Value Investing How to profit off Global Warming: HVAC Market Research with Due Dilligence on 5 Air-Conditioner brands. |
- How to profit off Global Warming: HVAC Market Research with Due Dilligence on 5 Air-Conditioner brands.
- Damodaran on Value Investing
- GTX Bankruptcy
- Staying Home: How the Coronavirus Changed Consumer Behaviors and Company Valuations
- How friendship helps to find the best stocks - Dennis Hong (ShawSpring) & Fred Liu (Hayden Capital)
- Long idea: oil & gas E&P CNOOC
| Posted: 25 Oct 2020 01:28 PM PDT If you find this interesting please follow my account for more DD.I'm also working on an Excel file which will provide all fundamental data about a stock, more info about that on my account. TLDR at bottom!Introduction With the change and progressing to extremer climates, global warming is coming our way. It has been shown world governments are incapable of properly taking action against this threat. Since it seems like global warming won't be stopped, we will have to start adapting to the new extreme climates. One way of ensuring a comfortable living/working space in this grim future is by making use of HVAC (Heating Ventilation & Air Conditioning). And that's what got me thinking. My family has been hell bent on NOT getting air-conditioning. But with the summer temperatures ever more frequently reaching +40c with a humidity of +70%(Hup Holland Hup) it's becoming unbearable. Sleepless nights, overheated pets, fainting, old people dying and just losing your will to live. These are all issues more people around the world are starting to face. Every place on earth is getting more extreme. Every place on earth is getting more need for Climate control. And every company is looking to profit of that! This is why my next play is in the HVAC industry. Finding our compatible companies. I only want to invest in the best companies. Living in The Netherlands I personally don't know the best brands, luckily, I've got great internet. So, after spitting through some review sites these are the 5 public companies that came out best when looking for "Best HVAC/Air-conditioning companies/brands". (Not ranked)
Understanding the HVAC market. Before we continue to further analyze the companies, we first need to understand the HVAC market. Some facts:
As can been seen in the above statements the HVAC business is very well integrated in some large countries. But the most exciting prospects are those of the developing countries. In Mexico, Brazil, Indonesia, South Africa and India only 16%, 16%, 9%, 6% and 5% respectively of the households have AC. This is a MASSIVE market just waiting to be exploited. - The Indian AC market stood at $4,3B in 2017 and is expected to surpass 11B by 2023, that's a CAGR of over 17%. This rising growth is led by rising infrastructure development, growing demand for housing and the constantly rising temperatures and consumers purchasing power. - The Middle Eastern and African market is expected to have an CAGR of 4,9% during 2019-2024. - The Indonesian market is currently experiencing a 2% CAGR in AC demand over 2012 till 2018. - The US is expected to have a CAGR of 3.1% from 2020 to 2030. - Europe is expected to have a CAGR of 6% from 2019 to 2025. - The global HVAC market is expected to grow with a CAGR of 5.5% from 2018 till 2024. Market share. This was actually really really difficult to find free sources on and I can't really make a clear picture out of it so here are the numbers: - 2013 North America market: Carrier 17%, Daikin 15%, Trane 10%, Johnson 9%, Lennox 6%, LG 5%. - 2013 Global AC market: Daikin 13%, Carrier 10%, Johnson 8%, Trane/LG 4%. - 2018 Indian market share: LG 17,7%, Hitachi 7,9%, Daikin 7,4%. - HVAC Used by construction firms in USA: Carrier 29%, Lennox 17,3%, Daikin 8,2%, Trane7,3%, LG 1,8% Johnson 1,8%. - 2020 global "Wall-Mounted Fan Coil Units" market: Daikin 29%, Trane 26%, Carrier 12%, Johnson 7,5% My conclusion from this and other information found online is that globally Daikin is the biggest followed by Carrier, Johnson, Trane, LG and Lennox. I accounted for all known acquisitions since 2013 in the market share. An introduction to the Companies Carrier Carrier products and related services include HVAC and refrigeration systems, building controls and automation, fire and special hazard suppression systems and equipment, security monitoring and rapid response systems, provided to a diversified international customer base principally in the industrial, commercial and residential property and commercial transportation sectors. Employees: 53,000+ Countries active: 160+ Market Cap: 25,959B Key points: - 85% of sales are in the USA or Europe, they are however planning to expand globally. - 51% HVAC, 29% Fire and Security, 20% Refrigeration. - Since April 2020 carrier has split off from Raytheon Technologies, allowing them to focus fully on the HVACR market. - Carrier is planning on cutting 600million in costs by 2022 (4% of current COGS) - Carrier has recently launched its "BlueEdge" platform, providing aftermarket service to customers and minimizing machinery downtime & costs. The platform will offer 3 different plans of service to customers. Currently 82% of all Carrier's revenue comes from products, this is a clear move to increase its services revenue. - As stated above, Carrier is planning to move more towards (digital) services. Strengths: - Well established brand within USA and Europe. - Leader of the HVAC market. - Very efficient products. - Diversified - 500+ patents and 115y of experience. - Owns cheaper sub-brands. - #1 HVAC brand for 10 consecutive years according to Builder Magazine - Increased focus on smart systems and apps. Weaknesses: - Trying to enter markets with well established competitors (Johnson Controls, Daikin) - Excessive dependence on the American market. - No lifetime warranties - No concrete plans for taking over the Asian market. Trane Trane Technologies Public Limited Company manufactures industrial equipment. The Company offers central heaters, air conditioners, electric vehicles, air cleaners, and fluid handling products. Trane Technologies serves customers worldwide. Employees: 50,000+ Countries active: 100+ Market Cap: 28,189B Key Points: - Since February 2020 Trane has split from Ingersoll Rand allowing it to fully focus on its HVAC business. - Revenue: 73% Americas, 12% Asia/Pacific, 15% EMEA. - Revenue: 79% Climate, 21% Industrial Strengths: - 120y of experience. - Known as reliable, efficient and silent. - Major investments in reducing carbon emissions for its systems. - Opportunity for expanding to Asia and the Middle East. - Reduced product emissions by more than 50% Weaknesses: - Heavy dependency on the American market. - No concrete plans on expansion in the Asian/Middle Eastern market. - No strong focus on apps/smart systems. Daikin DAIKIN INDUSTRIES, LTD. manufactures air conditioning equipment for household and commercial use. The Company also operates chemical, oil hydraulics, defense system, and electronics businesses. Employees: 76,000+ Countries active: 150+ Market Cap: 53,273B Key points: - Japan sales rose 7% YoY - Americas sales rose 13% YoY - EMEA sales rose 7% YoY - Asia/Oceania sales rose 10% YoY - Revenue: 89,6% HVAC, 8,1% Chemicals, 1,7% Oil Hydraulics, 0,6% Defense - Daikin creates Semiconductor-etching products. Making them well positioned for the "new" tech boom. With the sales of chemicals almost increasing 10% YoY. - Daikin provides warheads for the Japanese military. - Owns Goodman. Strengths: - Leader of the Indian AC market, creating products that can withstand the extreme conditions in the country. Being able to operate at temperatures as high as 54c, creating AC's that do not corrode due to sulfuric acid. and also, being able to be dropped from 1m height, to withstand the rough roads. - Grew its profit in FY2020 while all others decreased in revenue. - Produces products used for Semiconductors. - Has a clear plan to expand it's influence in emerging markets such as India and the Middle East. - Creates the full supply line for HVAC products, from refrigerants to AC-units. - Heavy R&D expenses. Weaknesses: - China-Us frictions. - Slowdown of the Japanese economy. - Does not have trailer refrigeration. - Outdated apps. Lennox International Lennox International Inc. provides climate control solutions. The Company designs, manufactures, and markets heating, ventilation, air conditioning, and refrigeration equipment. Lennox markets its products worldwide. Employees: 11,000+ Countries Active: 70+ Market Cap: 10,617B Key Points: - Revenue: 60% Residential, 25% Commercial, 15% Refrigeration. - Mainly present in America. - Increasing net profit margin. Strengths: - Currently has the most efficient split system. - Launching the Better Air initiative, focused on increasing indoor air quality, a Covid play. Weaknesses: - No concrete plans for expanding into emerging markets. - Not known for the best reliability. - Stagnating revenue and negative shareholders equity. - Unreliable apps. Johnson Controls Johnson Controls International plc operates as a diversified technology and multi industrial company worldwide. The company operates through Building Solutions North America, Building Solutions EMEA/LA, Building Solutions EMEA/LA, and Global Products segments. The company designs, sells, installs, and services heating, ventilating, and air conditioning systems, controls systems, integrated electronic security systems, and integrated fire detection and suppression systems for commercial, industrial, retail, small business, institutional, and governmental customers Employees: 105,000+ Countries Active: 150+ Market Cap 32,898B Key Points: - Launch of its open blue system. Giving customers total control over their building, temperatures, facial recognition ventilation, security, contact tracing and more all in the palm of your hand. (Seriously check the videos, really impressive). This is a clear Covid play and very well timed. - Owner of York and a joint venture with Hitachi. - Strong plans for Asian expansion. Strengths: - Very good smart systems and mobile apps. - Launch of it's OpenBlue system. A digital platform to connect every part of your building. - Using Covid to their advantage in launching products and services. - Well aware of the need to expand in China/Asia - Build a state of the art headquarters in China. Weaknesses: - Many negative reviews on its Hitachi brand Comparing the companies their financials. TTM DATA
Conclusion First of all, I should start with saying that Lennox really shouldn't have been included, they are on a completely different level than these 4 other companies. Also, Johnson had some fuckery going on in all their 10k's so these numbers might not add up, let me know if you found something. Looking at the company's financials and numbers it's a tough decision to make, all companies a pretty close to each other. There are however some things that stand out: - Carrier has a significantly higher NPM then the competitors. - Lennox might be in financial trouble. - Daikin spends the most on R&D relative to its revenue, I see this as a big plus. - Johnson their revenue is growing the fastest on a 5Y CAGR. - Johnson their P/E is much higher than the competition. - Johnson their Dividend is the higher % wise - Daikin has increased sales in 2020 while other companies have seen a drop. - Daikin's NPM is stable at around 8% while Carrier's NPM has grown explosively. - Trane has a high debt/equity ratio - Both Carrier and Daikin have a very strong Interest coverage ratio. - Johnson's TTM would be better without an irregular expense of 602M Now on to the less financial aspect of the data. I really like the way Daikin presents their annual report, they have clear strategies on how to better engage the Indian market. They are also showing that they know where their market growth protentional lays and are willing to act on it. Furthermore, what really strikes me as interesting is that Daikin produces materials for semiconductor testing, this might be a goldmine in the upcoming tech revolution and Daikin has shown to be well aware of this upcoming trend. Carrier on the other hand has not properly breached the Asian/Middle eastern market yet, they have stated to expand their geographical presence but I have found no conclusive strategies in how to do so. What is impressive about carrier is their high net profit margin and willingness to act on a more digital environment, an area where Daikin is currently lacking. To conclude this research properly, if I had to choose a company right now, I'd being going for Daikin. Their well-presented data and goals for emerging markets, combined with their semiconductor products make me believe they are most suited for rapid growth. Their geographical location also puts them in a better position for Asian dominance. And their Goodman sub brand is well known in America and a direct competitor to Carrier. Carrier is a close second, with impressive brand recognition and attractive financials. One thing carrier does well that Daikin does not is transport refrigeration. In my opinion trucking is going to play a much larger role when self-driving trucks start to appear. [link] [comments]  | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Posted: 26 Oct 2020 02:34 AM PDT | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Posted: 26 Oct 2020 02:32 AM PDT | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Staying Home: How the Coronavirus Changed Consumer Behaviors and Company Valuations Posted: 26 Oct 2020 02:31 AM PDT | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| How friendship helps to find the best stocks - Dennis Hong (ShawSpring) & Fred Liu (Hayden Capital) Posted: 25 Oct 2020 12:05 PM PDT | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Long idea: oil & gas E&P CNOOC Posted: 25 Oct 2020 06:02 PM PDT Investment case: - Exclusive rights to developed oil & gas fields in offshore China under production sharing contracts - Is then able to sell its oil at Brent prices within mainland China - Offshore China is relatively undeveloped compared to e.g. Gulf of Mexico - Shallow waters and cost discipline enables one of the lowest all-in cost of any oil major, at $26/boe - Has been free cash flow positive throughout most of its history, yet growth production at a close to 10% CAGR and maintained a 40% pay-out ratio - Net cash position gives the company flexibility - COVID-19 has hit oil demand and prices are below inflation-adjusted averages, but recovery of gasoline and kerosene demand is within sight - Assuming a gradual recovery and $60 Brent, target price of HK$16.6/share, implying upside of +115% without consider yearly dividend - Main risk is parent asset injections at unfavourable prices [link] [comments]  |
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