Daily Brief Industrials: Nidec Corp, Deutsche Lufthansa , Contemporary Amperex Technology (CATL), Voltas Ltd, Encore Wire, Lonking Holdings, J&T Global Express , Spirit Airlines, Norcros PLC, Singapore Post and more

• Nidec’s share price rose by 7% on the largest volume day of the year and on a day where the Nikkei declined by 2%.
• The move followed an announcement that Nidec will enhance its CDUs production line in Thailand by 10x by June 2024. CDUs are used to cool AI servers in data centres
• The market impact of 250 billion yen implies a sales impact of 69 billion yen, which is far too high for 24,000 units per year

• Given events in the Middle East and associated risks for oil prices, we publish a quick guide to the 2024 earnings sensitivity to fuel price increases for the European airlines.
• Rising fuel prices pose starkest risk to Lufthansa earnings, and it has just profit warned due to strike costs, which leave it needing a record 2H to meet guidance.
• Ryanair is comfortably most insulated given margin and balance sheet strength.

• CATL announced its 1Q24 net profit of CNY9.2B (+19% YoY), which straight out blew past market expectations 
• The fear of ever-declining battery prices is overstated, as CATL has clearly shown it can take lower margins and boost ROEs via higher inventory turnover and high utilisation rates  
• Our fair value of CNY253 (+27% UPSIDE) is derived by 23x 2024 PE ratio, which is 1SD below its historical mean. CATL is currently trading at exceptionally low valuations 

• Our flash checks across a couple of dealers indicate pressure on margins across the industry. Voltas Ltd (VOLT IN) is trying hard to gain market share.
• Other names discussed include PNB Housing Finance Ltd (PNBHOUSI IN), Vedant Fashions (MANYAVAR IN) and Bandhan Bank Ltd (BANDHAN IN). 
• Varun Beverages (VBL IN) and Schaeffler India (SCHFL IN) show up as interesting ARs to read. 

• Prysmian SpA (PRY IM) agreed to acquire Encore Wire (WIRE US) for $290/share in cash, 29% premium to 90-day VWAP, implied EV of €4,264 million, 11x EV/NTM EBITDA and 16.9x Fwd P/E.
• Encore wire has traded at an average 6.4x EV/EBITDA and 10.6x P/E over the last 5 years. I set my TP at $290. Synergies could be valued at $51/share.
• The shares are trading slightly above the offer price. Gross spread is +0.2%. The volume traded since announcement has been very strong. There is room for some sweetening. Long.

• Lonking Holdings (3339 HK)‘s demand should pick up in 2H24 supported by the government’s “Action plan to promote large-scale equipment renewals and consumer goods trade-ins”. 
• Industry volume sales have already witnessed a narrower YoY decline in Mar, with solid exports of wheel loaders and domestic sales of excavators.
• After going ex- in late-May, its PER will drop to 7.0x and yield will rise to 6.6%. Net cash of HK$1.56/share is more than fully cover its share price.

• J&T Global Express, a global logistics provider, raised about US$500m in its Hong Kong IPO in Oct 2023. Its pre-IPO investors will be released from its IPO linked lockup soon.
• As per Frost & Sullivan (F&S), the firm is the leading express delivery business in Southeast Asia, with a 25.4% market share as per 2023 parcel volume.
• In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

• Invest in Spirit 8% bonds due 9/20/2025
• Spirit Airlines has strong cash position and available credit
• Bonds are guaranteed by Spirit Airlines and backed by assets such as Airbus A320 airplanes

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Norcros plc is a United Kingdom-based supplier of bathroom and kitchen products.
• The principal activities of the Company and its subsidiaries are the design, manufacture, and distribution of a range of bathroom and kitchen products, mainly in the United Kingdom and South Africa.
• In the United Kingdom, it offers a range of bathroom and kitchen products for domestic and commercial applications. 

• kopi-C with SingPost’s CFO: “We’re building a Singapore-branded global logistics company” Its Group Chief Financial Officer Vincent Yik explains its strategy.
• With the decline in demand for postal services over the years, Singapore Post (SingPost), the country’s postal service provider, is pivoting to the logistics sector to survive and thrive, shares its Group Chief Financial Officer Vincent Yik.