In today’s briefing:
- Xinyi Glass Vs Flat Glass: Collapse and Long XYG
- GoTo (GOTO IJ) – Ploughing a Path to Profitability
- Tencent: Is Tencent Trying to Cope with Revenue Slowdown?
- India Channel Insight #36 | Daikin, Havells, Voltas
- IQiyi – Generates Profits for the First Time; Can It Maintain Its Profitability?
- Fast Retailing: China Near Pandemic Lows and America, Europe and Asia Affected by Rising Inflation
- Payment Companies Screens – More Constructive Market Signals or a Bear Market Rally?
- PureTech Health (PRTC LN): Own Pipeline and Strategic Investments Act as Dual Growth Engines
- Intco Medical Technology (300677.CH) – Declining Performance & Overcapacity Indicate Gloomy Outlook
- United Spirits Update: All Round Progress
Xinyi Glass Vs Flat Glass: Collapse and Long XYG
- The correlation between Xinyi Glass Holdings (868 HK) and Flat Glass (6865 HK) has narrowed thus it is time to lock the profit while it is still possible.
- Xinyi Glass formed a JV with Xinyi Solar Holdings (968 HK) to set up a polysilicon manufacturing facility.
- A 7% dividend with some potential growth juice from owning the shares at less than 7x PER is really quite a steal.
GoTo (GOTO IJ) – Ploughing a Path to Profitability
- GoTo announced its much-anticipated FY2021 and 1Q2022 results, which did not disappoint, with improvements in a number of different metrics across its main verticals.
- 1Q2022 saw a QoQ increase for on-demand, e-commerce, and fintech versus a seasonally strong 4Q plus the group improved take rates and contribution margin in 1Q2022 versus 4Q2021.
- GoTo‘s guidance for 2Q2022 is positive and it should be boosted by higher commission rates plus continuing synergies across the group, helping to improve profitability and growth.
Tencent: Is Tencent Trying to Cope with Revenue Slowdown?
- Tencent reported lowest YoY increase in revenue in 1Q2022. Subsequent to this, Tencent mentioned during earnings call that it continues to scale back on loss-making activities across its business segments.
- Recent scale back of operation is in its cloud-services segment that includes loss-making activities such as projects with high proportion of sub-contractors and deeply discounted-contracts for CVM and CDN capacity.
- Layoffs have become prevalent as a cost cutting measure and Tencent is in the process of reducing headcount at gaming and fintech businesses.
India Channel Insight #36 | Daikin, Havells, Voltas
- The overall Air Condition (AC) season has been good, with volumes up by more than +20% compared to the last two years.
- Daikin Industries (6367 JP) & Voltas Ltd (VOLT IN) have performed below expectations with stiff pricing and poor dealer support.
- Havells India (HAVL IN) (Lloyd) market share gain is on the back of lower prices. The focus has moved from premiumizing brand & expanding margins to gaining market share.
IQiyi – Generates Profits for the First Time; Can It Maintain Its Profitability?
- IQiyi reported 1Q2022 results last week. Revenue fell 8.7% YoY to RMB 7.3bn (vs consensus RMB 7.22bn) and reported an OP of RMB 93.4m (vs consensus loss of RMB 297m).
- Growth in ARM helped offset decline in the number of subscribers for membership revenue. However, online advertising and content distribution both declined due to lack of content and macroeconomic weaknesses.
- IQiyi’s shares have gained 11.2% since its earnings announcement as the company reported an OPM for the first time.
Fast Retailing: China Near Pandemic Lows and America, Europe and Asia Affected by Rising Inflation
- Fast Retailing (9983 JP)’s share price rose 10% towards the top end of the trend channel since reporting 15.8% YoY same-store sales growth in April 2022.
- However, the growth rate was influenced by weak comps and in April 2022 domestic revenue was 9% below the pre-pandemic level.
- Meanwhile, Uniqlo’s growth drivers are faltering with China’s revenue near pandemic lows and North America, Europe and Asia affected by rising inflation.
Payment Companies Screens – More Constructive Market Signals or a Bear Market Rally?
- Since our March-end report, our shorts – especially Kakao Pay – worked better than our longs, given the continuing turbulent conditions; Santander’s offer for Getnet minorities signals a specific opportunity
- We still favour Mastercard in the megacaps, and we stick with PagSeguro and Nexi despite both having disappointed; Cielo has been a strong performer, but we would not chase it
- Among our shorts, we remain negative on DLocal, given its very demanding valuations, and we still see Kakao Pay to be fundamentally over-valued; we reintroduce Paytm to the shorts list
PureTech Health (PRTC LN): Own Pipeline and Strategic Investments Act as Dual Growth Engines
- PureTech Health (PRTC LN) has highly differentiated wholly owned pipeline of seven therapeutic candidates and four lymphatic and inflammation platforms. It also has strategic investments in six founded entities.
- KarXT, lead candidate of founded entity Karuna Therapeutics Inc (KRTX US), is progressing toward commercialization, thereby entailing milestone and royalty opportunities for PureTech.
- PureTech’s lead candidate LYT-100 is in three late-stage clinical trials for three indications addressing large patient population. LYT-100 also has potential to address to other underserved diseases.
Intco Medical Technology (300677.CH) – Declining Performance & Overcapacity Indicate Gloomy Outlook
- Due to the reduction of glove selling price, lower demand, significant cost hike and inflation, it is expected that Intco would continue to face declining performance and margins.
- Under current circumstances, supply exceeds demand. The overcapacity could lead to substantial asset impairment. So, it would take some time before the industry clearing is finished or reach new balance.
- Intco’s weak performance would continue. Its share price is likely to remain depressed for some time.So, it may not be wise to bottom fishing that early even with low valuation.
United Spirits Update: All Round Progress
- United Spirits (UNSP IN) Q4F22 results have shown some good improvement.
- There is all round progress witnessed, including debt reduction, focus on gaining market share, better scope of working capital management. There is an intent of supporting premiumization as well.
- The results and strategic decision making reinforces our bullish stance on United Spirits; the cherry on top is that there is further room for improvement in the short-mid term.
Related tickers: Xinyi Glass Holdings (0868.HK), GoTo (GOTO.JK), Tencent (0700.HK), Daikin Industries (6367.T), iQIYI Inc (IQ.O), Fast Retailing (9983.T), PureTech Health (PRTC.L), United Spirits (UNSP.NS)
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