Daily Brief Industrials: Samsung C&T, Recruit Holdings, AP Moeller – Maersk A/S, Avon Rubber PLC, Ww Grainger Inc and more

• We discuss the surging share cancellations in Korea in 2024. As of 8 February 2024, Korean companies have announced 3.3 trillion won worth of shares to be completed this year. 
• At current blistering pace, it is likely that the share cancellations in Korea could jump at least 100% YoY to jump more than 10 trillion won in 2024. 
• Some of the leading Korean companies including Samsung C&T and KT&G that have announced share cancellations this year continue to outperform the market on average. 

• Recruit Holdings (6098 JP) reported 3QFY03/2024 results on Friday. Revenues decreased YoY due to decline in HR Tech revenues, while Adj. EBITDA for the quarter increased YoY. Both Beat consensus estimates.
• Weakening of labour markets and new pricing model have impacted HR Tech revenues, while cut down on investments have helped improve HR Tech margins.
• The company has launched Indeed Plus to help improve earnings, which we don’t expect to have a major impact on Recruit Holdings (6098 JP) ’s earnings in the near term.

• Q423 earnings fell sharply, but were sufficient to hit FY23 guidance
• FY24 guidance also lower, but allows for a very wide range of outcomes
• Management raised concerns about Red Sea impact, L-T excess supply issues

Avon Protection’s capital markets day highlighted its continued focus on medium-term margin expansion (targeting operating margin of 14–16%), concentrating on its core business of respirators and head protection. The unwinding of the armour business, alongside the consolidation of Team Wendy (acquired in H220) should enable Avon to benefit from rising global defence spending. Its strong relationship with the US DoD, and organic growth opportunities with recurring revenue from necessary product replacements, should bolster its medium-term target for ROIC to exceed 17%, which would surpass the average of UK defence peers.

• W.W. Grainger had a robust fourth quarter and full year for 2023, securing record sales and earnings for the year.
• The firm’s strategic focus on delivering optimum customer experience and service played a substantial role in this success.
• Grainger invested heavily in technology and supply chain enhancements to support its operations, particularly in its High-Touch Solutions model, which has seen a significant digital transformation.