In today’s briefing:
- Komatsu(6301) | Post 2Q Earnings – BACKTEST STILL Says over 45% Upside
- Bear Market Rally Continues; Financials/XLF Reversing YTD Downtrend; Small-Caps at 11-Month RS Highs
- CIMC Enric (3899 HK): Maintaining a Solid Trend
Komatsu(6301) | Post 2Q Earnings – BACKTEST STILL Says over 45% Upside
- Komatsu reported above Consensus 2Q OP; lifted OP guidance; and raised dividends. Outlook for next FY3/24 looks bright
- Share price is pricing in a severe recession. A PBR of 1.1x is implies a significant OP decline. We see no evidence of an earnings contraction next year
- We expect the share price to re-rate as the market prices in resilient earnings outlook. Our back test still suggests over 45% upside
Bear Market Rally Continues; Financials/XLF Reversing YTD Downtrend; Small-Caps at 11-Month RS Highs
- The market remains in bear market rally mode, and our price target remains the 200-day MAs on the SPX and Russell 2000, as discussed in last week’s Compass (Oct. 25).
- Longer-Term, this is still a bear market until the S&P 500 and IWM can break above their respective YTD downtrends/200-day MAs, and markets could easily test their lows again.
- With that said, there are signs that suggest breakouts above YTD downtrends/200-day MAs could be coming. Catalysts include the FOMC announcement on Wednesday, followed by midterm elections on Nov. 8.
CIMC Enric (3899 HK): Maintaining a Solid Trend
- CIMC Enric Holdings (3899 HK) has a steady 3Q22 with good revenue growth for the chemical & environmental and liquid food segments. Management also said margin has expanded YoY.
- Overall order backlog of Rmb13.7bn is generally sufficient to cover individual segment’s revenue over the next 6-15 months, comfortably securing the growth prospects.
- With significant overseas revenue, it is benefiting from depreciation of Rmb against the USD. It also anticipates a pick-up in domestic clean energy segment growth in FY23.
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