Alkhorayef Water & Power Technologies (AWP.SA; AWPT AB) – $2B market cap; $5M ADV: We added Alkhorayef Water & Power Technologies to the Emerging Markets Focus List as the stock bounced off the 21-DMA on above average volume. The company, a market leader with a ~25% market share, specializes in constructing, repairing, and maintaining water infrastructure in Saudi Arabia. Strong relationships with key government entities support Alkhorayef’s business development, tender bids, and maintenance contract renewals. A revenue backlog of $2.4B and a robust project pipeline of $39Bprovides a long runway for revenue growth. Input cost normalization and a higher share of high-margin maintenance work should aid margin expansion. Consensus expects revenue and EPS CAGR of 29% and 51%, respectively, in FY23-25. Fundamental & Technical note
Author: vipin khare
O’Neil Capital Equipment Sector Weekly
Keyence (KEYE.JP; 6861 JP) – $116B market cap; $216M ADV: We added Keyence to the Developed Markets Focus List as the stock bounced off
its 50-DMA and broke out of a stage-one 17-week cup-with-handle base on above average volume. Keyence designs and sells factory automation
equipment. The factory automation market is expected to recover gradually over the next two years, which should drive the company’s revenue
growth. Keyence’s direct sales approach and fabless business model enable industry-leading operating margin. It has a robust balance sheet free of
debt with a strong cash position allowing international business expansion. Consensus expects revenue and EPS CAGR of 11% and 12%,
respectively, in FY24–26. Fundamental & Technical note
O’Neil Capital Equipment Sector Weekly
E Ink Holdings (PVI.TW): Reported June 2024 monthly sales yesterday after market close. June sales increased to TWD 2,772M (+3% m/m; +19% y/y). Q2 Revenue: TWD 7,656M (+36% q/q; +6% y/y) beat estimates by 12%. This is the first quarterly revenue beat since the start of 2023. The stock is trading in the actionable range of its stage-two 17-week consolidation base. On the downside, support is at its 10-DMA (-2%), followed by its 21-DMA (-5%).
O’Neil Capital Equipment Sector Weekly
Hanwha Aerospace (SGA.KR; 012450 KS) – $9B market cap; $110M ADV: We added Hanwha Aerospace to the Emerging Markets Focus List as the stock is breaking out of a stage-two cup base and is actionable here. Hanwha Aerospace is South Korea’s largest defense contractor, with a strong presence across land systems, advanced weaponry, and the aerospace defense end market. The company is benefiting from increased defense spending, resulting in strong order growth for its products, mainly from Europe and the Middle East. Its land systems segment currently has an order backlog of KRW 30T, ~7x FY23 segment revenue, offering strong visibility, with deliveries peaking in FY26. The higher proportion of exports in the order book is expected to aid margins going forward. Consensus expects a revenue CAGR of 15% over the next two years. Fundamental & Technical note
O’Neil Capital Equipment Sector Weekly
Trex (TREX) – $8B market cap; $61M ADV: We removed Trex from the U.S. Focus List as the stock breached support along its 40-WMA on above
average volume after existing home sales in the U.S. fell for a third straight month in May. The company generates most of its revenue from renovations,
partly driven by existing home sales. A decline in existing home sales could impact renovation demand, which could have weighed down on the investor
sentiment. Support is near $66 (-11%). Fundamental & Technical note
O’Neil Capital Equipment Sector Weekly
Schneider Electric (QT@F.FR; SU FP) – $146B market cap; $180M ADV: We added Schneider Electric to the Developed Markets Focus List as the stock bounced off its 10-WMA support on above average volume. Schneider Electric is a global market leader in energy management and industrial automation solutions. Rising capex in electrification, expected gradual improvement in the discrete automation market, and transition of its software business from a license-based to a subscription-based model are the key growth drivers. Consensus expects revenue CAGR of 6% and adjusted EPS CAGR of 14% during FY23–25. Fundamental & Technical note
O’Neil Capital Equipment Sector Weekly
Ultratech Cement (URC.IN; UTCEM IN) – $37B market cap; $52M ADV: We added Ultratech Cement to the Emerging Markets Focus List as the stock broke out of a stage-two flat base into a new all-time high. Ultratech, India’s largest cement manufacturer, is expected to benefit from the swift implementation of infrastructure projects and strong government support for affordable housing. Energy prices, its key cost, have corrected from their peaks last year and are expected to decline further, driving the company’s margins. Ultratech is also investing in capacity expansion and acquisition and is expected to increase its cement capacity to 200MTPA in the next three years from 150MTPA. Consensus expects revenue and EPS CAGR to be 12% and 25% in FY24–26, respectively. Fundamental & Technical note
Jun 7, 2024 – AI Capital Equipment
O’Neil Capital Equipment Sector Weekly
Mitsubishi Heavy Industries (MH@N.JP; 7011 JP) – $31B market cap; $394M ADV: We added Mitsubishi Heavy Industries to the Developed Markets Focus List as the stock reclaimed its 50-DMA. It is forming a stage-five 10-week consolidation base, with pivot 2% away. The company is one of Japan’s largest heavy machinery makers. It manufactures gas turbines, defense equipment, nuclear reactor vessels, and other industrial machinery. The company’s leadership in gas turbines could facilitate clean energy transition. A robust orders growth in defense business coupled with favourable government policies supporting higher margins, and nuclear energy resurgence primarily in Japan and Europe, are the key growth drivers. Fundamental & Technical note
O’Neil Capital Equipment Sector Weekly
Construction Partners (ROAD) – $3B market cap; $25M ADV: We added Construction Partners to the U.S Focus List as the stock broke out of a stage-three cup base into a new all-time high. It is the No. 1 or No. 2 provider of road
construction and maintenance services in the fast-growing south-eastern states in the U.S. The company benefits from the strong demand for infrastructure expansion and the need to invest in deferred infrastructure maintenance in
these states. It operates in a highly fragmented end market, providing it with ample opportunity for consolidation with half of the expected annual revenue growth coming from acquisitions. It is also vertically integrated with asphalt plants
in each of its markets leading to better supply chain control and ability to capture better margins. The company’s revenue is highly predictable and recurring in nature, with a regular stream of maintenance contracts. Consensus expects
revenue CAGR of 14% and EPS CAGR of 47% over the next two years
