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

NEW BUY:&nbsp;&nbsp; Hywin Holdings [NASDAQ: HYW; US$7.90; $220 million cap], 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 initiate coverage with a Buy rating and a $14.00 price target based on a 10.2x P/E multiple on our forward FY 06/2022 estimate, representing nearly 80% upside.&nbsp; The overall risk-reward looks very compelling to us, with the stock trading at a 21% 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; Among the market leaders in an underpenetrated market, Hywin continues to expand its relationship manager and branch base which, along with rising productivity as measured by transaction volume, should ensure solid growth going forward.&nbsp; Indeed, Hywin just yesterday reported a very impressive 98% net income growth for the Q3 ended March, an acceleration from the 84% net income growth for the first half [ended December] of FY 06/2021.&nbsp; Numerous interactions with management give us confidence in the following key tenets of our thesis:&nbsp;
<ul>
<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; 56.4% 3-year [ended FY 06/2018 to FY 06/2020] CAGR</li>
<li>Recent Growth Accelerates:&nbsp;&nbsp; +98% net income on 47% sales growth in Q3 ended March, 84% net income growth for 1st Half ended Dec 2020</li>
<li>Rising Productivity:&nbsp;&nbsp; #1 in industry 26.5% transaction value 3-year [FY17-19] CAGR and 23% growth in FY06/2020</li>
<li>Clear Deep Value:&nbsp; 6.8x P/E on current FY 06/2021, 5.8x P/E on forward FY06/2022 estimate</li>
<li>Robust FCF &amp; ROE:&nbsp; 18% FCF Yield on FY 06/2022est., FCF &gt;/= 100% Net Income; 37% current run-rate ROE</li>
<li>Net Cash:&nbsp; Hywin has a stellar BS with 28% net cash to market cap, zero debt</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.&nbsp;</li>
</ul>
Clear Deep Value, 80% Upside:&nbsp; Hywin’s stock is trading at clear deep value levels on several different metrics.&nbsp; On reported earnings, Hywin is trading 6.8x P/E on FY 06/2021 estimates, and 5.8x P/E on our forecast for forward FY 06/2022.&nbsp; It should be noted that FY 06/2021 is nearly complete, with three quarters already reported and one month left to go till fiscal year-end, so this current year is close to a trailing period.&nbsp; Currently its competitors [Noah Holdings; NOAH; more details in attached report] is trading at a P/E of 13.3x, and the overall Hong Kong equity index and the Shanghai Composite are at 12.5x 2021 consensus estimates, respectively.&nbsp; Hywin is thus effectively trading at more than a 50% discount to peers and relevant benchmarks.&nbsp; Our price target of US$14.00 would imply a P/E on trailing 12.0x FY 03/2021 [nearly trailing], and 10.2x on our FY 06/2022 estimates. &nbsp;We think our price target is thus based on very reasonable, if not conservative, assumptions.&nbsp; &nbsp;
Q3:&nbsp; 98% Net Income Growth, Margins Surge:&nbsp; Hywin reported yesterday exceptional +98% net income growth on +47% revenue growth for the fiscal third quarter ended March.&nbsp; The results were well ahead of our internal expectations, and we have revised up our full-year model [attached at the end of this report] based in part on management’s June-ending fourth quarter guidance.&nbsp; Operating Margins jumped to 19.8% for Q3, up YoY from 13.5% in last year’s quarter, and up sequentially from 12.8% in the first half.&nbsp; Q3 earnings continues a trend of strong growth:&nbsp; Over the past three full fiscal years reported [ended FY 06/2018 to FY 06/2020] Hywin has recorded 56.4% CAGR in total net income after-tax.&nbsp;
Detailed 40-page Initial Report attached…..

NEW BUY:&nbsp;&nbsp; Hywin Holdings [NASDAQ: HYW; US$7.90; $220 million cap], 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 initiate coverage with a Buy rating and a $14.00 price target based on a 10.2x P/E multiple on our forward FY 06/2022 estimate, representing nearly 80% upside.&nbsp; The overall risk-reward looks very compelling to us, with the stock trading at a 21% 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; Among the market leaders in an underpenetrated market, Hywin continues to expand its relationship manager and branch base which, along with rising productivity as measured by transaction volume, should ensure solid growth going forward.&nbsp; Indeed, Hywin just yesterday reported a very impressive 98% net income growth for the Q3 ended March, an acceleration from the 84% net income growth for the first half [ended December] of FY 06/2021.&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; 56.4% 3-year [ended FY 06/2018 to FY 06/2020] CAGR
Recent Growth Accelerates:&nbsp;&nbsp; +98% net income on 47% sales growth in Q3 ended March, 84% net income growth for 1st Half ended Dec 2020
Rising Productivity:&nbsp;&nbsp; #1 in industry 26.5% transaction value 3-year [FY17-19] CAGR and 23% growth in FY06/2020
Clear Deep Value:&nbsp; 6.8x P/E on current FY 06/2021, 5.8x P/E on forward FY06/2022 estimate
Robust FCF &amp; ROE:&nbsp; 18% FCF Yield on FY 06/2022est., FCF &gt;/= 100% Net Income; 37% current run-rate ROE
Net Cash:&nbsp; Hywin has a stellar BS with 28% net cash to market cap, zero debt
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.&nbsp;

Clear Deep Value, 80% Upside:&nbsp; Hywin’s stock is trading at clear deep value levels on several different metrics.&nbsp; On reported earnings, Hywin is trading 6.8x P/E on FY 06/2021 estimates, and 5.8x P/E on our forecast for forward FY 06/2022.&nbsp; It should be noted that FY 06/2021 is nearly complete, with three quarters already reported and one month left to go till fiscal year-end, so this current year is close to a trailing period.&nbsp; Currently its competitors [Noah Holdings; NOAH; more details in attached report] is trading at a P/E of 13.3x, and the overall Hong Kong equity index and the Shanghai Composite are at 12.5x 2021 consensus estimates, respectively.&nbsp; Hywin is thus effectively trading at more than a 50% discount to peers and relevant benchmarks.&nbsp; Our price target of US$14.00 would imply a P/E on trailing 12.0x FY 03/2021 [nearly trailing], and 10.2x on our FY 06/2022 estimates. &nbsp;We think our price target is thus based on very reasonable, if not conservative, assumptions.&nbsp; &nbsp;
Q3:&nbsp; 98% Net Income Growth, Margins Surge:&nbsp; Hywin reported yesterday exceptional +98% net income growth on +47% revenue growth for the fiscal third quarter ended March.&nbsp; The results were well ahead of our internal expectations, and we have revised up our full-year model [attached at the end of this report] based in part on management’s June-ending fourth quarter guidance.&nbsp; Operating Margins jumped to 19.8% for Q3, up YoY from 13.5% in last year’s quarter, and up sequentially from 12.8% in the first half.&nbsp; Q3 earnings continues a trend of strong growth:&nbsp; Over the past three full fiscal years reported [ended FY 06/2018 to FY 06/2020] Hywin has recorded 56.4% CAGR in total net income after-tax.&nbsp;
Detailed 40-page Initial Report attached…..

Hywin [HYW]: +98% Income Growth @ 6x P/E, 28% Net Cash, 18% FCF Yield - Initiation Report