In today’s briefing:
- Alibaba: Hitting the Brakes Hard
- Renesas – Accelerating
- Toyota – In-Line 3Q Sets Up Strong 4Q Beat
- Bukalapak (BUKA IJ) – Storefronts, Specialty, and Financing
- India Channel Insight #25 | Mahindra and Mahindra, Escorts
- Commonwealth Bank of Australia – Pulling On All Earnings Levers
- Sumco – Consensus Probably Too Timid on Price Hikes
- Honda – Back and Forth OP Guidance Revisions
- ASE Holding (ASX.US, 3711.TT): The Outlook of 1Q22 Could Be a Bit Bearish as Actionable
- Yum China (YUMC.US/9987.HK): Zero-COVID Policy Weighted on Earnings
Alibaba: Hitting the Brakes Hard
- Even though the third quarter was seasonal historically, we are expecting the impact of seasonality to fade in future due to changes to Alibaba’s Core Commerce revenue composition.
- Therefore, it seems like the market is expecting too much from Alibaba Group (9988 HK) in the third quarter with a consensus EBITDA estimate of RMB 51.7bn.
- With equity markets near a breaking point and no change in investor sentiment towards Alibaba, an earnings miss in 3QFY22 could be potentially more price-sensitive than the last time.
Renesas – Accelerating
- Renesas’ 4Q results were strong as revenue came in well above guidance as we predicted, beating even our ¥310bn estimate at ¥314.4bn.
- EBITDA of ¥119.4bn was up 15.7% QoQ and should rise further thanks to a hefty backlog.
- We said previously that 2022 EBITDA could be on the order of ¥500-550bn rather than the ¥391bn which consensus projects… for reasons which escape us.
Toyota – In-Line 3Q Sets Up Strong 4Q Beat
- Toyota’s 3Q results were in-line with revenue and OP 2% above consensus and a slight QoQ improvement.
- The FY production plan was revised down as expected though we see slight upside to the 8.25m unit plan.
- Toyota has now averaged ¥853bn in OP over the last six pandemic driven quarters.
Bukalapak (BUKA IJ) – Storefronts, Specialty, and Financing
- Bukalapak (BUKA IJ) continues to expand the range of products it offers to its Mitras including logistics services and financial products but it is now extending more service to merchants.
- The platform’s Storefront offering aims to enable merchants which often operate through social commerce channels to improve their ability to attract and maintain customers and to facilitate payments and logistics.
- The Allo Bank stake was bought at 1.7x PBV and will grow through an ecosystem of 100m potential customers. Bukalapak (BUKA IJ) looks like value with positive newsflow.
India Channel Insight #25 | Mahindra and Mahindra, Escorts
- We interact with two dealers of Mahindra & Mahindra (MM IN) & Escorts Ltd (ESC IN)
- High pressure on billing is denting dealer profitability leading to dealership closures
- Weddings and changing spending patterns suggest a weak demand environment likely to continue.
Commonwealth Bank of Australia – Pulling On All Earnings Levers
- CBA reported modestly weaker FY 1H22 cash results from continuing operations of AUD 30.5 bn, which attributed primarily to a 77.1% decline in loss provision reversals;
- Despite the poor result, CBA has chosen to pull on numerous earnings levers to make even these numbers; and
- While credit has improved, reserves will need to be buttressed as we head into a period of higher interest rates.
Sumco – Consensus Probably Too Timid on Price Hikes
- Sumco’s 4Q results were on the strong side with revenue beating by 2.3% and OP beating by 2.0%.
- 1Q guidance was also bullish with revenue guidance of ¥99bn 5.3% higher than consensus while OP guidance of ¥21bn was 12.8% higher.
- Guidance is still a touch conservative in our view, particularly on the margin side.
Honda – Back and Forth OP Guidance Revisions
- When Honda reported its 2QFY22 results it revised OP guidance down and we said that unnecessary.
- Indeed, with 3Q now out they revised guidance UP, above where it was at 3Q, making the revision pattern look like ¥660bn > ¥ 780bn > ¥660bn > ¥800bn.
- That remains conservative and the company should beat though we still see limited upside until next year’s prospects start to be priced in.
ASE Holding (ASX.US, 3711.TT): The Outlook of 1Q22 Could Be a Bit Bearish as Actionable
- Hope we could be wrong, but the outlook of 1Q22 could be a bit bearish since we believe ASE Holding (ASEH) revenue/GM will reach ~NT$165bn/19.4% and ~NT$150bn/19.5% in 4Q21/1Q22 respectively.
- China has massive local efforts on OSAT business because of low entry barrier. In our views, China can exist very well in lower profit margin to compete.
- The worldwide OSAT (Outsourced Semiconductor Assembly and Testing) companies of scale are majorly centered in Asia Pacific area.
Yum China (YUMC.US/9987.HK): Zero-COVID Policy Weighted on Earnings
- Yum China Holdings, Inc (YUMC US) reported below-expectation 4Q21 earnings. Same store sale growth was down 11% year-over-year due to recent resurging of COVID cases in several regions of China.
- Yum China has leveraged its digital orders and delivery service to alleviate the impacts. Based on its operation in 1Q20, we believe Yum China could recover quickly from current outbreak.
- We think risk/reward is more compelling to own Yum China Holdings, Inc (YUMC US) as it has resilient business model and proven records to navigate through pandemic.
Related tickers: Renesas Electronics (6723.T), Toyota Motor (7203.T), Mahindra & Mahindra (MAHM.NS), Commonwealth Bank of Australia (CBA.AX), SUMCO Corp (3436.T), Honda Motor (7267.T), Advanced Semiconductor Engineering (Adr) (ASX.N), Yum China Holdings, Inc (YUMC.N)
Before it’s here, it’s on Smartkarma
