Stock research on global mid-cap companies

Evaluate Research

Evaluate Research provides institutional quality stock research on small-cap and  mid-cap companies on a global basis, thus helping connect investors with the company.

At Evaluate Research, we provide free of cost to all investors a 20-25 page Initiation Report which evaluates in great detail all aspects of the company:  growth opportunities, catalysts, business description, competitive positioning, SWOT analysis, risks, etc.  In addition, we determine specific price targets for the company based on detailed 5-year complete forecasts of financial statements including IS, BS, CF, ratios, etc.  Finally, whereas many sell-side brokers offer sketchy and irregular ongoing maintenance research of companies, if not outright dropped or termination of coverage, at Evaluate Research we systematically monitor and regularly publish Update Notes covering quarterly earnings, major corporate events, etc.

All of the research reports are broadly and freely disseminated globally to leading Fund Managers and analysts who invest specifically in mid-size equities, and also on leading investment information platforms including: Bloomberg, Thomson Reuters, FactSet etc.

Stock research on global mid-cap companies, Evaluate Research

Equity Bottom-Up

Buy-rated Hywin Holdings [NASDAQ: HYW; US$6.86; $200 million cap], Hywin reported very strong Q4 [ended June] results in which both revenues and EPS were above our estimates.&nbsp; This quarter ends a very successful year for Hywin, and both the quarterly reports post the company’s March IPO have now handily beaten expectations.&nbsp; The internal metrics in terms of clients, productivity, operating leverage, margins, and FCF generation were all exceptional – which should bode well for future periods as well.&nbsp; Hywin reported +111% net income growth [+81% diluted EPS] on +43% revenue growth for the quarter.&nbsp; Net cash [zero debt] is now $3.90 per ADS, or fully 57% of the current stock price!&nbsp; While we are not changing our $14.00 price target currently, the stock looks exceedingly undervalued on several metrics.&nbsp; There have been concerns regarding regulatory news in several sectors [unrelated to Hywin and the broader wealth management sector] in China which has impacted stock prices and the overall market; we do address these concerns in some detail in this report.&nbsp; In fact, recent policy news remains very favorable for the growth of asset management firms within China.&nbsp; Thus, Hywin’s overall risk-reward remains very compelling, in our opinion.&nbsp;
Key highlights for the June quarter were:
<ul type="disc">
<li>Client count increased by 12.5% YoY and 3% QoQ to 127,317</li>
<li>Active client count up 17.6% YoY to 29,094, this is leading to higher productivity and margins</li>
<li>Transaction value of wealth management products up 39.3% YoY to RMB 20.9 billion</li>
<li>Transaction value of wealth management products per relationship manager increased 53.8% YoY</li>
<li>Net revenues per relationship manager increased 57.9% YoY and 17.5% QoQ</li>
<li>Operating Margins jumped to 15.7%, up YoY from 13.4% in last year’s quarter, and up sequentially from 15.2% for the first nine months</li>
<li>Net cash [zero debt] surged to US$109 million [$3.90 per ADS], which is a huge increase QoQ from the March quarter’s US$61.5 million, or $2.20 per share.&nbsp; Net cash was up 275% YoY from June 2020&nbsp;</li>
</ul>
High Growth @ 5x P/E, 18% FCF Yield, 57% Net Cash:&nbsp; Hywin, China’s third largest, and most rapidly growing, independent wealth management provider and investment advisor, represents a unique combination of clear deep value and rapid growth in a secular growth sector.&nbsp; We maintain our Buy rating and a $14.00 price target, which we indicated in our Initial Report [attached] a few months back in June.&nbsp; Our target is based on a 10.2x P/E multiple on our forward FY 06/2022 estimate, representing just over 100% appreciation for the stock price.&nbsp; The upside opportunity looks very compelling to us, with the stock trading at over a 30% discount to its recent March IPO price of $10.00.&nbsp; The stock is still very much undiscovered following its recent NASDAQ listing, and Evaluate Research remains the only firm who is now actively covering the company.&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
Among the market leaders in an underpenetrated market, Hywin continues to expand its branch network and client base which, along with rising productivity as measured by transaction volume, should ensure solid growth going forward.&nbsp; Numerous interactions with management give us confidence in the following key tenets of our thesis:&nbsp;
<ul type="disc">
<li>A Market Leader:&nbsp; Hywin is the 3rd largest independent wealth management provider in China, with a growing 7.5% market share.</li>
<li>Strong Net Income Growth:&nbsp; 111% net income growth and 81% EPS per ADS growth for the quarter just ended</li>
<li>Rising Productivity:&nbsp; Operating Margins jump to 15.3% in FY 06/2021, up from 12.4% last year.&nbsp; June quarter margins higher at 15.7%</li>
<li>Clear Deep Value:&nbsp; 5.9x P/E on trailing FY 06/2021, 5.0x P/E on our forward FY06/2022 estimate</li>
<li>Robust FCF &amp; ROE:&nbsp; 21.9% FCF Yield on FY 06/2022est., FCF &gt;/= 100% Net Income; 34% actual ROE for FY 06/2021</li>
<li>Net Cash:&nbsp; Hywin has a stellar BS with 57% net cash to market cap</li>
<li>Secular Growth Sector:&nbsp; 3rd party wealth management penetration rate only 6.2% in China in 2019, versus 32% in Hong Kong &amp; 62% in USA.</li>
</ul>
Today’s Update Note&nbsp;attached…..

Buy-rated Hywin Holdings [NASDAQ: HYW; US$6.86; $200 million cap], Hywin reported very strong Q4 [ended June] results in which both revenues and EPS were above our estimates.&nbsp; This quarter ends a very successful year for Hywin, and both the quarterly reports post the company’s March IPO have now handily beaten expectations.&nbsp; The internal metrics in terms of clients, productivity, operating leverage, margins, and FCF generation were all exceptional – which should bode well for future periods as well.&nbsp; Hywin reported +111% net income growth [+81% diluted EPS] on +43% revenue growth for the quarter.&nbsp; Net cash [zero debt] is now $3.90 per ADS, or fully 57% of the current stock price!&nbsp; While we are not changing our $14.00 price target currently, the stock looks exceedingly undervalued on several metrics.&nbsp; There have been concerns regarding regulatory news in several sectors [unrelated to Hywin and the broader wealth management sector] in China which has impacted stock prices and the overall market; we do address these concerns in some detail in this report.&nbsp; In fact, recent policy news remains very favorable for the growth of asset management firms within China.&nbsp; Thus, Hywin’s overall risk-reward remains very compelling, in our opinion.&nbsp;
Key highlights for the June quarter were:

Client count increased by 12.5% YoY and 3% QoQ to 127,317
Active client count up 17.6% YoY to 29,094, this is leading to higher productivity and margins
Transaction value of wealth management products up 39.3% YoY to RMB 20.9 billion
Transaction value of wealth management products per relationship manager increased 53.8% YoY
Net revenues per relationship manager increased 57.9% YoY and 17.5% QoQ
Operating Margins jumped to 15.7%, up YoY from 13.4% in last year’s quarter, and up sequentially from 15.2% for the first nine months
Net cash [zero debt] surged to US$109 million [$3.90 per ADS], which is a huge increase QoQ from the March quarter’s US$61.5 million, or $2.20 per share.&nbsp; Net cash was up 275% YoY from June 2020&nbsp;

High Growth @ 5x P/E, 18% FCF Yield, 57% Net Cash:&nbsp; Hywin, China’s third largest, and most rapidly growing, independent wealth management provider and investment advisor, represents a unique combination of clear deep value and rapid growth in a secular growth sector.&nbsp; We maintain our Buy rating and a $14.00 price target, which we indicated in our Initial Report [attached] a few months back in June.&nbsp; Our target is based on a 10.2x P/E multiple on our forward FY 06/2022 estimate, representing just over 100% appreciation for the stock price.&nbsp; The upside opportunity looks very compelling to us, with the stock trading at over a 30% discount to its recent March IPO price of $10.00.&nbsp; The stock is still very much undiscovered following its recent NASDAQ listing, and Evaluate Research remains the only firm who is now actively covering the company.&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
Among the market leaders in an underpenetrated market, Hywin continues to expand its branch network and client base which, along with rising productivity as measured by transaction volume, should ensure solid growth going forward.&nbsp; Numerous interactions with management give us confidence in the following key tenets of our thesis:&nbsp;

A Market Leader:&nbsp; Hywin is the 3rd largest independent wealth management provider in China, with a growing 7.5% market share.
Strong Net Income Growth:&nbsp; 111% net income growth and 81% EPS per ADS growth for the quarter just ended
Rising Productivity:&nbsp; Operating Margins jump to 15.3% in FY 06/2021, up from 12.4% last year.&nbsp; June quarter margins higher at 15.7%
Clear Deep Value:&nbsp; 5.9x P/E on trailing FY 06/2021, 5.0x P/E on our forward FY06/2022 estimate
Robust FCF &amp; ROE:&nbsp; 21.9% FCF Yield on FY 06/2022est., FCF &gt;/= 100% Net Income; 34% actual ROE for FY 06/2021
Net Cash:&nbsp; Hywin has a stellar BS with 57% net cash to market cap
Secular Growth Sector:&nbsp; 3rd party wealth management penetration rate only 6.2% in China in 2019, versus 32% in Hong Kong &amp; 62% in USA.

Today’s Update Note&nbsp;attached…..

Hywin [HYW]:  +81% EPS June Qtr, 5x P/E, 57% Net Cash, 22% FCF Yield:  Earnings Update