on March 1, 2024.
- In 1H FY2024/8, the company reported net sales of ¥1,990 mn, adjusted EBITDA of ¥226 mn, and operating profit of ¥86 mn. It had an irregular 5-month accounting period in 1Q FY2023/8 that included the July-August 2022 earnings following a change in the accounting period of the former Valuedesign Inc., which was merged with the company.
- As a result, the company’s earnings summary for 1H FY2024/8 show sales being down 12% YoY, adjusted EBITDA up 2% YoY, and operating profit up 237% YoY.
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