Daily Brief Industrials: Keisei Electric Railway Co, Waaree Renewable Technologies, China Communications Construction, Csx Corp, Equifax Inc, Epwin Group PLC, Mytilineos Holdings Sa and more

• A solution for Keisei, similar to case of parent-subsidiary listing, is cashing OLC shares to raise profitability and growth potential of its business, to eliminate the distortion in market capitalization.
• There is a corporate governance issue in that OLC is accepting board members from Keisei, which has below 20% equity and does not clearly explain the synergies of the business.
• This can be viewed as part of dissolving cross-shareholdings where the company wants to obtain voting advantage without business synergies and cannot find opportunities to spend the cash it sells.

• Waaree Renewable Technologies (WAREERTL IN) or (WRTL) is into Solar EPC and is a subsidiary of Waaree Energies Ltd. 
• Revenues and order book have increased exponentially in the last few years.
• While the business has certainly picked up, there are few forensic checks that need attention; most important being the auditor’s comment on the need to increase strength of internal controls.

• China Communications Construction (1800 HK) maintained healthy earnings growth at 10% in 1Q24, ahead of the consensus expectation of 7.3% for full-year FY24.
• A 0.2pp gross margin expansion and positive swing in credit and asset impairments are the drivers, though higher finance costs have offset some of their benefits.
• 1Q24 new contracts were up 10.8%, and we estimate backlog equals 4.5x FY24F revenue. Despite YTD outperformance, it is still cheap at 2.4x PER and 0.2x P/B.

• CSX Corporation had a solid start to 2024, dealing with a number of challenges, including severe weather in January and the Francis Scott Key Bridge collapse.
• Despite these difficulties, the corporation managed to maintain a consistent momentum with a volume performance that kept moving forward.
• The company’s management remains committed to mitigating the impact of these challenges for its customers.

• Equifax Inc.’s strong start in 2024 is evident from its Q1 reported revenue of $1.389 billion, up 7%, resulting from sustained strength in mortgage revenue and global non-mortgage businesses.
• Equifax’s adjusted EBITDA margins of 29.1% were also slightly above expectations.
• Moreover, their adjusted earnings per share (EPS) of $1.50 a share exceeded the high end of their guidance.

Epwin’s FY23 results were robust and management navigated inflationary pressures well. Despite some market headwinds, we have increased our FY24 and FY25 underlying operating profit estimates for the second time this year. Long-term, well-established growth trends imply that Epwin is well-placed to leverage off increasing demand for its energy-efficient and low-maintenance building products. Epwin offers an attractive investment case with the potential for uplifts from additional self-funded M&A. It trades on an FY24e P/E ratio of 8.3x, materially below the long-term average of 10.5x, and yields c 6%. The extended share buyback programme should help support the share price.

On April 25, Mytilineos (MYTIL) announced, as part of its strategic review, that it is considering a potential international listing on the London Stock Exchange (LSE) within the next 12–18 months. Listing on the LSE would demonstrate a strong vote of confidence by MYTIL in the UK market and aligns with its international growth ambitions, allowing the company to leverage its geographically diverse portfolio of operations. It would provide greater liquidity for investors and enable MYTIL to continue to expand its global presence. While pursuing an LSE listing, MYTIL will retain its listing on the Athens Exchange, demonstrating its ongoing commitment to contributing to the Greek economy, while also acting as an ambassador for Greece in the UK.