Author: Sambit Mohanty

OZ Minerals

Posted on by Sambit Mohanty

Key points from this report:

 

  • We recommend adding incremental positions in OZ Minerals as the stock broke out to multi-year highs from a six-week cup base on strong volume. It had consolidated for the past seven months from May highs and is now actionable at AUD 26.5-28.0.
  • OZ Minerals has transformed into a multi-asset miner and has a strong pipeline of growth projects through FY25 that have strengthened its mineral resource and ore reserve estimates. It expects accelerating sales and EBITDA growth in FY21, led by growth in Cu production.
  • Fundamental ratings: Composite Rating of 95, EPS Rank 96, and SMR Rating of A. It has strong EPS growth estimate of 151% y/y for FY21.

APL Apollo Tubes

Posted on by Sambit Mohanty

Key points from the note:

 

  • We recommend adding incremental positions in APL Apollo Tubes as the stock has broken out of a 10-week cup-with-handle base on good volume and is actionable. It has very strong support along its 50-DMA (-12%), followed by the 200-DMA (-29%). Despite being a late-stage breakout, we believe there is more upside left for the stock as its recent constructive consolidation allowed its moving averages to catch up. The 100-DMA is good long-term support for the stock.
  • APL Apollo is the market leader in India’s structural steel tube market. It has a high share of value-added products and is aggressively increasing its capacity to cater to new markets like heavy structural tubes for institutional buildings and colored pipes.
  • Fundamental ratings: Composite Rating of 93 and SMR Rating of A. SMR Rating is backed by expanding pretax margin, ROE, and revenue growth. Solid EPS Rank of 96 with 60% and 30% EPS growth estimates for FY22 and FY23, respectively.

Trane Technologies

Posted on by Sambit Mohanty

Trane Technologies manufactures climate control products for buildings and also offers transport refrigeration
technologies. It operates under the brand names Trane and Thermo King.
FY20 revenue by segment/geography: Americas, 78%; EMEA, 13%; Asia-Pacific, 9%.
FY20 revenue by stream: equipment sales, 67%; aftermarket, 33%.
Top competitors: Carrier Global (CARR), Lennox International (LII), and Watsco Inc (WSO).

Sharp Improvement in Industry Group Rank

Posted on by Sambit Mohanty

Key points from this report:

 

  • Case-Shiller Index: The Case-Shiller Index tracks housing prices in the U.S. In the past year, the index has gained 19.5%.
  • Positive sentiment among homebuilders: National Association of Home Builders’ housing market index has exceeded estimates for the past three months.
  • Sharp Group Rank improvement: Industry Group Rank has improved to 34 from 192 over the past six weeks, indicating strong investor interest.
  • Resale market is tight. Limited supply.
  • Curtailing sales among larger builders: Larger home builders such as DHI and PHM have curtailed sales in order to align demand with their production cycles.
  • Supply-side shortages: Production levels have been impacted due to labor shortages and increased lumber and copper prices

Schneider Electric

Posted on by Sambit Mohanty

Key points from this report:

 

  • Reiterate Buy: We are reiterating our Buy recommendation on Schneider Electric as the stock is breaking out of a stage-two nine-week cup base into all-time highs. We recommend that investors add to positions here.
  • Strong fundamental ratings: EPS Rank of 93, Composite Rating of 98, and SMR Rating of B. Fundamental ratings are expected to improve further as consensus estimates double-digit earnings growth over the next two years.
  • Improving technical ratings: Technical ratings have improved over the past five weeks, with a strong A/D Rating of B+ and an Up/Down Volume ratio of 1.2. RS line is close to its all-time high, with an RS Rating of 79.
  • On track to meet the buyback and portfolio optimization targets:
    • Schneider resumed its share buyback program, which was suspended in FY20. It has a share buyback target of €1.5B-2B by FY22. €600M in buybacks have been completed year-to-date.
    • It completed the disposal of IMServe and U.S. Motion this year, thereby achieving €800M in disposed revenue year-to-date. Management indicated that it is on track to divest €1.5B-2B in revenue by FY22.
  • Strong forecasts for FY20-22E: Revenue is expected to grow 11–13% y/y organically, with EBITA margin of 16.9–17.2% (+120-150bp y/y). Consensus estimates revenue and EPS CAGR of 10% and 30%, respectively, in FY20-22E. The stock is trading at a P/E of 27x for FY21E, below average among its large-cap peers globally.

Great Wall Motors

Posted on by Sambit Mohanty

Key points from this report:

 

  • We reiterate our buy recommendation for Great Wall Motors as the stock has regained the pivot range of a stage-four double bottom base after briefly pulling back to its 50-DMA (-13%). The company has set an ambitious electrification plan for 2025 and has developed the ORA and Saloon brands for the entry-level and premium electric markets, respectively. The company has set sales volume and revenue growth targets of ~4x and ~6x by 2025, respectively, with electrification at the center of its strategy.
  • The company is the largest sports utility vehicle manufacturer and the eighth-largest automotive company in China. It is the fifth-largest EV manufacturer in China with ~5% market share.
  • It expects 80% of sales volume in 2025 to come from new energy vehicles. The company’s electrification target is significantly higher than China’s target of achieving 20% of new car sales from electric cars. Last week, the company launched Jijialong, its first electric car from its luxury all-electric car brand Saloon. ORA models, which were launched in 2018, are positioned as affordable small electric cars.

Kornit Digital

Posted on by Sambit Mohanty

Key points from this report:

 

  • Kornit Digital manufactures digital printing machines, inks, and other consumables used in direct-to-garment and direct-to-fabric printing.The stock reclaimed its 50- and 21-DMA on consecutive days on above average volume. It is trading at a 52-week high. We recommend that investors add to positions here.
  • Kornit announced that it will offer 1.94M shares in an upsized public offering for $151 each, a discount of 2.6% to Thursday’s closing price of $155. Amazon, through an affiliate, will also be participating in the offering and will sell an additional 705K shares. The offering is expected to generate $293M for Kornit, which would be used for acquisitions, working capital, and capex.
  • Kornit’s patented technologies allow for high-quality prints at lower rates as they do not require garments to be pre-treated before printing and utilize less ink. It also has a proprietary ink system that is able to handle printing on a variety of colors.
  • Management has guided for Q4 FY21 sales of $89M–93M (+26% at the midpoint) with an adjusted operating margin of 13–15%. For FY21, it guided for sales growth of 65% y/y, backed by a strong order pipeline and positive sales momentum. The stock trades at a high PE multiple of 128x FY21E as consensus expects a sales CAGR of 47% and EPS CAGR of 155% in FY20-22.

Ashtead Group

Posted on by Sambit Mohanty

Key points from this report:

 

  • Buy AHT.GB: We are reiterating our buy recommendation on Ashtead Group (AHT.GB) as the stock broke out of a stage-two six-week cup base on above average volume and is trading at a 52-week high.
  • Targets specialty segment revenue CAGR of 18% in FY20–24: It targets revenue contribution of high-margin specialty segment to increase to $2.4B by 2024 driven by increased greenfield locations and cross-selling.
  • Constructive market conditions to drive demand: Positive read-through from key competitor United Rentals (URI) and passage of the U.S. infrastructure bill indicate strong demand trends for construction equipment (45% of U.S. rental revenue) for upcoming quarters.
  • Leader targeting share expansion in high-growth markets: Ashtead is one of the top two companies in each of its operating geographies by market share. It aims to expand its market share in the U.S. to 20% by 2026 (from 11%) and 10% in Canada (from 7%).
  • Strong growth estimates support higher multiples: It trades at a slight premium to its peers at 24x FY22e EPS due to its higher growth, adjusted operating margin and ROE. For FY21–23, consensus expects sales CAGR of 11% and EPS CAGR of 26%.

O’Neil Energy/Material Weekly

Posted on by Sambit Mohanty

Energiekontor (EKTX.DE; EKT:GR) – $1B market cap – Technicals: The stock is hitting all-time highs and a after breaking out of a long stage-three consolidation in mid-October. It is extended from the pivot, but is displaying excellent Technical Ratings and may present a secondary entry off the 21-DMA (EUR 75.2). It has decent fundamental ratings like SMR Rating of B, Composite Rating of 76, but an EPS Rank of just 1

Nibe Industrier

Posted on by Sambit Mohanty

Key points from this report:

 

  • Buy NIBE.SE: We are reiterating our buy call on Nibe Industrier (NIBE.SE) as the stock is trading in the buy range of its stage-four six-week cup base.
  • Strong replacement demand for HVAC products: The gradual phasing out of products using oil and gas is a favorable trend for Nibe’s energy efficient heat pumps. Most countries in Europe and North America are incentivizing more energy efficient climate solutions.
  • Demand for products remains strong, supply chain disruptions are near-term headwinds: Components shortages and uncertain delivery from suppliers have affected the company’s delivery schedules. Nibe plans to increase its capacity to fulfill the strong demand and focus on securing access to raw materials and components.
  • Some business segments experienced strong demand in spring, which is traditionally a low season. The unusually strong demand meant that Nibe was unable to build up inventory of its finished products ahead of its peak season.    .
  • Strong double-digit growth estimates: For FY20–22, consensus estimates sales CAGR of 12% and EPS CAGR of 19%.