In today’s briefing:
- The Beat Ideas: EID Parry’s Strategic Transformation- Cane to Consumer
- Pinduoduo (PDD US): Oversold on Concerns About Slowdown
- BUY: First Pacific Company (142 HK): Right Stock Trapped in the Wrong Market
- Hindenburg Strikes Again: SMCI’s 10K Delay Raises Red Flags
- Trip.com Q224: Slower Growth | But Higher Margins | Competition Has Eased | BUY with US$58 Target
- Zhongsheng Group Holdings (881 HK, BUY, TP:HKD12.5): A Contrarian Play
- India Autos: Expected Weak Wholesale Data. Hyundai Dispatches Drop in August
- Apollo Hospitals Enterprise (APHS IN): Upside Momentum to Continue on Promising Business Outlook
- Taiwan Tech Weekly: Nvidia’s SG Revenue Red Flag; Rise of Custom Silicon; SEMICON Taiwan This Week
- Dream International H1 FY24 Concall Highlights: Resilient, Dividend, And Cash Levels Maintained
The Beat Ideas: EID Parry’s Strategic Transformation- Cane to Consumer
- Eid Parry India (EID IN) A Murugappa Group Company setting stage for transformation from cyclical sugar business to more stable consumer and high margin business.
- The company has diversified into the non-sweetener segment and is emphasizing an asset-light model to drive further expansion.
- Eid Parry India (EID IN) is also the holding company of Coromandel International (CRIN IN), which holds substantial intrinsic value.
Pinduoduo (PDD US): Oversold on Concerns About Slowdown
- The market has lingering concern about substantial slowdown in PDD’s growth and has been pricing in the outlook for most part of the year.
- 2Q results did signal imminent growth deceleration, and management’s blunt yet honest comments about the pressure on margin further stoke fears.
- We regard 1/3 market cap wipe-out after the results as over-reaction. While risks have been reflected to large extent, we do not expect a meaningful re-rating until 2H25.
BUY: First Pacific Company (142 HK): Right Stock Trapped in the Wrong Market
- First Pacific Co (142 HK) is a Southeast Asian conglomerate that has been handicapped by its listing in the Hong Kong market over the last several years.
- As Southeast Asian markets (Indonesia and Philippines) begin to re-rate on the back of a more accommodating Fed policy, First Pacific is beginning to participate in the uptrend.
- Metro Pacific Investments Corp (MPIC), the second largest piece of the company’s NAV has been active in acquiring more infrastructure assets since being privatized last year.
Hindenburg Strikes Again: SMCI’s 10K Delay Raises Red Flags
- Super Micro Computer Inc. (SMCI) has found itself in the crosshairs of controversy following a recent report from Hindenburg Research and the company’s delayed 10-K filing.
- As the tech giant continues to ride the wave of AI enthusiasm, the latest developments have cast a shadow over its stellar growth narrative.
- While SMCI’s impressive revenue figures and expanding market share in AI-driven solutions have attracted considerable investor attention, the company’s past accounting missteps, unresolved regulatory concerns, and potential internal control weaknesses suggest a need for heightened caution.
Trip.com Q224: Slower Growth | But Higher Margins | Competition Has Eased | BUY with US$58 Target
- Despite slower top-line growth, Trip.com posted firmer margins in Q224
- Cash Operating Expenses as a % of Net Revenue fell by around -250 bps Y/Y
- Post-Covid, Trip.com has less competition; BUY with target of US$58 per ADS
Zhongsheng Group Holdings (881 HK, BUY, TP:HKD12.5): A Contrarian Play
- 1H24 results were below expectations, with profits halved YoY. Irrational competition with overzealous discounts, and general decline in preference of traditional luxury cars for NEVs is hurting Zhongzheng (ZS)
- Signs of bottoming as industry are trying to stop the discounting madness and instill some level of rationality
- ZS is trading at 0.47x book, its cash = MCAP, and FY25 PE of 3.7x. Ridiculously cheap for a profitable and positive FCF churning company.
India Autos: Expected Weak Wholesale Data. Hyundai Dispatches Drop in August
- Recent media reports on declining passenger vehicle (PV) sales in India for August are based on wholesale data and reflect expected weakness due to high dealer inventory levels.
- Hyundai Motor India (1342Z IN)‘s dispatches dropped by 8% in August, yet the company remains strong in the SUV segment, with the Creta, launched in January 2024, driving growth.
- Outlook for the passenger vehicle segment is cautiously optimistic, supported by monsoon impact, festive season, new product launches, but challenges like heavy rainfall, high inventory levels, and economic uncertainties persist.
Apollo Hospitals Enterprise (APHS IN): Upside Momentum to Continue on Promising Business Outlook
- Apollo Hospitals Enterprise (APHS IN) reported strong Q1FY25 result, with 15% revenue growth and a massive 83% jump in net profit. EBITDA margin improved to 13.3% (Q1FY24: 13.0%).
- Sequential improvement is expected in Q2 and Q3. The company believes ARPOB growth will improve over the next few quarters with stronger growth in surgical volume and better case mix.
- The company believes enhanced volume growth, improvement in case and payer mix, and a focus on cost optimization will drive margin expansion by 100bps over the next 3–4 quarters.
Taiwan Tech Weekly: Nvidia’s SG Revenue Red Flag; Rise of Custom Silicon; SEMICON Taiwan This Week
- Latest Industry Signals — Nvidia Crashed While Marvell Soared… Custom Silicon a Threat to Nvidia’s Monster Growth? Taiwan AI/Server Exposed Names Were a Mixed Bag of Performance
- Key Events to Watch — SEMICON Taiwan This Week, We Will Be Attending
- Perspective — NVIDIA’s >5x YoY “Singapore” Revenue Growth Is A Red Flag
Dream International H1 FY24 Concall Highlights: Resilient, Dividend, And Cash Levels Maintained
- Dream International (1126 HK) reported revenues/profits of -7.8%/-17% YoY for H1 FY24 due to prolonged destocking of plastic/plush toys, resulting in weak (-18% YoY) North American sales (43% of revenues).
- With over 1.26 bn HKD net cash (43% of the market cap), the company paid another generous dividend of 20 cents (we believe H2 will be higher).
- The company has deep value, trading at 3.9x FY24e PE/1.1x EV-EBITDA, with a 12.7% yield.
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