Equity Bottom-Up: Los Andes Copper Ltd, China Shenshan Orchard, Meituan, TSMC, Edelweiss Financial Services, Burning Rock Biotech, Roland Corp, Elastic NV, Nutanix Inc and more

• In January this year, we wrote about Los Andes Copper and how it is undervalued. YTD the stock is up over 40% in difficult tape.
• Recent drill results highlight the attractiveness of the company with multiple intercepts indicating its prime Vizcachitas asset continues to grow in all directions.
• Copper supply/demand dynamics could get really tight going into FY23/FY24. Positioning ahead of this is important.

For our next Corporate Webinar, we are glad to welcome China Shenshan Orchard (DKNG SP) Executive Director, David Zhao.

In the upcoming webinar, David will share a short company presentation, after which he will engage in a fireside chat with Smartkarma Analyst Angus Mackintosh. A live Q&A session will follow.

The Corporate Webinar will be hosted on Tuesday, 28 June 2022, 17:00 SGT.

China Shenshan Orchard Holdings Co. Ltd. is a horticultural company in the business of planting, cultivating, and selling kiwi fruit in the People’s Republic of China (“PRC”). The Group holds forest use rights for eight strategically located orchards, spanning a total land area of 9,805 mu (approximately 6.5 million sqm), which is believed to be one of the largest domestic kiwi fruit orchards concentrated in Chibi City, Hubei, the PRC.

Corporate Webinars by Smartkarma Corporate Solutions feature discussions with IROs and Executives, discussing their companies, the challenges they face, and the opportunities in their sectors and markets.

• Revenue growth mainly came from initiatives, which is the focus of April layoff.
• We believe revenue will slow down and the operating loss will shrink.
• We set a downside of 11.5% and a price target of HK$160.

• Medium-Term revenue growth expectations could be exceeded given capacity expansion plans, announced pricing increases and a continued tight semiconductor supply market.
• Based on TSMC’s robust medium-term outlook, for revenue growth and profitability, current sell-side estimates of only 10% EPS growth for FY2023f seem conservative.
• TSMC is currently trading at a 16.2x forward PE ratio, one standard deviation below its 5-year average, a level which has historically proven to be a good entry point.

• After a tough 3Y since the IL&FS crisis, Edelweiss’ credit business is now getting back on track. Asset quality has normalized to <2% Net NPA.
• Edelweiss’ other businesses continue to post robust growth. ARC, Asset Management and Insurance businesses are scaling up well. Wealth Management business is on track for listing by Feb 2023.
• At a market cap of INR 5200cr, Edelweiss is trading cheap even if one ascribes zero valuation to its Credit business.

• Burning Rock Biotech (BNR US) reported strong Q1 2022 results, with accelerated double-digit revenue growth of 27% y/y, higher than full year 2022 revenue growth guidance of 22%.
• Operating loss widened due to 41% y/y surge in opex, primarily attributed to higher staff cost, which resulted from an increase in headcount.
• Management reiterated 2022 revenue growth guidance of 22% y/y. With Shanghai re-opening, this seems to be achievable.

• We expect high-end musical instruments to be one of the worse affected among consumer discretionary names during a high inflationary environment.
• Although Roland Corp (7944 JP) says that demand remains strong, the numbers such as revenue and backlog suggest weakening conditions.
• In addition, there’s a risk of a recession and it appears that Roland has not made sufficient progress in streamlining operations to maintain profitability in a low revenue environment.

• Elastic just dramatically raised its revenue guidance for FY2025…implying a massive acceleration in revenue growth that the 18% move in the stock underplayed.
• Dynatrace is a wildly profitable software company trading at a significant discount to its Rule of 40 metrics.
• The overall observability space is red hot, unimpacted by macro factors and being overlooked by software investors.

• Meituan reported 1Q2022 results yesterday. Revenue grew 25.0% YoY to RMB46.3bn (vs consensus RMB45.3bn) while operating losses for the quarter slightly dropped to 12.1% of revenues from 12.9% in 1Q2021.
• As a result of Omicron spread in March, revenue declined sequentially as all three segments reported QoQ decline in revenue during 1Q2022.
• Meituan hasn’t reported GTV for food delivery as well as no. of domestic hotel room nights for In-Store, Hotel & Travel which seems strange, suggesting 2Q numbers could be worse.

• This model uncovers companies facing recent sharp cuts in estimates. These shorts can have very disparate characteristics.
• The key judgement involves whether the negative revisions are temporary or if they are indications of ongoing weakness in the business. 
• Breaking Estimates stocks often continue to decline after the cuts.  This week we flag:  Nutanix, Upstart, Ubiquiti, Corsair Gaming