Vermilion Compass: Weekly Equity Strategy

Are the Lows "In" for this Pullback? While we are not yet out of the woods, we continue to see evidence that suggests the lows may be "in" for this pullback. Last week (4/23/24 Compass) we discussed the possibility that further downside was limited on the S&P 500 due to a multitude of reasons (SPX had simply filled 2/22/24 gap support that we had been discussing since late-February, Russell 2000 and Equal-Weighted S&P 500 were holding above key supports, short-term oversold conditions, subdued ...

Upgrade or not to upgrade, that is the question

Yard response and dry bulk qualms

Our trip to South Korea and China revealed Chinese shipbuilders are seeking growth to take on Korea’s established yards who are facing constraints. An eagerness to add capacity is one of our takeaways, as well as a gloomy outlook for Chinese real estate, which in our view should inevitably weigh on dry bulk demand.

Safe Bulkers (Buy, TP: USD5.70) - Still discounted dry bulk exposure

The market is pricing Safe Bulkers at a ~50% discount to NAV, which we believe mitigates any potential vessel value risk and leaves a still-favourable risk/reward towards the dry bulk supply-side narrative. However, we find the recent dry bulk freight market strength counter to fundamental demand drivers in China (importer of ~75% of seaborne iron ore volumes and ~50% of overall volumes), and see some market downside risk near-term. Still, at today’s share price, we see an attractive 17% earning...

Novo Nordisk (Buy, TP: DKK1100.00) - Company consensus added

We are slightly below consensus on Q1e LCY sales growth (we forecast 19.4%, consensus 21.4%) and LCY operating profit growth (we forecast 16.8%, consensus 19.5%), due to lower expected Wegovy sales. However, we believe the Ozempic US prescription trend will prompt management to raise the 2024 guidance to LCY sales growth of 20–28% (18–26%) and LCY operating profit growth of 23–31% (21–29%). We reiterate our BUY and DKK1,100 target price.

ALK-Abello (Buy, TP: DKK145.00) - Set for still-strong European tablet...

We expect another strong quarter for European tablet sales in Q1, up c15% YOY, marking a third consecutive quarter with growth in the teens, which should help boost investor confidence (results due at 07:00 CET on 3 May). However, due to tough comparables for the legacy business and seasonality patterns, we expect the 2024 guidance to be maintained. We reiterate our BUY and have raised our target price to DKK145 (140).

SpareBank1 SR-Bank (Buy, TP: NOK158.00) - Solid growth and asset quali...

With NII remaining at high levels and modest loan losses, SRBNK reported a Q1 ROE of 14.6% versus its >13% target. Following strong lending growth of 2.3% QOQ, the CET1 ratio was flat QOQ, with the bank highlighting cNOK2.5bn synergy potential from the pending merger with SpareBank 1 Sørøst-Norge. We have made only minor changes to our 2025–2026e EPS. With the stock trading at a 2025e P/E of ~8.9x, we continue to find the valuation attractive. We reiterate our BUY and NOK158 target price.

In need of a higher ROE

Adj. PTP +10% vs. ABGSCe (lower cost and loan losses). EPS up +6%, +5% and 6% for '24e/25e/26e. Valuation in line with fundamentals: HOLD.

Stronger growth and better costs

Adj. PTP beat of 10% vs. ABGSCe, 2% vs cons. driven by lower loan losses and better costs as income just soft. Cons. EPS chg. likely down 1-3%, stock likely flat to -2% today

Novo Nordisk (Buy, TP: DKK1100.00) - Ozempic to drive raised guidance

We are slightly below consensus on Q1 LCY sales growth (we forecast 19.4%, consensus 20.1%) and LCY operating profit growth (we forecast 16.8%, consensus 17.3%), due to lower expected Wegovy sales. However, we believe the trend in Ozempic US prescriptions will prompt management to raise the 2024 guidance to LCY sales growth of 20–28% (18–26%) and LCY operating profit growth of 23–31% (21–29%). We reiterate our BUY and DKK1,100 target price.

Coloplast (Buy, TP: DKK1050.00) - Awaiting an acceleration in H2e

We forecast Q2 organic revenue growth of 7.6% YOY (in line with consensus), driven by the Chronic Care business segments, and an EBIT margin before special items of 27.6% (consensus 27.5%). We continue to expect QOQ improvements for the coming quarters. We expect the 2023/24 guidance to be unchanged for c8% organic revenue growth, and a 27–28% EBIT margin before special items. We reiterate our BUY, and have raised our target price to DKK1,050 (1,000).

Scope for continued strong earnings

Seeing support from still-high interest rates and sound fundamentals, we expect solid NII and robust asset quality to contribute to continued strong earnings generation for the banks, despite the stable and eventually falling key policy rate trajectory. Trading at an average 2025e P/E of ~8.5x (adjusted for undistributed 2023 dividends), we continue to find the valuation undemanding. We maintain a positive view on the sector and highlight SVEG as our top pick.

A brewing challenge for the yards

Our 17th Annual Energy & Shipping Conference was well attended by investors and industry executives showcasing the still-growing interest for the sectors. Limited yard capacity is fuelling high newbuilding prices and raising freight rate expectations for the vast fleet renewal necessary in the coming decade. Long lead times underpin a bullish supply story for much of shipping in the coming years, albeit exposed to geopolitical risks affecting trade patterns. Our overall impression was general op...

ODDO BHF SECURITIES MORNING NEWS – DETAILED COMMENTS 03/08/2024

We host our 8th ODDO BHF TMT Forum virtually in 07th and 08th March 2024. In total, 46 companies will be presenting during the forum. In the following note, we provide some initial feedback of companies on day 1. - ...