TMT: Sea Ltd, Win Semiconductors, Mercari Inc, ASE Technology Holding Co Ltd, Persistent Systems and more

• SEA sell volumes are deteriorating into new lows with two buy tranche levels outlined to align with the RSI near 25 as the primary long trigger.
• Selling exhaustion is noted as the descending price wedge matures. Sell volumes deteriorating into new low sets up the entry.
• 102 is the key hurdle to clear with macro targets at 132 and 170. Buy probe near 70 with a higher conviction buy near 54.

• For 2Q22 guidance, the revenue declines high single digits % QoQ, and GM falls between high twenties to low-thirties.
• The current China smartphone inventory digestion won’t influence WinSemi’s expansion plan because it’s in construction phase now.
• It is due to cellular for 2Q22 decline, which is not easy to clarify whether it’s 4G, or 5G.

• Mercari’s 3Q results underwhelmed with both revenue (-4.5%) and OP (¥2.9bn loss vs. a predicted ¥1.0bn profit) missed. 
• Guidance was also weak and problems with rising fraudulent transactions in Japan and low tax reporting thresholds for sellers in the US are headwinds. 
• Nevertheless, the drastic fall in the stock price appears to have gotten far ahead of these problems and ignores the bright future of the company in our view.

• In the 2Q22 guidance, the revenue for ATM/EMS is ~NT$76.7bn/NT$61.2bn, the GM for ATM is ~27.5% and OPM for EMS is ~8.8%.
• In the first quarter, ASE Holding already surpassed the historical peak of 27% gross margins. And ASE Holding will see that trend continue.
• It’s a normal phenomenon that ASE Holding is seeing inventory level being higher than before.

• Persistent Systems Ltd (Persistent) reported strong and broad-based growth in Q4FY22 and beat our expectations on all key parameters.
• The company’s revenue stood at Rs 1,638 Cr, up 9.8% QoQ and 42.2% YoY. Its operating profits registered a growth of 14% QoQ to Rs 230 Cr and operating margins marginally expanded by 40bps QoQ to 14%
• We recommend a BUY rating on the stock and assign a 38x P/E multiple to its FY24E earnings of Rs 126.8/share to arrive at a TP of Rs 4,820/share, indicating an upside potential of 18% from CMP.

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