In today’s briefing:
- JD Logistics (2618 HK) – Asset Light Model Yet to Yield Higher Returns?
- Arwana Citramulia (ARNA IJ) – Tiling a Porcelain Path
- Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers
- Voltas Ltd: Improvement in Margins Led by Healthy Execution, While Missed Profitability
- Elgi Equipments: Decent Numbers Amid Challenges
- Ashok Leyland: Commodity Headwinds Weigh on Performance; Growth Drivers Intact
- Operating performance misses our estimate
JD Logistics (2618 HK) – Asset Light Model Yet to Yield Higher Returns?
- JD Logistics is a logistics distribution service platform that provides logistics solutions in China through its nationwide warehouse and distribution logistics network
- Unlike its peers, it does not directly invest in warehouse assets but instead leases them from its parent company JD.com, which theoretically confers advantages of an “asset light” strategy
- JD Logistics has yet to yield such benefits to date, but its upcoming full year 2021 results could help investors determine potential ROA and margin improvement trends
Arwana Citramulia (ARNA IJ) – Tiling a Porcelain Path
- Tile manufacturer Arwana Citramulia (ARNA IJ)‘s 4Q2021 results confirmed a strong finish to the year and management expects an equally vibrant performance in 2022, as a top quality Indonesian industrial
- Increased capacity, better product mix, greater efficiencies on gas usage, and the new line of porcelain tiles will help to drive better margins this year.
- Arwana Citramulia throws off high returns with ROEs of more than 30%. Valuations do not look challenging with a strong EPS 30% growth and a forward PER of 11x.
Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers
S&P and Nasdaq saw a risk-on move, up 1.6% and 2.5%. Sectoral gains were led by IT and Consumer Discretionary, up 2.7% and 2.1% each. The US 10Y Treasury yield rose by 5bp to go back above the 2% mark to 2.03%. European markets were also higher with the DAX, CAC and FTSE up 2%, 1.9% and 1.1% each. Brazil’s Bovespa closed 0.8% higher. In the Middle East, UAE’s ADX was up 0.3% and Saudi TASI closed 1.2% higher. Asian markets have opened broadly higher with Shanghai, HSI, STI and Nikkei up 0.7%, 1.3%, 0.1% and 2.1% respectively. US IG CDS spreads were 1.9bp tighter and HY CDS spreads were 9.5bp tighter. EU Main CDS spreads were 1.8bp tighter and Crossover CDS spreads were 8.8bp tighter. Asia ex-Japan CDS spreads were 2.3bp wider.
Voltas Ltd: Improvement in Margins Led by Healthy Execution, While Missed Profitability
- Voltas (VOLT) reported a mixed set of numbers in Q3FY22. Revenue/PAT de-grew by 10%/25% YoY (below our estimates by 4.6%/22%)
- On the other hand, EBITDA grew by 6.7% YoY (above our estimates by 6%)
- The company witnessed lower growth in UCP (up 9% YoY); EMPS (down 34.6% YoY) was below expectations.
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Elgi Equipments: Decent Numbers Amid Challenges
- Elgi Equipments (Elgi) manufactures wide range of air compressors (~90% of revenue) and automotive equipment (~10%).
- Elgi is the second largest player in the Indian air compressor market (~22% market share) and among the top eight players globally
- Target Price and Valuation: We value Elgi at Rs 410 i.e. 50x P/E on FY24E EPS
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.
Ashok Leyland: Commodity Headwinds Weigh on Performance; Growth Drivers Intact
- Ashok Leyland Ltd (AL) reported a subdued performance that stood below our estimates
- We tweak our estimates downwards to factor in near-term headwinds and lower volumes.
- We maintain our BUY rating on the stock and value it at 18x FY24E EPS to arrive at a TP to Rs 160 (Rs 175 earlier), implying an upside of 29% from CMP.
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.
Operating performance misses our estimate
- ENGR’s 3QFY22 revenue was 25% below our estimate, with the miss led by a 25%/26% miss in the Consultancy/Turnkey segment.
- Operating profit stood at INR625m, 48% below our estimate.
- This was on account of an unfavorable revenue mix, with 47% revenue from Turnkey projects.
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.
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