In today’s briefing:
- Advantest (6857 JP): High Gearing on the Downside
- Narrative and Numbers | Astral Ltd (ASTRA IN) | FY23
- China Comm Const (1800 HK): New Contract Growth Accelerated
- Sodick (6143) – Aiming to Steer Through Current Circumstances
- IPower, Inc. – Water Tower Hour Recap: A Conversation with CFO Kevin Vassily
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.
Narrative and Numbers | Astral Ltd (ASTRA IN) | FY23
- Astral Ltd (ASTRA IN) is a manufacturer of Chlorinated Poly Vinyl Chloride (CPVC) and Poly Vinyl Chloride (PVC) plumbing systems, catering to both residential and industrial applications.
- The company offers a compelling narrative, propelled by the larger market trends of agriculture, housing, and market share expansion.
- Despite the confident growth outlook, the current valuation at 75x NTM appears relatively high. It might be prudent to await a more appealing entry opportunity.
China Comm Const (1800 HK): New Contract Growth Accelerated
- China Communications Construction (1800 HK) saw stronger new contract growth in 2Q23, increasing by 15.5% YoY. Sharp pick-up in domestic contracts is the key driver.
- We estimate its backlog at end-1H23 at Rmb3.9trn, up 15% from end-FY22. This equals 5.1x the projected FY23 revenue, indicating very comfortable forward coverage.
- Despite a 22.5% share price increase YTD, it trades on just 0.21x P/B. Compared with an ROE of 7-8%, it is inexpensive. Upside will come from asset value realisation.
Sodick (6143) – Aiming to Steer Through Current Circumstances
- Digging in for the duration – continuing weak demand from China contributed significantly to weak Q1-2 FY12/2023 numbers, with sales declining 14.8% YoY and resulting in an operating loss.
- The key issue is that customers are experiencing low utilization rates at production facilities, and hence do not require new capacity.
- Sodick revised its guidance for FY12/2023, with expectations of similar market conditions persisting into H2 FY12/2023.
IPower, Inc. – Water Tower Hour Recap: A Conversation with CFO Kevin Vassily
iPower CFO Kevin Vassily joined the Water Tower Hour to discuss the company’s business and existing and new business opportunities for FY24.
A return to bottom-line profitability and the development of the new Business Services segment will be the focus for the company in FY24.
iPower is an e-commerce platform operating as an online retailer and supplier of home goods, hydroponics, pet, and wellbeing products.
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