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Contemporary Amperex Technology reported 7% net profit growth year over year in the fourth quarter. Thanks to the lower lithium price, the gross margin recovery trend remains intact, with a 5 percentage point gain in the quarter from a year ago. Given the low seasonality for electric vehicle sales during the period, we consider CATL’s first-quarter net profit, accounting for 20% of our original full-year forecast, in line with our expectations. We fine-tuned our forecast and slightly raised fair value estimate to CNY 242 per share from CNY 240, which implies a forward price/earnings ratio of 20 times. At current levels, we view shares as undervalued, with stocks trading in 4-star territory.

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Contemporary Amperex Technology, commonly known as CATL, is the largest producer of lithium-ion rechargeable batteries for electric vehicles in China and globally. According to SNE Research, CATL is ranked first in the global EV battery market with a market share of 37% as measured by installed capacity in 2023 and 43% share in China. CATL’s major customers include most of the leading automakers such as Tesla, Nio, Geely, SAIC, and Volkswagen.
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Brilliance China Automotive’s earnings growth hinges on expanding Brilliance BMW Automotive, the joint venture with BMW, while limiting losses from its minivan business. While Brilliance sold a 25% stake in the BBA JV to BMW in 2022, future localization of higher-end models and a rise in export volume will partially offset the drop in share of BBA's profits attributed to Brilliance, in our view.
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At core, Hub24 is a provider of investment administration software as a service. This includes portfolio administration, investment management tools, and managed account services. The firm has a diversified offering, with administrative capabilities spanning custodial and noncustodial assets, self-managed super funds, trusts, and corporate compliance. Endeavors to add value include providing data analytics or features to facilitate dynamic advice strategies. It is also well integrated with external financial services and software providers. These efforts help Hub24 capture more touchpoints within the advice landscape, and support its endeavors to streamline the implementation of financial advice to clients under a single—Hub24’s—platform.
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Group 1's restructurings and investment in technology for used-vehicle procurement have paid off. A common operating metric in the dealer sector is selling, general, and administrative expenses as a percentage of gross profit; Group 1's ratio improved to 64.2% including rent expense in 2023 compared with 77.9% in 2007, and management expects it to remain below 70% thanks to permanently reducing headcount by 7% during the pandemic. The company in 2018 began transforming itself with its Val-U-Line used-vehicle strategy and scheduling accommodations for service technicians, which are improving employee retention and increasing technician headcount. Val-U-Line comes from Group 1 wisely, in our opinion, wanting to retail more used vehicles rather than send them off to auction, because the former is more profitable. The AcceleRide omnichannel platform should keep the firm competitive with new entrants to the online used-vehicle market such as Carvana but is also for new vehicles, service, and buying vehicles from consumers. We think digital will enable much better SG&A leverage than the company has had in the past and increase used-vehicle sales over time.
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Once known as a producer of midtier men's shirts, PVH transformed itself by purchasing fashion brand Calvin Klein in 2003, Tommy Hilfiger in 2010, and Calvin Klein licensee Warnaco in 2013. More recently, it disposed of most of its noncore labels to focus on Calvin Klein and Tommy Hilfiger. While now lacking diversification, we think it was prudent for the firm to focus on its highest-potential properties and returning capital to shareholders through share repurchases. However, although they are popular worldwide, we do not believe that either of PVH’s major brands has the pricing power or competitiveness to provide a moat.
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Iberdrola is the second-biggest integrated utility in Europe after Enel. Besides its domestic Spanish market, Iberdrola has strong exposure to the United Kingdom since the acquisition of Scottish Power in 2007. It is the European utility with the largest exposure to the United States thanks to its wind development and the acquisition of UIL in 2015. Its US assets are grouped in 81.5%-owned Avangrid. In March 2024, Iberdrola proposed to acquire the rest of Avangrid for $34.25 per share, just above our fair value estimate of $33 at the time. We expect the deal to be completed at $36 by the end of 2024.
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Domino's Pizza Enterprises is the Australian master licence holder of the Domino's Pizza brand. It also has operations in New Zealand, Japan, Singapore, Malaysia, France, Germany, Belgium, Luxembourg, Taiwan, Cambodia, and the Netherlands. The stock suits investors seeking exposure to the food and beverage sector. Management is active, importing marketing strategies from the United States, or creating new ones, and applying them to local trends in individual markets. Management has adapted to market trends by refreshing the product range, including healthier ingredients and gourmet styles, and transitioning to online ordering.
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National Silicon Industry Group is a Chinese up-and-coming semiconductor silicon wafer producer. Contrary to its larger peers, NSIG is unlikely to build new sites outside of China because of geopolitical risks and the incremental demand coming from Chinese customers. We expect NSIG to triple its 300-millimeter wafer capacity by 2030, compared with end-2023 levels, partly fueled by China’s pursuit of a self-sufficient supply chain.
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Boral’s strategy and operating model focuses on three strategic priorities: operating efficiency in construction materials, maximizing value from the property portfolio, and the provision of more sustainable products. The first pillar aims to simplify the business by streamlining and investing in cement, aggregate quarries, recycling, concrete, and asphalt capabilities to enhance network efficiency, customer engagement, and efficiency.
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Tata Consultancy Services is a leading global IT services provider, providing the typical menu of offerings--from software implementation to digital transformation consulting to servicing business operations teams. Unlike most of its peers, which earn a narrow moat, in our view, we think Tata merits a wide economic moat, as we believe the company benefits from switching costs and intangible assets, similar to other peers in the industry, as well as cost advantage. While the company is undergoing headwinds like an industrywide labor shortage, we think that the company’s stable moat trend will stay secure. Meanwhile, forays into the higher-value realm of industrials engineering will help ensure Tata is an above-average beneficiary of substantial growth trends within the IT services industry at large.
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Conagra’s business has evolved over the years, from a conglomerate, reinforced by its 2012 acquisition of Ralcorp that bolstered its private-label exposure (later divested at half the purchase price), to its present focus on brands and driving growth through increased value (rather than just boosting volume). However, food is competitive, and we don’t think it has a portfolio of leading brands and entrenched retailer relationships to warrant pricing power, a handicap relative to branded peers. In addition, it spends notably less in product development and marketing, claiming more efficient spending closes the gap. But we remain skeptical and don’t believe it will capitalize on consumer trends more effectively than competitors. A subscale portfolio lacking strong brands combined with continued underspending is likely to leave it an industry laggard, in our view.
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We believe no-moat Macy’s is struggling to stay relevant as consumers have many choices. The firm recently announced the closure of about 150 of its lower-performing stores over the next three years as part of its “A Bold New Chapter” plan. We think this move is long overdue as department stores have been losing market share to e-commerce and other retailers (outlets, branded stores, specialty stores, discounters) for at least 15 years. Other parts of the new strategy include investments in continuing stores, new smaller-format stores, cost reductions, supply chain investments, and luxury expansion. Even so, due to store closures and a lack of consistent organic growth, we forecast yearly revenue and operating margins will stay well below historical highs for the foreseeable future. Specifically, we estimate long-term operating margins at just over 5% on annual revenue growth below 1%.
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The years since the financial crisis have shown that American International Group would have destroyed substantial value even if it had never written a single credit default swap, had noncore businesses it needed to shed, and had material issues in its core operations that it needed to fix. We've been encouraged, however, by the recent progress in terms of improving underwriting margins, and management's efforts to reduce costs have been another material step.
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Until 2021, Pinnacle West had been earning solid returns and rewarding shareholders with dividend increases as customer and energy usage growth in Arizona outpaced most other utilities. But regulatory setbacks have made it difficult for Pinnacle West to turn those favorable fundamentals into earnings and dividend growth.
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Intuit is the giant behind U.S. small-business accounting software QuickBooks and do-it-yourself U.S. tax software TurboTax. With TurboTax and QuickBooks online sales having eclipsed their respective desktop sales, Intuit has now transitioned into a cloud-first company. Consequently, this has enabled Intuit to leverage customer data to streamline the user experience across disparate products and to natively market its offerings, in turn supporting switching costs and a network effect, which we consider to already be the backbones of Intuit’s wide moat.
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OGE Energy completed its long transition to a fully regulated all-electric utility in late 2022 when it finished selling the 95 million Energy Transfer partnership units it acquired in a swap transaction for its stake in midstream firm Enable. Utilities investors should be more comfortable with OGE now that it is a pure play regulated electric utility.
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We expect The Star Entertainment Group to deliver strong earnings growth over the next decade, buoyed by the recovery from pandemic-induced lows, the ramp-up of Queens Wharf and Gold Coast growth projects, and solid performance from its Sydney property, despite increased competition. The Star casino in Sydney is the company's core asset, which has historically generated approximately 70% of group earnings as the city's only casino. However, The Star's exclusivity in Sydney has come to an end with a second Sydney casino licence issued to Crown Resorts opening in August 2022. This is a major blow to The Star, ending its long-standing monopoly in Sydney.
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Crispr Therapeutics is a clinical-stage gene editing company focused on the development of CRISPR/Cas9-based therapeutics. The company's proprietary platform specializes in Clustered Regularly Interspaced Short Palindromic Repeats (CRISPR)/Cas9, which precisely cuts DNA to disrupt, delete, correct, and insert genes to treat genetically defined diseases. CRISPR’s emerging technology has led to a new class of therapies, which are well suited for targeting rare diseases or other disorders that are caused by genetic mutations.
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Curaleaf cultivates and sells cannabis in the US with a presence in 17 states. Vertically integrated, Curaleaf produces through 21 cultivation sites and sells directly through 147 dispensaries and wholesale to other dispensaries. Compared with other multistate operators, Curaleaf has generally employed a more aggressive growth strategy, which hasn't always paid off, leading to exits and sales.

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