Industrials: Seibu Holdings, GrafTech International Ltd, Somany Ceramics and more

• Seibu Holdings created a new Medium Term Management Plan in May 2021 including what it called Big, Hairy, Audacious Goals, or BHAGs.
• That goal was to move a longtime asset-heavy business to an asset-light model by selling hotel and leisure assets, securitising others, and undergoing a Whole Business Restructuring.
• Seibu Construction was sold in January and now it looks like 30 out of 40-odd Japan hotel and leisure facilities are nearly a done deal with a sale to GIC.

• GrafTech International Ltd (EAF US) Q4 2021 results demonstrated the company is well on track to an FY22 profit of over 520 mn USD, implying a 5x PE. 
• Debt deleveraging remains a powerful theme in the story. With an average debt reduction of 400 mn USD a year, the company will be close to zero debt by 2023. 
• We believe the company will also use its cash to buy back stock ( 159 mn USD authorized buyback or 6% of market capitalization ) and pay dividends. 

However, EBITDA fell 2% YoY, owing to the elevated gas price impact. The company continues to keep a tight leash on its debtors. Timely capacity expansion in Q4FY22 should bolster its volume and market share growth. We maintain BUY on Somany Ceramics with an unchanged target price of INR 1,130/share (13x Dec-23E consolidated EBITDA). We continue to like SOMC for its strong retail distribution, improving product mix, and tightened working capital (WC).