Stock research on global mid-cap companies

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Stock research on global mid-cap companies, Evaluate Research

Equity Bottom-Up

Leoch International Technology / Equity Bottom-Up

Leoch reported very strong results for the half year ended December 31st, 2016. Revenue for the period was up 45.5% [almost 25% above our estimate] from RMB2,361.8 mn in 2H2015 to RMB3,436.5 mn in 2H2016 driven by tremendous growth in the SLI Batteries segment supported by a strong upward surge in lead price during the last quarter of the year. Gross profit for 2H2016 came in at RMB571.6 mn translating into a YoY growth rate of 27.1% over the corresponding period last year. Adjusted EPS for the period was RMB9.42 cents [about 12% higher than our estimate], a growth of 25% over the 2H2015 adjusted EPS of RMB7.54 cents. During our call with management, they seemed confident in the company’s ability to maintain 20%+ revenue and EPS growth rate over the next 2-3 years.
The SLI Batteries segment, which now contributes 23% to the company’s overall sales vs.19.4% in FY2015, recorded stellar growth of 97% in 2H2016. Revenue for the period came in at RMB907.9 mn vs. RMB460.7 mn in 2H2015. In our Initiation Report, we had mentioned that the company had become a qualified supplier of start-stop batteries [which help to increase fuel efficiency of vehicles] for 2-3 automakers. We believe that it was sales to these automakers that resulted in strong revenue for start-stop batteries driving overall segment growth. Considering that the company started selling batteries to these new customers mostly in the second half of FY2016, we believe that the segment can easily grow by another 70%-80% in the first half of FY2017. Overall for the entire year FY2017, we believe that SLI Batteries growth will be in the 55%-60% range. Given that Leoch is one of the very few suppliers of start-stop batteries in the PRC and taking into account the government’s continued push towards increasing fuel efficiency of vehicles in the country, we continue to expect robust results for the segment going forward.
Analyst: Ajeya Patil

Leoch reported very strong results for the half year ended December 31st, 2016. Revenue for the period was up 45.5% [almost 25% above our estimate] from RMB2,361.8 mn in 2H2015 to RMB3,436.5 mn in 2H2016 driven by tremendous growth in the SLI Batteries segment supported by a strong upward surge in lead price during the last quarter of the year. Gross profit for 2H2016 came in at RMB571.6 mn translating into a YoY growth rate of 27.1% over the corresponding period last year. Adjusted EPS for the period was RMB9.42 cents [about 12% higher than our estimate], a growth of 25% over the 2H2015 adjusted EPS of RMB7.54 cents. During our call with management, they seemed confident in the company’s ability to maintain 20%+ revenue and EPS growth rate over the next 2-3 years.
The SLI Batteries segment, which now contributes 23% to the company’s overall sales vs.19.4% in FY2015, recorded stellar growth of 97% in 2H2016. Revenue for the period came in at RMB907.9 mn vs. RMB460.7 mn in 2H2015. In our Initiation Report, we had mentioned that the company had become a qualified supplier of start-stop batteries [which help to increase fuel efficiency of vehicles] for 2-3 automakers. We believe that it was sales to these automakers that resulted in strong revenue for start-stop batteries driving overall segment growth. Considering that the company started selling batteries to these new customers mostly in the second half of FY2016, we believe that the segment can easily grow by another 70%-80% in the first half of FY2017. Overall for the entire year FY2017, we believe that SLI Batteries growth will be in the 55%-60% range. Given that Leoch is one of the very few suppliers of start-stop batteries in the PRC and taking into account the government’s continued push towards increasing fuel efficiency of vehicles in the country, we continue to expect robust results for the segment going forward.
Analyst: Ajeya Patil

Leoch International Technology

Strong Results, 45% Revenue Growth