In today’s briefing:
- Sony (6758 JP) | Master of the Metaverse
- Alibaba (9988 HK): Well Controlled Expense in 4Q22 and Forthcoming Turning Point in June, Buy
- ITC Ltd (ITC IN) | A Good Place to Hide
- MediaTek (2454.TT): The Smartphone Demand Could Further Decrease in 2022.
- A Pair Trade Between Doosan Corp & Doosan Enerbility
- Hindustan Unilever (HUVR IN) | The Right Priorities, but Ain’t Enough
- Dr Lal PathLabs Ltd (DLPL IN): Base Business Recovering; Competition Is the Only Headwind
- LICHF: Stellar Q4FY22 Results
- Shenzhen Expressway (548 HK): Cautiously Optimistic
- BCH: Turning Back to Core Operation Post 1Q22 Peak
Sony (6758 JP) | Master of the Metaverse
- Sony’s hosted its 2022 Corporate Strategy Meeting last week. Our key takeaway is that SONY is shifting towards greater investment in Content, Creators, and Communities.
- Sony recognizes that technology is changing the way that content is produced and consumed and is responding with new experiences and monetization models.
- Sony will continue to benefit from the evolution of the internet as it becomes more social, immersive and financialized (otherwise known as the metaverse).
Alibaba (9988 HK): Well Controlled Expense in 4Q22 and Forthcoming Turning Point in June, Buy
- Operating margin improved in 4Q22 due to well controlled expenses in minor businesses.
- We believe the state council meeting will provide a turning point in June.
- We set an upside of 31% and a price target at HK$106.
ITC Ltd (ITC IN) | A Good Place to Hide
- ITC Ltd (ITC IN) ‘s core cigarette portfolio is relatively inelastic to the current commodity inflation. With the reopening of offices and social events, volumes are likely to trend higher.
- A renewed focus on FMCG is likely to aid volumes for the non-cigarette segment.
- Valuations are in favor and we see limited scope for de-rating if not re-rating.
MediaTek (2454.TT): The Smartphone Demand Could Further Decrease in 2022.
- MediaTek’s revised downward forecast for 650-680nm smartphone delivery in 1Q22 earnings conference, but we think that number could be revised down again by the end of July.
- MediaTek announced new WiFi products, Filogic 880 and 380, in COMPUTEX2022 on May 24-27. Besides, MediaTek invests in new opportunities for AI in the US.
- The mainland China fights fiercely against COVID-19 and stays at the Zero Policy.
A Pair Trade Between Doosan Corp & Doosan Enerbility
- There are three major reasons we like a pair trade between Doosan Corp (go long) and Doosan Enerbility (go short).
- First, share prices of two companies have diverged too much this year. Second, Doosan Corp is currently trading at a 76% discount to its NAV, which is excessive.
- Third, as investors have poured capital into nuclear power themed Doosan Enerbility, they have neglected its parent Doosan Corp.
Hindustan Unilever (HUVR IN) | The Right Priorities, but Ain’t Enough
- Hindustan Unilever (HUVR IN) is focusing on protecting its business model and market share, which is the key in such an operating environment.
- Presence across multiple price points and playing a targeted game in target geographies will aid in maintaining steady-state growth.
- Current valuations, lack of trigger for driving exponential volume growth and expected slowing pace of premiumisation warrant caution.
Dr Lal PathLabs Ltd (DLPL IN): Base Business Recovering; Competition Is the Only Headwind
- Dr Lal PathLabs Ltd (DLPL IN) reported 35% y/y revenue growth in its non-COVID business in FY22. Non-COVID realization per patient is also back to pre-COVID levels.
- The company has acquired Suburban Diagnostics last year, which will further widen its geographical footprint, with western region contributing 24% of revenue from 10% earlier.
- There is a lot of noise regarding competition in the industry. Thus far, DLPL has not seen much pricing pressure and underpenetrated Indian diagnostic segment can accommodate more players.
LICHF: Stellar Q4FY22 Results
- LIC Housing Finance (LICHF IN) reported stellar results, in line with the expectation from our last note. NIM expanded while provisions declined leading to Q4FY22 PAT of INR 1100cr+.
- Asset quality improved with Stage 3 assets at 4.64% vs 5.04% QoQ and Stage 2 assets at 3.08% vs 3.75% QoQ. LICHF also recovered 350cr of NPAs during Q4FY22.
- Adjusted for one-off tax benefits and assuming FY23 NIM at 2.4%, LICHF’s normalized PAT potential is INR 3600cr+ suggesting that LICHF is trading at <6x P/E on FY23E PAT.
Shenzhen Expressway (548 HK): Cautiously Optimistic
- Shenzhen Expressway Co H (548 HK) guided that many drivers are presented for the rest of the year to support growth, after a 24% YoY decline in 1Q22 net profit.
- Toll road business should benefit from organic growth and project completions, while clean energy and waste treatment businesses will experience astronomical growth from capacity acquisitions.
- There exists room to leverage up for growth as liabilities-to-asset ratio is still 11pp below its tolerance level of 65%. Besides below-average PERs, FY22F yield of 10% is attractive too.
BCH: Turning Back to Core Operation Post 1Q22 Peak
- Upgrade to BUY from HOLD rating with an unchanged TP of B21.00, based on 14.36xPE’22E which is close to -2SD of 3-years trailing average.
- We see earnings trend to fall QoQ in 2Q22, as COVID-19 contribution fades in parallel with declining infection patients cases and dropped RT-PCR test for vaccinated tourists.
- We view profit trend to drop HoH in 2H22, as COVID-revenue normalizes YoY off high base in 2H21 based on our expectation government declares COVID as endemic in July.
Related tickers: Sony Corp (6758.T), ITC Ltd (ITC.NS), Mediatek Inc (2454.TW), Doosan Corp (000150.KS), Hindustan Unilever (HLL.NS), LIC Housing Finance (LICH.NS), Shenzhen Expressway Co H (0548.HK), Bangkok Chain Hospital (BCH.BK)
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