Investment Rating - The report indicates a positive outlook for Japanese companies, with expectations of a 3% year-on-year increase in capital expenditure (capex) for FY2025 despite rising uncertainties [5][7]. Core Insights - The capex expansion cycle for Japanese companies continues, particularly in sectors such as semiconductors, automation, power transmission and distribution, and inbound tourism [1][5]. - Corporate profit margins and return on assets (ROA) have reached record levels, with expectations for further improvement due to ongoing corporate balance sheet reforms initiated in FY2023 [1][27]. - Promising companies identified for future growth include Hitachi Construction Machinery, Sojitz, Nippon Yusen, Capcom, SCREEN Holdings, and Tokyo Electron, which are expected to benefit from increased capex and improved profit margins [1][63]. Summary by Sections Capex Trends - Capex has been in an expansion cycle since FY2022, with significant investments in semiconductors, automation, and inbound tourism projected to continue into FY2025 [4][5]. - The manufacturing sector is seeing increased capex driven by digitalization and AI, particularly in semiconductor capacity and electric vehicle (EV) battery production [7][8]. Sector Performance - Key sectors expected to see accelerated capex include machinery, real estate, retail, and automobiles, with ROA improvements noted in machinery, chemicals, steel, and IT & services [4][48]. - Historical data shows that during previous capex expansion phases, sectors such as machinery, automobiles, and chemicals experienced significant profit margin growth [45][46]. Promising Companies - Companies such as Hitachi Construction Machinery, Sojitz, Nippon Yusen, Capcom, SCREEN Holdings, and Tokyo Electron are highlighted for their strong capex plans and potential for increased profit margins and ROA [1][63].

Investment Rating - The investment rating for Haidilao International Holding Ltd is Overweight, with a price target of HK$20.00, indicating a potential upside of 28% from the current price of HK$15.58 [4]. Core Insights - The report highlights that Haidilao is on track to meet its 2025 target for gross store openings, with an expected acceleration in the second half of 2025. The company aims for a gross opening of more than a mid-single-digit percentage of its existing network [6]. - The gross profit margin (GPM) for 2025 is projected to be lower than in 2024 due to rising raw material costs and enhanced customer services, although lower depreciation expenses may provide some mitigation [6][2]. - The report notes that the staff cost ratio is expected to remain stable year-on-year in 2025, while marketing efforts are being expanded to include regional and store-level initiatives [2]. Financial Metrics - For the fiscal year ending December 2025, the estimated net revenue is projected to be RMB 45,930 million, with an EBITDA of RMB 9,002 million and a net income of RMB 5,338 million [4]. - The earnings per share (EPS) for 2025 is estimated at RMB 0.99, with a projected compound annual growth rate (CAGR) of 14% for EPS from 2025 to 2027 [7]. - The report indicates a price-to-earnings (P/E) ratio of 14.5 for 2025, which is considered reasonable given the macroeconomic uncertainties [7]. Market Context - The report mentions that the overall consumption sentiment remains weak, impacting top-line growth, with a year-on-year decline in table turn for Haidilao observed in May 2025 [6]. - The company is also adjusting its store opening strategy for YEAH Qing BBQ, scaling back slightly to ensure quality openings, targeting 100 gross store openings in 2025 [6].

Investment Rating - The report maintains a high-conviction Overweight rating for Oracle and related companies within the Office of the CFO coverage group, including BlackLine, OneStream, and Vertex [1][4]. Core Insights - The accelerating growth of Oracle Fusion and NetSuite, driven by AI, indicates a potential Back-Office Supercycle extending beyond the SAP ecosystem, enhancing confidence in investment calls [1][4]. - Oracle's F4Q25 results exceeded expectations, with Fusion's growth accelerating to 22% YoY and NetSuite to 18% YoY, with further growth anticipated in FY26 [2][11]. - The need for organizations to adopt AI is prompting upgrades from on-premises to cloud solutions, as AI capabilities are exclusively available in the cloud [2][4]. Summary by Sections Oracle's Performance - Oracle's recent results suggest a significant inflection point for ERP upgrades to the cloud, indicating increased demand for services associated with ERP cloud migrations [4]. - The report highlights that Oracle's strategic SaaS products are gaining popularity as they enable advanced AI capabilities, which are unavailable in on-premise systems [5][8]. Market Dynamics - SAP has been leading the Back-Office Supercycle with a more aggressive cloud migration strategy, which has positively impacted their cloud backlog growth [3]. - The report notes that the ability to leverage AI is a primary driver for CIOs upgrading their ERP platforms, as indicated by a recent survey [12]. Future Outlook - The anticipated ERP upgrades are expected to drive additional demand for services related to Oracle's cloud offerings, reinforcing the Overweight calls on BlackLine, OneStream, and Vertex [4]. - The report emphasizes that Vertex stands to benefit significantly due to its close relationship with Oracle [4].

Investment Rating - The report assigns an "Overweight" (OW) rating to Ping An Group and AIA Group, while China Life is rated "Underweight" (UW) [10][51]. Core Insights - The report emphasizes the shift in China's insurance consumption from savings-type products to service-oriented protection products, particularly commercial health insurance, which is expected to benefit from rising service consumption trends [2][7]. - The report highlights the significant mortality protection gap in China, indicating a need for increased focus on protection-type policies to enhance consumer safety and insurer profitability [6][11]. - Ping An Group's strategic initiatives in promoting commercial health products are viewed as largely underestimated by the market, presenting a potential investment opportunity [28][30]. Summary by Sections Industry Overview - The insurance sector in China is transitioning towards service consumption, with a focus on health and protection products rather than traditional savings policies [2][7]. - The report notes that savings policies, which offer guaranteed rates of 2.5% to 3.5% per annum, are not classified as service consumption, while commercial health insurance is [8][9]. Market Dynamics - The demand for savings-type policies has increased due to a shrinking agent sales force and attractive yields compared to bank deposits, leading to a decline in overall product margins [6][11]. - The report suggests that a shift towards higher-margin protection and health policies would benefit both consumers and insurers, especially in light of the government's push for enhanced service consumption [6][11]. Strategic Recommendations - The report proposes three strategies to enhance service consumption in the insurance sector: 1. Implementing tax breaks for commercial health insurance to stimulate market growth [43][45]. 2. Offering corporate tax benefits for insurers that increase sales of protection policies [45][47]. 3. Encouraging insurers to integrate nurse care and the healthcare ecosystem with health insurance [44][45]. Company-Specific Insights - Ping An Group is highlighted for its extensive healthcare and elderly care network, which significantly contributes to its new business value (NBV) [29][30]. - AIA Group's initiatives, such as the 'AIA Vitality' program, are noted for promoting health policy sales and improving customer engagement [34][35]. Financial Metrics - The report provides a valuation comparison for various insurance companies, indicating potential upside for Ping An Group and AIA Group based on their current market prices and projected price targets [10][48].

Key Takeaways Australia • Labor Data: Solid employment (35k jobs added) with participation rate flat at 67.1%. This keeps unemployment rate at 4.1%, which remains below RBA's forecast (4.2%) and signals continued labor market tightness. China June 13, 2025 09:36 AM GMT Asia/Pacific Weekly Preview | Asia Pacific M Update Central Banks in Focus; China's Activity Data India • WPI: YoY to moderate from decelerating food prices and declining fuel prices. Sequentially it will inch up. Indonesia • BI: A pause afte ...

June 13, 2025 01:08 AM GMT Greater China Semiconductors | Asia Pacific Memory Refresh: CXMT's 16Gb DDR4 exit; EW Nanya Tech At 1x P/B, Nanya Tech's stock price could remain pressured by the industry's structural change, especially when/if DDR4 demand starts to be replaced by CXMT's DDR5 in 4Q25. Market had some misconceptions on China CXMT's DDR4 strategy: In Greater China Semiconductors: Memory Refresh: DDR4 Supply-driven Upcycle Arrives (14 May 2025), we mentioned that ChangXin Memory Technologies (CXMT) ...

Investment Rating - The report maintains a positive investment rating for companies such as Leap Motor, Xpeng Motors, BYD, Li Auto, and Geely, while holding a conservative long-term outlook on state-owned joint venture automakers like Dongfeng Motor, SAIC Motor, and GAC Group [1]. Core Insights - The report identifies ten structural trends in the automotive industry, emphasizing the potential for profit growth, investor positioning, and the current automotive market environment [1]. - Key themes include the expansion of Chinese automakers into Europe, innovation in technology, restructuring of dealer networks, focus on autonomous driving, and the impact of pricing strategies and tariffs [1][3]. Summary by Themes Theme 1: Expansion into Europe - Chinese automakers are increasingly focusing on the European market due to higher profit margins and less competition compared to China [3]. - The average selling price of vehicles in the EU can be 2-3 times higher than in China, with Chinese manufacturers potentially achieving 50-100% higher profitability in Europe despite tariffs [3][4]. Theme 2: Innovation and Technology - Chinese automakers are noted for their rapid technological innovation, with significant advancements in electric vehicle components and systems [6][8]. Theme 3: Restructuring Dealer Networks - The report highlights a trend of restructuring among Chinese dealers due to intense competition and declining profitability, with discount rates reaching record highs [18][19]. Theme 4: Strong Model Cycles - Companies like Mercedes-Benz and Xpeng are expected to launch several new models starting in 2025, indicating a strong product pipeline [22]. Theme 5: Focus on Autonomous Driving - The industry is shifting towards autonomous driving technologies, with AI playing a crucial role in enhancing vehicle capabilities [23]. Theme 6: Global Collaborations - Partnerships between Chinese automakers and global manufacturers are increasing, with companies like Xpeng collaborating with Volkswagen and Leap Motor with Stellantis [25][30]. Theme 7: Pricing Competition - The report discusses the ongoing price competition in the Chinese market, driven by demand slowdown and oversupply, with significant discounts affecting profitability [35]. Theme 8: EU Pricing Strategies - In the EU, consumers prioritize monthly payments over manufacturer suggested retail prices, influencing sales strategies for Chinese brands [42]. Theme 9: Impact of US Tariffs - The report assesses the limited impact of US tariffs on Chinese automakers, as they have not significantly exported to the US since previous tariff implementations [54]. Theme 10: Rare Earth Issues - The discussion on rare earth materials highlights potential supply chain risks for North American electric vehicle manufacturers, although current inventories mitigate immediate impacts [55].

Investment Rating - The report raises price targets for COHR and LITE by 16% and 15% respectively, both reaching $100, indicating a positive investment outlook for these companies [7][9]. Core Insights - The adoption of co-packaged optics (CPO) is expected to be more imminent than previously anticipated, driven by a broad group of suppliers, while the disruption to existing optical companies will be limited [6][9]. - CPO advantages, such as performance and power consumption, are now outweighing challenges related to thermal management, reliability, and serviceability [9]. - The CPO market is projected to reach $5 billion by 2030, with significant growth expected starting in 2027 [9]. - The total addressable market (TAM) for pluggable transceivers is expected to expand from $11 billion in 2025 to $23 billion in 2030, reflecting a compound annual growth rate (CAGR) of 17% [9]. Summary by Sections CPO Deep-Dive - The CPO market is gaining traction due to the increasing demand for high data rates and power efficiency, particularly in the context of AI advancements [6][9]. - The report emphasizes that existing optical suppliers will continue to play a crucial role in the CPO ecosystem, alleviating investor concerns about potential disruptions [9]. Optical Networking - The report highlights a positive trajectory for optical networking companies, with raised estimates and price targets for COHR and LITE, supported by stronger demand drivers [7][9]. - Recent positive data points from telecom demand and pre-announcements from Lumentum have contributed to the increased confidence in these companies' positioning within the CPO landscape [9]. NVIDIA Insights - NVIDIA's GTC Paris keynote underscored the strong potential for AI infrastructure deployment in Europe, with an expected $1.5 trillion investment in AI infrastructure over the coming years [12]. - The report notes that NVIDIA is ramping up production of its AI data center products, with significant demand visibility extending into 2026 [12].

Investment Rating - The report indicates a robust year-on-year (YoY) broad credit growth of 9%, aligning with market expectations [2][7]. Core Insights - The report highlights that new Total Social Financing (TSF) reached Rmb2,287 billion, slightly below the consensus of Rmb2,330 billion, with outstanding credit YoY remaining unchanged at 9% [2][7]. - Fiscal front-loading, particularly through government bond issuance, is identified as a key driver supporting infrastructure capital expenditure [2][7]. - Despite the strong overall credit growth, private sector credit demand remains weak, evidenced by a net decline in short-term household loans and a slowdown in long-term corporate loans [2][4][7]. - The credit mix is imbalanced, with corporate loans growing at 8.9% YoY, significantly outpacing household loans at 3%, reflecting a supply-demand imbalance [4][7]. Summary by Sections Credit Growth - Broad credit YoY growth is expected to sustain at approximately 9% in June and July, but may soften afterward due to a high base effect from the previous year [3][7]. - A potential real GDP growth of less than 4.5% in Q3 could prompt new fiscal stimulus measures in September or October, estimated at Rmb0.5-1 trillion, which may not be sufficient to counteract the high base effect [3][7]. Credit Structure - The report emphasizes that the overall credit structure has been supply-centric, primarily driven by public funding for infrastructure projects [7]. - The persistent growth in corporate loans compared to household loans indicates ongoing challenges in private credit demand and a lack of balance in the credit market [4][6][7].

Investment Rating - The report provides a cautious outlook on the technology sector in Asia Pacific, particularly focusing on the developments surrounding DeepSeek's R2 model [7]. Core Insights - DeepSeek's R2 model is anticipated to redefine AI development, pricing, and reliance on domestic AI chip supply chains in China, serving as a potential catalyst for accelerating AI application deployment [1][2]. - The R2 model is expected to achieve significant advancements in multilingual reasoning and code generation, offering a hybrid model with lower power consumption and smaller parameter scale, while being cost-effective compared to its predecessor R1 [2][9]. - The model's efficiency is projected to lower computational requirements, facilitating AI commercialization and expanding total demand, potentially disrupting the AI market [2][10]. Summary by Sections R2 Model Overview - R2 represents the second major iteration of DeepSeek's reasoning model, promising improvements in multilingual reasoning and code generation, with a focus on efficiency and cost reduction [2][9]. - The model is designed to be multimodal, featuring enhanced visual capabilities and a significant reduction in operational costs compared to R1 [2][13]. Supply Chain Developments - The R2 model is supported by a robust ecosystem of Chinese companies, leveraging Huawei's Ascend 910B chip cluster for training, which signifies a shift towards a localized supply chain [3][17]. - DeepSeek aims to reduce dependency on external chip manufacturers, contrasting with the previous reliance on NVIDIA GPUs for training the R1 model [17][20]. Market Impact - The report suggests that DeepSeek's advancements will benefit local GPU, GDDR, and China's HBM sectors, indicating a positive outlook for these industries amidst a broader AI market recovery [20][22]. - The performance of DeepSeek's models, particularly in the context of increasing computational demands during inference, is expected to drive further innovation and resource allocation within the AI ecosystem [20][23]. Competitive Landscape - DeepSeek's approach emphasizes software-driven resource optimization rather than hardware dependency, which could lead to significant cost reductions and efficient training of large models [23][24]. - The report highlights the competitive pressure on NVIDIA from Huawei's Ascend chips, which are designed to match NVIDIA's performance while being domestically produced [17][20].