Investment Rating - The report maintains a Buy rating on Analog Devices (ADI) and ON Semiconductor, a Neutral rating on Microchip Technology (MCHP) and NXP Semiconductors (NXPI), and a Sell rating on Texas Instruments (TXN) [1][2]. Core Insights - The report indicates a reduction in forward estimates for Analog, MCU, and Power semiconductor suppliers due to renewed weakness in the Automotive sector, with updated earnings estimates for 2025/26 now sitting 13%/12% below Street consensus [1][2]. - There is a cautious outlook for the near-term, but potential for a rebound in fundamentals in 2025 exists, driven by fiscal stimulus in China and possible rate cuts in the U.S. [1][2]. Summary by Sections Automotive Market Dynamics - The report highlights a softer-than-expected demand in the global Automotive market, increased competition in the China EV market, and incremental weakness in Industrial and Consumer end-markets [2][3]. - IHS has revised down its 2024 global automotive production forecast from 89.5 million to 88.5 million units, reflecting a 2.1% year-over-year decline [3][14]. Semiconductor Company Performance - Recent negative updates from various OEMs and Tier 1 suppliers indicate a general weakening in automotive demand, with significant EBIT downgrades reported by major automotive companies [8][9]. - The semiconductor companies covered have a higher revenue exposure to the Automotive end-market compared to the overall semiconductor industry [16][23]. Inventory and Production Adjustments - Inventory levels at major Automotive OEMs and Tier 1 suppliers remain elevated, with expectations of continued under-shipping of semiconductors into 2025 [24][31]. - The report notes mixed progress in inventory management among semiconductor companies, with Analog Devices successfully reducing inventory while others like Texas Instruments and ON Semiconductor have continued to build inventory [24][29]. Revenue and Earnings Estimates - The report has reduced revenue, margin, and earnings estimates across the semiconductor coverage universe, with average cuts of 1% for 2024, 4% for 2025, and 2% for 2026 [40][42]. - The updated estimates for the companies are below Street consensus across all five names, indicating a more conservative outlook [40][42].

Market Activity and Capital Flows - The Hong Kong market is particularly active, with southbound capital inflows reaching approximately $6 billion, while India saw inflows of $1 billion, South Korea slightly over $900 million, and Japan lagging behind [1][2] - Significant capital outflows have been observed this year, with approximately $3 billion outflows from China and Hong Kong, and $1 billion from Taiwan, while Australia and India saw inflows of $2 billion and $3 billion respectively [1][2] - Trading volumes in China and Hong Kong have surged to record highs, with Hong Kong reaching HKD 600 billion and mainland China reaching CNY 3.5 trillion in a single day [2] Sector Focus and Investor Behavior - Financials, technology, and healthcare sectors are the primary recipients of capital inflows, while surveys and mutual funds are the main sellers [1] - Mutual funds in Hong Kong and mainland China have maintained a positioning level of around 5.2%, while hedge funds have reduced long positions and potentially increased short positions [1] - The total net position in the Chinese market, although declining, remains at the 39th percentile on a five-year basis [1] ADRs and US Market Dynamics - The ADR platform has been exceptionally busy over the past two weeks, indicating a surge in interest in Chinese ADRs, with capital flows divided into two phases: pre and post fiscal stimulus announcements [1][3] - US investors are awaiting the next positive catalyst to trigger the next wave of investments [1] - The market has reacted well to the Federal Reserve's 50 basis point rate hike, but concerns about inflation persist [1] AI and Semiconductor Industry - The AI and semiconductor industries are hotspots of market interest, particularly following Nvidia's community replication conference [1] - The semiconductor sub-sector is trading at levels seen in June, attracting significant reinvestment, with Nvidia and broader AI themes being heavily discussed [4] Election Impact and Treasury Briefing - The upcoming US election is creating market uncertainty, with investors seeking more clarity on potential tariff plans and US-China geopolitical relations [4] - The Treasury briefing is crucial for market sentiment and capital flows, with participants eagerly anticipating clear fiscal stimulus directions and specific measures [1][6] Regional Market Dynamics - Japan has seen a net purchase of $3.2 billion over the past three weeks, with significant buying activity in both China and Japan, indicating a reallocation of funds from the US and Europe rather than intra-regional shifts [6] - India remains highly active, with no signs of capital shifting to China through swap markets, and significant IPO activities such as the $500 million fast bond issuance by Danny and the upcoming Hyundai IPO [6] ETF and Emerging Market Flows - Emerging market ETFs without China exposure are being sold, while those including China (with a 30% weighting) are being bought, indicating a rotation back into China within the broader emerging market context [5] - The CSI 1000 and CSI 2000 indices are trading in the mid-single digits, significantly lower than earlier in the month, reflecting reduced willingness to establish long positions at the index level [5] Short Selling and Sector-Specific Activities - Short positions in Hong Kong have increased by about 3 percentage points month-on-month, with significant shorting activity in financial stocks and a 26% increase in short positions in energy stocks [5] - The real estate sector is a focus for ECM and event-driven strategies, with increased activity due to price volatility and expectations of further issuances [5]

Investment Rating - The report maintains a "Buy" rating on DBN due to its strong market position in biotech traits and a "Buy" rating on Muyuan based on sustained hog price recovery [4][43]. Core Insights - Improved visibility on trait payments for the 2023/24 season has been established, with major seed producers settling trait payments during August-September [3][4]. - The first contribution of biotech seeds trait license revenue for DBN is expected to reach 10% and 20% of net profit in 2024/25E, based on a 2-15% industry penetration assumption and a 60-70% market share in trait supply [4][6]. - Biotech corn seed production area is projected to reach 100-150k mu in 2023/24E, supplying 10-15% of national corn production next crop season, with expectations for a 2-3x increase in seed production area for 2024/25E [6][7]. Summary by Sections Biotech Seeds - Feedback indicates that trait payments for the 2023/24 season have been settled, with prepayments made by major seed producers [3][4]. - Biotech seed pricing is expected to remain stable at Rmb80/mu, reflecting a 40-50% premium over traditional seeds [4]. Protein Demand - Domestic hog demand showed sequential improvement in 3Q24E, with signs of destocking of frozen pork inventory beyond past seasonality [4][11]. - The average domestic hog price was Rmb19.0/kg in September, which is 7% lower month-on-month but 15% higher year-on-year [24]. Grains and Supply - The supply deficit for corn in 2024/25E is estimated at 7 million tons, or 0.6% of the market, compared to a surplus of 0.1% for 2023/24E [14]. - For soybeans, a supply surplus of 22 million tons is projected for 2024/25E, representing 5.5% of the market [14]. Market Trends - The report highlights a decline in the sow herd by 0.2% month-on-month in August 2024, which is 10% lower than at the beginning of 2023 [22]. - The inventory of frozen pork has decreased to 0.6 million tons in 3Q24E, which is 33% lower quarter-on-quarter, driven by recovering consumption [23].

Investment Rating - The Life Science Tools sector is rated with a cautious outlook, reflecting concerns over biopharma spending and instrument recovery [1][2][29] Core Insights - The Life Science Tools sector has performed in line with the S&P 500, but the CRO sector has underperformed due to fears of continued weakness in biopharma spending [1] - There is confidence in a bioprocessing recovery, but the speed and magnitude of this recovery remain debated among investors [2] - The report highlights a potential instrument recovery, particularly in mass spectrometry, driven by innovation and academic funding [3][8] Summary by Sections Market Performance - Year-to-date performance shows the Life Science Tools sector outperforming the XLV by approximately 8% [1] - The CRO sector has underperformed both the S&P and XLV by around 20% and 12% respectively [1] Bioprocessing Recovery - There is optimism regarding sequential improvement in order growth and destocking trends, but the return of large pharma spending in 2025 is seen as less likely [2] - DHR's Biotech segment growth estimates of 11.4% are viewed as overly ambitious [2] Instrument Recovery - The report discusses the correlation between biopharma capex and instrument procurement, noting a separation in growth trends among different companies [3][8] - TMO and BRKR are expected to be more insulated from downturns in the Pharma market due to their focus on mass spec instruments [8] China Market Dynamics - China is highlighted as a key area of focus, with expectations for stimulus impacts to materialize in 2025 [19] - Long-term growth in China is projected to slow, affecting the growth contributions from Tools companies [20] Valuation Insights - The sector is currently trading at a premium valuation of 20.4x 2025E EV/EBITDA, above the long-term average of 16x [29] - TMO and DHR are noted for maintaining high valuation multiples despite market challenges [29][30] Earnings Expectations - The report provides earnings expectations for various companies, indicating cautious growth projections for 2025 [59][62][67]

Investment Rating - The report maintains a Buy rating on Sempra Energy (SRE), American Electric Power (AEP), Eversource Energy (ES), NextEra Energy (NEE), and Xcel Energy (XEL) [6][39][20][18][25] - Duke Energy (DUK) is rated Neutral [22][25] - Public Service Enterprise Group (PEG) and WEC Energy Group (WEC) are also rated Neutral [27][33] - Ameren (AEE), Consolidated Edison (ED), Exelon (EXC) are rated Sell [6][9][39] Core Insights - The utilities sector is experiencing a shift in valuation, with the baseline P/E multiple increased to 17x from 16x, driven by rising power demand and decreasing interest rates [7][13] - The average total return for the coverage following the update is projected at 11% [5] - The report highlights strong growth expectations for Sempra Energy and Eversource Energy, with SRE expected to outperform consensus estimates by 5% for 3Q24 [5][20] - Duke Energy is anticipated to face challenges with a projected 6% downside to consensus estimates due to mild weather and one-time items from the previous year [5][22] Summary by Company Sempra Energy (SRE) - Rated Buy with a price target of $96, reflecting a 21% total return potential [6][39] - Expected strong growth at Oncor and potential updates on the Port Arthur LNG project [5][20] American Electric Power (AEP) - Rated Buy with a price target of $113, indicating a 19% total return potential [6][39] - Anticipated to benefit from regulatory updates and capital plan discussions [4][6] Duke Energy (DUK) - Rated Neutral with a price target of $120, reflecting a modest upside [22][25] - Expected to face headwinds from mild weather and lack of one-time benefits seen in the previous year [5][22] NextEra Energy (NEE) - Rated Buy with a price target of $86, indicating a 7.1% upside [21][20] - Strong long-term growth story with significant renewable capacity additions planned [18][20] Public Service Enterprise Group (PEG) - Rated Neutral with a price target of $84, reflecting a 6.6% downside [27][32] - Potential for data center contracts to drive earnings growth [27][31] WEC Energy Group (WEC) - Rated Neutral with a price target of $96, indicating a 2% upside [33][38] - Regulatory risks in Illinois and Wisconsin are a concern [33][38] Eversource Energy (ES) - Rated Buy with a price target of $80, indicating a 30% total return potential [6][39] - Expected to benefit from ongoing capital investments and regulatory updates [6][39] FirstEnergy (FE) - Rated Buy with a price target of $49, indicating a 19% total return potential [6][39] - Focus on ongoing rate cases and potential impacts from capacity auctions [40][39]

Industry Overview - The PC industry shipments remained weak in 3Q24, with IDC reporting a -2% year-over-year decline and Canalys reporting a +1% year-over-year growth, both indicating slower growth compared to previous quarters [1] - The recovery in PC shipments is slower than initially expected for 2024, but growth is anticipated to accelerate in 2025, with IDC forecasting 4% year-over-year growth for 2025 [2] - Major vendors like Dell, Apple, and HP showed weaker-than-expected shipments in 3Q24, with Dell and Apple experiencing significant year-over-year declines [1] Vendor Performance - Dell's 3Q24 shipments declined by -4% year-over-year according to both IDC and Canalys, while Apple's Mac shipments dropped by -24% (IDC) and -20% (Canalys) [1] - HP's shipments remained flat year-over-year in 3Q24, showing no growth [1] - Lenovo maintained a stable market position with a 3% year-over-year growth in shipments, according to both IDC and Canalys [9] Market Share and Growth Trends - Lenovo holds the largest market share at 25% (Canalys) and 24% (IDC), followed by HP at 20% and Dell at 15% (Canalys) and 14% (IDC) [9] - ASUS showed strong quarter-over-quarter growth at 22% (Canalys) and 29% (IDC), indicating a potential recovery in its market position [9] - The total PC market saw a 6% quarter-over-quarter growth according to Canalys and 7% according to IDC, reflecting seasonal improvements [9] Company-Specific Analysis: Dell Technologies - Dell's F2025 estimates were revised downward due to lower PC unit sales, partially offset by higher average selling prices (ASPs) [10] - The company's Client Solutions Group (CSG) revenue is forecasted at $12.46 billion for F3Q25E, reflecting a +1% year-over-year growth, in line with Dell's guidance [10] - Dell's diversified portfolio positions it to benefit from AI server demand, growth in the PC market, and strong performance in the Infrastructure Solutions Group (ISG) segment [20] Company-Specific Analysis: HP Inc - HP's F2024/25/26 EPS estimates remain largely unchanged, but F4Q24 estimates were modestly reduced due to lower PC shipments [13] - HP's focus on higher-end PCs and initiatives in the printing segment, such as Big Tank and HP+ ink subscription services, are expected to mitigate secular headwinds [23] - The company targets returning 100% of free cash flow (FCF) to shareholders through dividends and buybacks over the next several years [23] Investment Ratings and Price Targets - Dell Technologies is rated Buy with a 12-month target price of $155, based on 15X NTM+1Y EPS, reflecting confidence in its diversified portfolio and growth prospects [16] - HP Inc is rated Neutral with a 12-month target price of $35, based on 9.0X NTM+1Y EPS, reflecting growing confidence in a 2025 PC recovery [21]

Investment Rating - The report provides a "Buy" rating for AZEK, TREX, and WY, while recommending a "Sell" for AOS and LPX [1][5][10][11][12]. Core Insights - Despite a 78 basis points decline in the 30-year mortgage rate, housing activity remains challenged due to weak consumer sentiment and macroeconomic uncertainty. However, stocks in the coverage are up an average of 18% since early July, with builders leading at 29% [1]. - The report anticipates that margins for many companies will remain under pressure due to limited revenue upside, particularly in volumes, as consumers adopt a wait-and-see approach to home purchases and repairs [1][2]. - The report highlights potential recovery in housing turnover, supported by survey data, and suggests that management teams may adopt a cautious tone while noting potential upside as 2025 approaches [1][2]. Summary by Company AZEK - AZEK is positioned for accelerated growth due to share gains and reduced retail exposure, with a 12-month price target of $52, implying a 19% upside potential [8]. TREX - TREX is expected to benefit from normalizing retail channel inventories, with a 12-month price target of $84, indicating a 30% upside potential [9]. WY - WY's bullish outlook is based on improving operating conditions in lumber, with a revised price target of $39, suggesting a 19% upside potential [10]. AOS - AOS is rated as a "Sell" due to expected volatility in residential water heater volumes, with a price target of $73, indicating a 17% downside potential [11]. LPX - LPX is also rated as a "Sell" due to anticipated weakness in R&R demand, with a revised price target of $90, suggesting a 17% downside potential [12]. Earnings Outlook - The report emphasizes the importance of new home demand and potential recovery in R&R spending as key focus areas for investors during the earnings season [17]. - It also highlights the implications of severe weather on new home construction and broader supply chains, as well as the outlook for gross margins and SG&A leverage [17][19].

_ 9 October 2024 | 6:39PM BST The EM Trader China Easing Adds Breadth n China's easing has triggered a broadening in the EM equity rally. The broad EM equity index was held back until the summer amid weak China activity and an underwhelming policy response, coupled with bouts of global macro volatility. With an improving macro cycle led by Fed easing and the much-needed recent coordinated stimulus announcements from China's policymakers, EM equities have staged an impressive rally, with the MSCI EM index up ...

Investment Rating - The report maintains a Neutral rating on both Seagate (STX) and Western Digital (WDC) [1][24]. Core Insights - Estimates for Seagate have been raised due to sustained strength in Nearline HDD demand, while estimates for Western Digital have been lowered due to weakness in NAND pricing [1]. - Seagate's 12-month price target is increased to $110 from $107, while Western Digital's price target is decreased to $72 from $79 [1][19]. HDD Industry Summary - Demand for Nearline HDDs remains robust, with exabytes shipped growing sequentially and pricing increasing, albeit at a moderate pace [1]. - The industry is currently supply-constrained, with extended lead times across key inputs [1]. - Western Digital has gained market share in the capacity-optimized HDD market [5] and is expected to outgrow Seagate in HDD revenue for CY2024, but Seagate is forecasted to recover market share by CY2025 [1][3]. NAND Industry Summary - The NAND market is experiencing a soft patch characterized by excess inventory and weak demand in the PC/smartphone OEM sectors, partially offset by strength in enterprise SSDs [8]. - Western Digital is expected to be disproportionately affected due to its higher exposure to the Client SSD and retail markets [8]. - A sequential decline in NAND average selling prices (ASPs) is anticipated through CY2025, although potential upside exists if supply-side discipline continues [8][11]. Financial Estimates - Western Digital's revenue forecasts for CY2024/25/26 have been reduced by 2%/5%/4%, respectively, with non-GAAP EPS estimates decreasing by 7%/21%/18% [11]. - Seagate's revenue forecasts for CY2024/25/26 have been raised by 1%/3%/3%, with non-GAAP EPS estimates increasing by 4%/5%/6% [14]. Price Target Methodology - Western Digital's price target of $72 is based on a fundamental component of $66 and an SOTP component of $79 [19][20]. - Seagate's price target of $110 is based on a normalized non-GAAP EPS estimate of $7.30 [24].

Investment Rating - The report maintains a **Neutral** rating for COSCO SHIPPING Holdings (601919.SS) with a 12-month price target of Rmb13.80 for A-shares and HK$10.70 for H-shares [1][2][4] Core Views - COSCO SHIPPING Holdings reported a strong 9M24 net profit of Rmb38bn, up 73% YoY, accounting for 87% of the full-year Bloomberg consensus of Rmb43bn [1] - Q3 net profit surged 286% YoY and 110% QoQ to Rmb21.3bn, driven by higher contract rates for Europe routes due to rerouting amid the Red Sea disruption [1][3] - The company's new pricing strategy, which includes more floating adjustments on contract rates, contributed to the earnings beat [1][3] - The FY24 dividend yield of 8.8%/12.0% for A/H-shares is attractive, trading above its historical average [1] Financial Performance - Revenue for 12/24E is projected at Rmb230.3bn, with EBITDA expected to reach Rmb74.2bn [2] - EPS for 12/24E is forecasted at Rmb2.62, with a P/E ratio of 6.0x [2] - The company's net debt/EBITDA ratio is expected to improve to -1.5x by 12/24E [2] Industry and Market Context - The average SCFI (Shanghai Containerized Freight Index) for Europe and Med routes increased by 308% YoY and 86% from March-May, reflecting higher freight rates [1][3] - The Red Sea disruption has led to longer voyage times, delaying revenue recognition for Europe routes, with Q3 revenue reflecting freight rates from June to August [1][3] - Fuel costs, historically 15-20% of total opex, decreased by 2% QoQ in Q3, contributing to higher profits [3] Valuation and Risks - The 12-month price targets are based on 0.8x/1.1x FY25E target P/BV multiples, above historical averages, reflecting higher ROE expectations due to supply chain complexity [7] - Upside risks include unexpected events reducing effective capacity and potential special dividend payouts [7][8] - Downside risks include faster-than-expected new ship deliveries and weaker-than-expected global trade demand [7][8] Freight Rate Analysis - The SCFI Comprehensive index stood at 2,135 as of 27-Sep-24, with Europe and Med routes showing significant YoY increases of 279% and 242%, respectively [6] - US West Coast and East Coast freight rates also saw substantial YoY growth, at 265% and 140%, respectively [6]