Daily Brief Industrials: Cosco International Holdings, Taihan Electric Wire, CIMC Vehicle Group Co Ltd, Cathay Pacific Airways, Eureka Forbes, Deutsche Lufthansa , Wilmington PLC and more

• In More Hong Kong Stocks Priced For Liquidation, I flagged thirteen stocks the market is all-but implying are priced for liquidation. 
• One of the cut-off points in that analysis was a requirement for stocks to trade at least US$1mn/day. Removing that constraint uncovers shipping services play COSCO International Holdings (517 HK) (CSI).
• CSI’s market cap accounts for ~86% of its 1H23 net cash position. Earlier this month, CSI announced another positive profit warning. Those numbers should be out late-March.

• LG Display’s tight stock rights trading prompts a need to assess potential trading opportunities. Taihan Electric Wire’s concurrent capital increase warrants close observation.
• Watch for a potentially wider spread in Taihan Electric Wire’s stock rights trading from the 22nd, given local institutional demand focus on LG Display may create a buying vacuum.
• Observers speculate on a CJ CGV-like pattern at LG Display. With no current market movements, predicting such a scenario is difficult. Nonetheless, I’ll monitor closely and share any developments.

• On the 28 November 2023, SOE-backed CIMC Vehicle Group Co Ltd (1839 HK) announced a conditional H-share buyback at a $7.00/H-share, a forgettable 8.6% premium to last close.
• This Voluntary Offer followed by a Merger by Absorption requires shareholder approval and SAFE signing off. The SAFE condition was satisfied on the 26th Jan.
• Last night, CIMC announced the CBP investigation into the evasion of  U.S. anti-dumping and countervailing duties was extended. There is no mentioned in interim accounts or HKEx of this investigation.

• There is room for FY23 result of Cathay Pacific Airways (293 HK) to beat market expectations on stronger traffic volume and better yield performance.  
• Resumption of more capacity, from 70% of the pre-pandemic level at end-FY23, will drive FY24 earnings with ROE at 12-13%, putting it on an inexpensive 0.65x P/B. 
• Its associate Air China Ltd (H) (753 HK) will also benefit from the release of pent-up demand in the domestic market and the recovery in international travel. 

• The market seems to be dancing to its own tune and is likely to continue.
• EUREKAFO’s distributors are dissatisfied, MANYAVAR’s reported numbers failed to match up to the on-ground optimism. 
• LTFH’s “strong” retail playbook keeps performing, and SGMART’s website raises concerns about its operations. 

• We refresh estimates on AF-KLM, IAG, Lufthansa following Singapore Airlines’s effective profit warning, noting higher fuel prices make margin protection more difficult.
• Our 2024 EBIT estimates are 7% ahead of consensus at €2.0bn for AF-KLM, 6% ahead at €3.6bn for IAG and 5% behind at €2.5bn for Lufthansa.
• Lufthansa has highest-in-class capacity growth, with its biggest focus on APAC while APAC yield weakness prompts margin management concerns as ground handlers strike.

With November’s purchase of Astutis, January’s sale of MiExact and the proposed Healthcare business disposal, Wilmington is now firmly focused on opportunities within the large global governance, risk and compliance (GRC) market. The group’s significant cash resource should enable further M&A to accelerate growth across the GRC landscape, while investment in technology platforms and AI capabilities improves revenue and operating margin prospects in the core activities. H124 organic revenue growth (continuing business) was up 7%, with a 12% gain in adjusted EPS. FY24 results to June are expected in line with market forecasts. Given the improving quality of earnings we regard the valuation as undemanding.