Investment Rating - The industry investment rating is classified as In-Line [8]. Core Insights - The report addresses the mismatch in AWS Trainium2/2.5 chip shipments attributed to unstable PCB yield rates, with an expectation of approximately 1.1 million chip shipments in 2025 [1][3]. - Supply chain checks estimate total shipments for the Trainium2/2.5 life cycle (2H24 to 1H26) at 1.9 million units, with a focus on production and consumption in 2025 [2][11]. - The report highlights a significant gap between upstream chip production and downstream consumption, suggesting improvements in yield rates may reduce this gap by 2H25 [6][11]. Upstream - Chip Output Perspective - As of late 2024, 0.3 million units of Trainium2 chips were produced, with a projected total of 1.1 million shipments in 2025, primarily packaged by TSMC (70%) and ASE (30%) [3][11]. - An additional 0.5 million Trainium2.5 chips are expected to be produced in 1H26, bringing the total life cycle shipments to 1.9 million units [3]. Midstream - PCB Perspective - Downstream checks indicate potential shipments exceeding 1.8 million units of Trainium chips, averaging around 200K per month since April [4][11]. - Key suppliers for PCB boards include Gold Circuit and King Slide, which provide essential components for Trainium computing trays [4]. Downstream - Server Rack System Perspective - Wiwynn is identified as a key supplier for server rack assembly, with revenue from AWS Trainium2 servers increasing in 1Q25, aligning with the upstream chip production estimates [5][11]. - The report notes that each server rack can accommodate 32 chips, supporting the projected consumption figures [5]. Component Suppliers - Major suppliers for Trainium2 AI ASIC servers include AVC for thermal solutions, Lite-On Tech for power supply, and Samsung for memory components [10][18]. - Other notable suppliers include King Slide for rail kits and Bizlink for interconnect solutions [10][18]. Future Projections - For Trainium3, shipments are estimated at 650K for 2026, with production managed by Alchip [12][13]. - The report anticipates that Trainium4 will enter small production by late 2027, with a rapid ramp-up expected in 2028 [14].

Investment Rating - The report initiates coverage of Hengrui Pharma's H-shares and resumes coverage of A-shares, both with an Overweight (OW) rating, with H-shares being the preferred stock [1][43]. Core Insights - Hengrui Pharma is positioned to benefit from an improving domestic policy environment and accelerated globalization, which has not yet been fully reflected in the market [1]. - The company is recognized for its extensive and balanced product portfolio, with a strong pipeline across various therapeutic areas, including oncology, metabolic and cardiovascular diseases, immunology, and respiratory diseases [3][12]. - Hengrui is expected to receive approvals for 5, 5, and 11 new drugs in 2025, 2026, and 2027, respectively, totaling 47 NDA/BLA approvals from 2025 to 2027 [3][10]. Summary by Sections Market Potential - The global pharmaceutical market is valued at $1.47 trillion, approximately 6.6 times the size of the Chinese domestic market, with a projected CAGR of 5.7% from 2023 to 2028 [3][32]. - Hengrui has completed 14 licensing deals since 2018, with a total transaction value of $15 billion, indicating strong interest from global biopharma companies in assets from China [3][32]. Financial Projections - The target price for H-shares is HK$78, representing a 45% upside, while the target price for A-shares is RMB 71, representing a 37% upside [7][43]. - Revenue and net profit are projected to grow at CAGRs of 18% and 24%, respectively, from 2024 to 2027 [4][37]. - Innovative drug sales are expected to grow at a CAGR of 34% from 2024 to 2027, contributing to 74% of total drug sales by 2027 [38][40]. Product Pipeline - Hengrui has developed a comprehensive pipeline of innovative drugs, with a focus on key disease areas and a one-stop solution for various subtypes and treatment needs [19][21]. - The company is advancing multiple GLP-1 products targeting the $100 billion global diabetes market, with competitive clinical data supporting their efficacy [19][20]. Valuation Analysis - The DCF valuation method yields a target price of HK$78 for H-shares and RMB 71 for A-shares, with a reasonable premium due to Hengrui's leading position and growth potential [4][43]. - The SOTP analysis indicates that the contribution of globalization opportunities to total value is still conservative, accounting for only 13% of the total estimated value [4][43].

July 9, 2025 08:16 AM GMT Capital Goods | Europe Initial thoughts on a potential 50% US copper tariff for Industrials. A tailwind for Rexel and Prysmian In Cap Goods, Copper is typically a less important input cost relative to steel. However, we see specific companies like Rexel (2% US price rises) and Prysmian (Encore margins) that may stand to benefit near-term from potential Copper tariffs. However, demand destruction over time remains a concern. Key Takeaways What happened? News reports suggest US Presi ...

Investment Rating - The report downgrades Ciena Corporation (CIEN) to Underweight (UW) from Equal-weight (EW) with a price target of $70, down from $73 [6][33] - Corning Inc (GLW) and Coherent Corp (COHR) have their price targets increased to $50 from $44 and $92 from $83 respectively [6][13] - Lumentum Holdings Inc (LITE) price target raised to $85 from $76 [6][13] Core Insights - The optical sector outlook is positive, driven by increasing data speed demands necessitating more fiber and optical transmission, benefiting companies like CIEN, GLW, LITE, and COHR, which have seen an average increase of approximately 80% since early 2024 [3][8] - Despite the positive revenue trajectory, margin health remains a concern, particularly for CIEN, which has limited EPS upside due to its exposure to lower-margin datacom businesses [3][4] - The report highlights that while optical names have experienced significant multiple expansions, earnings revisions have not kept pace, indicating potential risks for further valuation increases [8][18] Summary by Company Ciena Corporation (CIEN) - CIEN's revenue estimates for FY26 have increased by 5% since March 2024, but EPS estimates are down by 9%, primarily due to disappointing gross margins from its pluggables business [25][33] - The downgrade to UW reflects limited potential for positive EPS revisions, with a current P/E multiple of 25x FY26 estimates [4][33] - CIEN's earnings power is projected at approximately $3.33, with a bear case valuation of $26 and a bull case of $98 [33][65] Corning Inc (GLW) - GLW's revenue estimates for FY26 are 11% higher than in March 2024, with EPS estimates up by 23% [52] - The report maintains an Equal-weight rating, with a price target of $50, reflecting a 19x multiple on FY26 earnings [57][79] - GLW's growth is supported by its fiber business, although macroeconomic factors and tariffs pose risks [57][84] Coherent Corp (COHR) - COHR has seen a 100% increase since early 2024, with FY26 revenue estimates 5% higher than in March 2024 and EPS estimates up by 6% [47] - The report maintains an Equal-weight rating with a price target of $92, reflecting a 20x multiple on FY26 earnings [51][96] - COHR's margin recovery is noted, but the report remains cautious due to ongoing tariff uncertainties and market volatility [47][96] Lumentum Holdings Inc (LITE) - LITE's revenue estimates for FY26 are 10% higher than in March 2024, with EPS estimates up by 1% [34] - The report maintains an Equal-weight rating with a price target of $85, reflecting a 21x multiple on FY26 earnings [46][34] - LITE's valuation is considered full at a P/E of approximately 23x, given its historical trading range [37][34]

Investment Rating - The industry investment rating for China Healthcare is classified as Attractive [6][63]. Core Insights - The report discusses the potential impact of a proposed 200% US tariff on pharmaceuticals, highlighting the implications for both generic and innovative drugs [2][8]. - There is a significant shortage of sterile injectables in the US, with 102 generic medicines under-supplied from 2019-2024, primarily affecting categories such as anesthesia and oncology [3]. - Innovative drug manufacturers have higher gross margins (GMs of 80% or more) and are better positioned to absorb import costs compared to generic drug makers, who face GMs of 40-60% [4]. Summary by Sections Generic Drugs - The US is experiencing an acute shortage of sterile injectables, with 70% of the 102 under-supplied generic medicines being injectables [3]. - Most generic formulations and APIs are produced in India and China, with limited US-based production facilities [3]. Innovative Drugs - Innovative drug makers have more flexibility to manage import costs due to higher gross margins [4]. - Leading Chinese Contract Development and Manufacturing Organizations (CDMOs) are adapting their supply chains to include more US-based facilities [4]. Industry Ratings - The report includes a detailed list of companies within the China Healthcare sector, with various ratings such as Overweight (O), Equal-weight (E), and Underweight (U) [63][65].

Investment Rating - The industry investment rating is classified as Attractive [4]. Core Insights - The report highlights significant supply chain reconfigurations among major pharmaceutical companies, with investments in the US driven by tax cuts and a pro-innovation government stance [3]. - A 20% tariff on Chinese pharmaceutical imports is currently in effect, which is notably lower than the reciprocal tariff rates on other Chinese imports [2][6]. - The imminent pharmaceutical-specific trade deal aims to re-shore manufacturing and create jobs in the US [2]. Summary by Relevant Sections Trade Talks and Tariffs - Prior to recent trade talks, the US had no import tariffs on formulations and a 1.7% average on active pharmaceutical ingredients. A 20% tariff was imposed on Chinese pharmaceuticals, significantly lower than the 145% reciprocal rate on other imports [2][6]. - The report anticipates that markets will react to the end of the "90-day pause" on tariffs, although specific policies for Chinese biopharma will likely be introduced later [6]. Supply Chain Adjustments - Major pharmaceutical companies such as Lilly, J&J, Merck, Novartis, Roche, and BeiGene have announced substantial capital expenditures in the US, motivated by tax incentives and risk mitigation [3]. - Leading Chinese Contract Development and Manufacturing Organizations (CDMOs) like WuXi Group are shifting their capital expenditures to Singapore and the US, citing favorable tariffs and similar manufacturing economics [3]. Company Ratings - The report includes ratings for various companies within the China healthcare sector, with notable mentions such as: - 3SBio (1530.HK) rated as Overweight - CSPC Pharmaceutical Group (1093.HK) rated as Overweight - Aier Eye Hospital Group (300015.SZ) rated as Underweight [61].

Investment Rating - The report maintains an "Overweight" rating for Alibaba Group Holding with a revised price target of US$150, down from US$180, indicating a potential upside of 39% from the current price of US$107.99 [7][5]. Core Insights - The report highlights that Alibaba is facing earnings pressure due to heightened investments in instant commerce, with an estimated Rmb10 billion in investments for the first quarter of fiscal year 2026, leading to a projected 16% year-over-year decline in consolidated EBITA [1][4]. - Despite the near-term earnings challenges, Alibaba is viewed as the best AI enabler in the sector, with cloud revenue expected to grow by 22% year-over-year [3][5]. Summary by Sections Earnings Forecasts - For 1QF26, total consolidated revenue is expected to increase by 2% year-over-year, while adjusted EBITA is projected to decline by 16% due to investments in food delivery and quick commerce [4][12]. - The report anticipates a significant drop in combined EBITA for the Travel and Local Services segments, with a forecasted decline of over 40% year-over-year in the second quarter [2][5]. Revenue and Profit Estimates - Revenue estimates for fiscal year 2026 have been trimmed by 4%, with adjusted EBITA forecasts reduced by 26% for FY26 and 18% for FY27 due to the impact of increased investments [5][13]. - The adjusted net profit attributable to Alibaba is expected to decrease by 23.9% for FY26, reflecting the challenges posed by the current investment strategy [13]. Valuation Methodology - The price target adjustment to US$150 is based on a discounted cash flow (DCF) analysis, with a raised weighted average cost of capital (WACC) to 11% due to increased competitive risks [14][15].

Investment Rating - The investment rating for Broadcom Inc is Overweight (OW) with a price target of $325.00 by December 2025 [2][17]. Core Insights - Strong AI demand is driving growth in Broadcom's custom AI XPU business and high-performance networking portfolio, with incremental demand from inference workloads not previously accounted for in forecasts [1][13]. - The non-AI semiconductor business is showing signs of recovery, which could lead to positive EPS revisions next year [1][15]. - VMware's revenue growth is expected to be sustained until late 2026/2027, with an anticipated annualized revenue base of $20 billion [1][15]. - Semiconductor operating margins are expected to expand due to operating leverage, despite potential gross margin headwinds from the AI XPU business [1][15]. - Broadcom is focusing on reinvesting in AI growth opportunities rather than pursuing M&A, which could dilute resources [1][15]. Summary by Sections AI Demand and Product Development - AI demand remains strong, particularly in inference workloads, which could lead to upside in previous forecasts [1][13]. - The company is on track to tape-out first-generation AI XPU products this year, collaborating with leading prospects like Arm/Softbank and OpenAI [1][13]. - AI compute workloads are driving significant networking demand, presenting opportunities for higher dollar content capture in scale-up networking [1][13]. Non-AI Business Recovery - A gradual "U" shape recovery is observed in the non-AI semiconductor business, reflected in increasing bookings and orders [1][15]. - This recovery could contribute to a positive EPS revision cycle next year [1][15]. VMware Business Growth - The VMware VCF platform is expected to sustain strong revenue growth until late 2026/2027, with projected annualized revenues reaching approximately $20 billion [1][15]. Financial Performance and Margins - Semiconductor operating margins are anticipated to continue expanding due to strong operating leverage, despite lower gross margins from AI XPU demand [1][15]. - AI revenues are projected to grow at 60% year-over-year in FY26, with operating expenses not expected to grow at the same elevated levels [1][15]. Strategic Focus - The company plans to reinvest in business growth over the next 1-2 years, focusing on AI opportunities and customer engagement rather than M&A [1][15].

Investment Rating - The industry investment rating is "In-Line" [6] Core Insights - The report highlights an increase in GB200 rack output, with estimates suggesting a rise to approximately 10-11k in Q3 from around 6k in Q2 [1] - Quanta's June revenue reached approximately NT$190 billion, reflecting an 18% month-over-month increase and a 71% year-over-year increase [2] - Wistron's June revenue was NT$209,182 million, remaining flat month-over-month but showing a 136% year-over-year increase, with Q2 revenue at NT$551.3 billion, which is 22% above estimates [2] - Hon Hai's cloud and networking business saw a slight month-over-month increase, attributed to higher shipments of GB200 server racks [3] - The actual deliveries to end customers may be lower than reported due to the inclusion of computing tray equivalents without accounting for assembly and testing times [4] Company Summaries - Quanta shipped 500-600 GB200 racks in June, totaling 1.2-1.3k for Q2 [8] - Wistron shipped 700-800 GB200 racks equivalent of computing trays in June, with a total of 1.8-1.9k for Q2 [8] - Hon Hai delivered slightly over 1k GB200 racks in June, totaling approximately 3k racks in Q2 [8] - The report notes a higher number of notebook shipments at 5.0 million, reflecting a 32% month-over-month increase [9]

Investment Rating - The report maintains an Overweight (OW) rating on US stocks, Treasuries, and US Investment Grade Corporate Credit, emphasizing a focus on quality assets [3][4][5]. Core Insights - The report indicates a global growth slowdown, forecasting a decline from 3.5% in 2024 to 2.5% in 2025, with the US experiencing a drop in real GDP growth from 2.5% in 2024 to 1.0% in both 2025 and 2026 [1][7]. - The impact of tariffs is highlighted as a structural shock to the global trading order, affecting demand and supply across various economies, particularly in the US and China [1][7]. - Despite the anticipated slowdown, the report suggests that risk assets may perform well as markets adjust to less severe growth expectations [2][3]. Economic Forecasts - Global GDP growth is projected at 2.5% for 2025, with the US at 1.0%, Euro Area at 0.8%, Japan at 0.3%, and Emerging Markets (EM) at 3.8% [8]. - Inflation rates are expected to be 2.1% globally and 3.0% in the US for 2025, with a gradual decline in subsequent years [8]. Sector Recommendations - In the US, the report favors quality cyclicals, large caps, and defensives with lower leverage and cheaper valuations [5]. - For Japan, the focus is on domestic reflation and corporate reform beneficiaries, while in Europe, the report recommends a shift towards resilient sectors such as defense, banks, software, telecoms, and diversified financials [5]. - Emerging Markets are recommended to focus on financials and profitability leaders, with a preference for domestic-focused businesses over exporters [5]. Market Valuations - The report provides specific price targets and P/E ratios for major indices, including S&P 500 at 6,500 with a P/E of 21.5x, MSCI Europe at 2,250 with a P/E of 15.2x, and MSCI EM at 1,200 with a P/E of 12.5x [6].