Daily Brief Equity Bottom-Up: The Beat Ideas: Deep Industries- A Hidden Oil & Gas Proxy and more

• Deep Industries (DEEPI IN) targeting 800 Cr worth of revenue by FY26, with 35% CAGR in next 2 years.
• India is opening more oil & gas wells, needs services of company like Deep who can provide one stop shop for all Oil & Gas Needs.
• Key Triggers- Prabha Barge(60% Operating Margins) and Dolphin Offshore(for diversifying into offshore services) will further margin accretive.

• A European Court dismissed the injunction application filed by Insulet for overseas intellectual property rights infringement which would allow Eoflow to start selling its EoPatch products in Europe. 
• Eoflow is trying to complete a rights offering in December 2024. The expected rights offering price is 4,235 won (27% lower than current price). 
• Although results of the main lawsuit in the US remain undecided, with the UPC’s decision in favor of Eoflow, the legal sentiment on this case is in favor of Eoflow.

• Initiate a short position in MCHP Target Price Range: $45-50 Time Horizon: 6-12 months 
• Declining fundamentals: Q2 FY2025 revenue declined 48% YoY, with adjusted EPS falling 72% YoY. Valuation concerns: P/E of 36.8x vs. sector median of 22x, unsupported by current performance.  
• Geo-Political risk: 50% of sales from Asia, exposed to potential trade tensions. Operational challenges: Customer destocking and sluggish demand. ETF-Driven price support: Potential for sharp correction if sector rotation occurs. 

• Prada S.P.A. (1913 HK) (1913 HK —US$18 billion) is a strange beast.

• It’s an Italian fashion group listed in Hong Kong, of all places. Many European and American investors ignore the name, which has caused Prada to trade at a considerable discount to its peers.

• The first Prada shop was opened in 1913 by Mario Prada, a former leather goods salesman who imported English handbags and travel accessories and sold them to the Italian elite.

• Aspirasi Hidup Indonesia booked a solid set of 3Q2024 results with an upgrade to SSSG projects for FY2024 with the numbers and guidance for 20 new stores this year. 
• The company continued to expand stores more aggressively outside Java in 3Q2024 and into October and intends to increase store openings further in 2025 along with its rebranding exercise. 
• ACES will see inventories rise in 4Q2024 as it stocks up early for rebranding and upcoming festive periods. Valuations remain attractive with improving growth and productivity driven by regional expansion.

• HP undergoes leadership overhaul and revamps supply chain in preparation for Trump 2.0, while strict qualification measures impact 7nm technology development.
• TSMC’s AI chip expansion is overshadowed by the potential return of Trump, with global notebook shipments fluctuating in Q3/Q4 2024.
• DIGITIMES Research forecasts a steady revenue growth of over 10% CAGR for the global wafer foundry industry during the 2024-2029 period, while Apple India’s sales soar to US$8B driven by strong iPhone sales. Availability of Samsung’s HBM3E for Nvidia’s Blackwell remains uncertain.

• Post-Covid, Aeon Co Ltd (8267 JP) began to deliver real profit growth but 1H2024 showed it cannot rest on its laurels. 
• While it’ll be happy not to be worrying about a takeover bid like its rival, Seven & I, it still doesn’t have a profit machine similar to Seven Eleven Japan.
• Welcia helps and so does expanding e-commerce but there is still plenty of room for cutting overhead.

• In this Insight, we share our channel inputs that might be relevant for SRF Ltd (SRF IN), Navin Fluorine International (NFIL IN), and Gujarat Fluorochemicals (FLUOROCH IN).
• Weak demand and operational conditions in China have forced companies to focus on clearing inventory rather than maintaining prices, which has negatively impacted India’s export-oriented companies.
• Industry-Wide product cycles, especially in Specialty Chemicals, are shortening, which is a potential threat to leaders like SRF Ltd (SRF IN).

• Polymatech Electronics (POLM IN) revenues have skyrocketed by 27x in the last three years, but the balance sheet is filled with several red herrings. 
• Topline looks out of sync with production and have been largely aided by receivables. Being an R&D oriented company, the R&D expense only appeared in FY24, when sales were INR6bn
• Mis-Classification of cash flows, questionable RPT with promoters, dubious transition towards IND AS, absurd nature of some key expenses, also warrant attention

• Lagardere has two core businesses: publishing and travel retail.
• Publishing business has long-term cash flow potential and growth opportunities.
• Travel retail has captive audience but faces competition from airports for margins.

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