Equity Bottom-Up: Bajaj Finance Ltd, Samsung Electronics, Shenzhen International, Siam Cement, KPIT Technologies, MonotaRO Co Ltd, Jiangsu Hengrui Medicine, Yungjin Pharmaceutical Co and more

In our next Webinar, we welcome back Analyst Ankit Agrawal, CFA, who will share and elaborate on three high-conviction ideas from the Indian market, across sectors and market caps.

The webinar will be hosted on Wednesday, 11 May 2022, 17:00 SGT/HKT.

• Samsung Electronics (005930 KS)’s underperformance to SK Hynix (000660 KS) just part of the cycle or company specific?
• Does the supply constraint issue help or hurt Samsung?  Who is better off? 
• Key points to focus on to see where Samsung is vs. their blueprint of technology roadmap

• Shenzhen International (152 HK) has secured pre-tax gain of HK$2.8bn from deemed disposal of Qianhai Business and this is another example for its ability to realise underlying asset value.  
• SZI still holds a 50% stake in Qianhai Business, allowing it to capture further upside from this project. The transaction should also improve cash flow as land fees are repaid.
• Other logistics transformation projects like the South China Logistics Park, which has an area even larger than Qianhai Business, will provide upside for the longer term. 

• BAF reported strong Q4FY22 earnings led by 1) healthy AUM growth and 2) decline in provisioning. YoY, the NIM growth was similar to the AUM growth suggesting no margin compression.
• However, QoQ, BAF witnessed NIM compression, partly driven by interest reversal from a corporate account that became NPA. Overall, the management is confident of maintaining NIMs at current level. 
• The pace of core AUM growth also declined QoQ. However, this could be due to seasonality and despite declining pace, Q4FY22 core AUM growth was still healthy at 5%+.

• Maintain BUY rating with a TP of Bt445.00, based on 13.7xPE’22E, which is close to its 10-years trading mean.
• Unlock value potential through SCGCs IPO, citing a stronger position in PE/PP/PVC, fuel by solid olefins demand in Vietnam and Indonesia, increasing HVA products and Vinyl.
• LSP project is on planned at 93% completion, which is expected to COD in 1H23. We view the new capacity to come into operation in times of better petrochemical outlook.

• KPIT Tech reported strong Q4FY22 revenue growth (5%+ QoQ in constant currency [CC] terms). It also reported margin improvement, despite supply-side headwinds; with EBITDA margin at 18.6% vs 18.5% QoQ.
• FY23 guidance came in optimistic with revenue growth expected to be in 18-21% range in CC terms and EBITDA margin projected to remain stable in the 18-19% range.
• Demand environment continues to be robust with high visibility for growth. Q4FY22 total deal win was healthy at USD 200mm; including a large deal of Euro 70mm value.

• Monotaro’s 1Q22 topline was broadly in line with expectations but OP overshot consensus and company guidance by ¥355m and ¥396m respectively as SG&A fell short of the plan by ¥435m.
• Although the market treated MonotaRO Co Ltd (3064 JP) as a pandemic stock, it has stronger fundamentals than most pandemic winners.
• Shares are not cheap enough to be outright bullish but it is still a decent long hedge to short many other low-quality names.

• The 2021 report is the worst ever annual report of Hengrui, with double drop in both revenue and net profit.2021Q4 and 2022Q1 are also the worst two quarters so far.
• Although Hengrui has invested heavily in R&D and internationalization, it’s still trying to follow an established model with better security.Essentially, Hengrui is still the same Hengrui. Nothing has changed fundamentally. 
• For now, Hengrui hasn’t released any signal for “a reversal”. If going bottom fishing, investors may have to take a long, uncertain journey with Hengrui. Can you afford to wait?

• Yungjin Pharmaceutical Co (003520 KS) earns 15% of total revenue from exports. The company mainly exports antibiotic product cephalosporins to Japan.
• Yungjin’s export income declined 47% y/y in 2021 due to COVID. With Japan’s policy of reducing the usage of antibiotics, we are not upbeat on the recovery of this business.  
• Yungjin’s outlicensed new drug candidate completed only phase 1 trial. If the candidate successfully completes later stages of trials, it is expected to be marketed only in 2024.