In today’s briefing:
- Samsung C&T: Deep Discount NAV, Capital Shifting to Value/Holdcos, & Trading Business Boost
- Kubota (6326 JP) | US Housing Risk to Big to Ignore
- Ashok Leyland – Market Share Gains Amid Healthy Growth to Drive Re-Rating
- Result Update – Ashok Leyland
- V-Guard Industries – Robust Topline Growth; Electronics Segment Sales to Recover
Samsung C&T: Deep Discount NAV, Capital Shifting to Value/Holdcos, & Trading Business Boost
- Three major positive factors for Samsung C&T include deep discount NAV, capital shifting to value/holdcos, and higher commodity prices boosting trading business earnings.
- Shanghai lockdown remains a black box event and there are some increasing concerns that the China COVID induced lockdowns could result in a potential earnings miss for Samsung Electronics.
- Samsung C&T (028260 KS) has been outperforming Samsung Electronics (005930 KS). Samsung C&T is flat for the year versus Samsung Electronics which is down 13.6% YTD.
Kubota (6326 JP) | US Housing Risk to Big to Ignore
- Kubota’s stock declined in sympathy with agricultural major Deere following a quarterly earnings miss
- Kubota faces similar supply chain and cost pressures, but it is the US housing market that is a bigger concern
- We believe that the market is underestimating the earnings risk for Kubota should the housing market start to cool
Ashok Leyland – Market Share Gains Amid Healthy Growth to Drive Re-Rating
- Revenue ahead of estimate; margins beat on better operating leverage: AL reported revenue of Rs87.4bn, ahead of our estimate by 6%, led by strong volume growth and higher realisations.
- Gross margin was flattish at 21.8% QoQ, in line with our estimate.
- EBITDA margin at ~9% (+170bps NBIE est.) was up 480bps QoQ on account of higher operating leverage, which was partially offset by RM inflation
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Result Update – Ashok Leyland
- Demand Outlook: The management remains positive on MHCV demand going ahead led by (1) Recovery in core economic sectors such as Construction & Mining, Steel, Cement, and Infrastructure spending
- Margins: The management highlighted that it has taken a 2% price hike in Jan’22 and an additional 2-2.5% hike in Apr’22 to offset the impact of elevated steel prices.
- Hinduja Leyland Finance (HLFL): Around 35% of HLFL’s portfolio comprises CVs while the balance is divided between 2W, 3W, and OHV, among others.
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V-Guard Industries – Robust Topline Growth; Electronics Segment Sales to Recover
- Expects double-digit margins going forward: The management highlighted that despite some challenges related to the third covid wave in the first few weeks of 4QFY22, VIL was able to effectively carry forward the momentum from 3QFY22 and end FY22 on a strong note.
- Electronics segment sales to recover in 1QFY23: Electronics segment showed a moderate growth due to delayed start to the summer and channel partners unwilling to stock up due to the Omicron wave.
- Working capital position & capex plans: As on 4QFY22, NWC days on TTM basis stood at 106 days vs. 102 days QoQ and 83 days on YoY basis.
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