J P M O R G A N Europe Equity Research 24 March 2025 (39-02) 8895-2700 chiara.x.battistini@jpmorgan.com J.P. Morgan Securities plc/ J.P. Morgan Securities (Asia Pacific) Limited Olivia Townsend, CFA (44-20) 3493-6916 olivia.townsend@jpmorgan.com J.P. Morgan Securities plc Apurva Vishwaraj LVMH.PA, MC FP Price (21 Mar 25):€602.50 Price Target (Dec-26):€650.00 European Luxury & Sporting Goods LVMH Chiara Battistini AC Q1 25 sales preview and fine-tuning of estimates Ahead of Q1 25 trading update (date TBC, we ...

更多资料加入知识星球：水木调研纪要 关注公众号：水木纪要 Asia Pacific Equity Research 07 February 2025 BYD- H&A Placing on Positive Catalyst Watch: The advancement in AD solution and adoption Riding on two mega trends in 2025: 1) rising adoption of AD solution and 2) exploiting overseas opportunity: BYD-H is up 18% YTD vs. HSCEI 6%. We believe two investment themes will dominate the China auto market this year and are very relevant to the company: Penetration of L2+ advanced autonomous driving (AD) feature will rise sharply, driven by ...

Investment Rating - The report does not explicitly provide an investment rating for the industry but indicates a general positive outlook for certain companies within the Hardware & Networking sector, particularly those leveraging AI technologies [16]. Core Insights - The report emphasizes that Apple is expected to show resilience in its stock performance throughout 2025, driven by anticipation of the AI cycle and the upcoming iPhone 17 cycle [2]. - Edge AI is projected to remain a core investment theme by the end of 2025, with significant opportunities for application development in consumer devices like smartphones and PCs [2][3]. - AI benefits for enterprises are likely to be measured primarily in terms of cost savings and efficiencies rather than direct revenue increases [3]. - Companies heavily invested in AI may face challenges in investor sentiment during the first half of 2025 until clearer guidance on revenue momentum is provided [4][6]. - A tighter dispersion of share price performance is expected in 2025, as investors seek value in underperforming stocks amid a recovery in demand drivers [7]. - Consolidation in cyclical customer end-markets, such as Telco and Enterprise, is anticipated to enhance recovery and drive cost synergies [8]. - Contract manufacturers are expected to gain favor among investors due to their leverage to AI-led growth and lower associated risks compared to OEMs [9]. - Concerns regarding tariff impacts are expected to diminish as companies have invested in supply chain resilience over the years [10]. - The report notes that the commercialization of autonomous and electric vehicle technologies remains uncertain, with challenges in growth outlook and vehicle model launches [11]. - The debate regarding the favorability of on-premises versus public cloud AI infrastructure for hardware companies is expected to tilt towards on-premises solutions by the end of 2025 [14]. Summary by Sections - **Apple's Performance**: Anticipated resilience in stock performance due to AI cycle and iPhone 17 [2]. - **Edge AI**: Expected to be a major investment theme with opportunities in consumer devices [2][3]. - **AI Benefits**: Focus on cost savings and efficiencies rather than revenue [3]. - **Investor Sentiment**: Challenges for AI-leveraged companies until clearer guidance is provided [4][6]. - **Share Price Performance**: Tighter dispersion expected as investors seek value [7]. - **Market Consolidation**: Anticipated in cyclical customer end-markets to drive recovery [8]. - **Contract Manufacturers**: Favorable positioning due to AI growth leverage [9]. - **Tariff Concerns**: Expected to be less impactful than previously feared [10]. - **Autonomous and Electric Vehicles**: Uncertain commercialization and growth outlook [11]. - **AI Infrastructure Debate**: Tilt towards on-premises solutions by year-end 2025 [14].

Investment Rating - The report suggests a cautious outlook for the Chinese stock market, emphasizing the need for attention to re-inflation processes and policy support, while favoring companies that can consistently exceed market expectations in earnings [2]. Core Insights - The projected GDP growth target for China in 2024 is around 5%, with an expected increase in the total broad deficit by approximately 2 trillion RMB, primarily allocated to infrastructure and strategic emerging industries [1][3]. - Domestic investors are relatively optimistic about China's economic outlook, while international investors remain cautious due to concerns over the effectiveness of supply-side reforms and the risk of a balance sheet recession [1][6]. - The U.S. economy is currently facing high inflation, significant fiscal deficits, and post-cycle challenges, contrasting sharply with the economic situation in 2017 [9][10]. - Future U.S.-China trade relations remain uncertain, with potential for further tariffs that could impact China's exports and economic growth, particularly in low-value consumer goods sectors [1][16]. - To combat deflation risks, China requires stronger cyclical policies alongside structural reforms to achieve economic rebalancing and sustainable development [1][20]. Summary by Sections Economic Outlook - The anticipated GDP growth target for 2024 is set at approximately 5%, with a broad deficit expected to increase by around 2 trillion RMB, raising the GDP ratio by nearly 1.4 percentage points [3][4]. - The broad fiscal expansion is expected to allocate about two-thirds of funds to investment, particularly in infrastructure and strategic emerging industries, with limited support for consumption and social security [4][5]. Investor Sentiment - Domestic investors show optimism due to signs of improvement in supply-side reforms, while international investors express caution regarding the sustainability of these reforms and the potential for a balance sheet recession [6][7]. - There is a divergence in views on future macroeconomic policies, with domestic investors expecting limited large-scale demand-side stimulus, while international investors hope for more substantial measures [13][14]. U.S. Economic Context - The current U.S. economic landscape is characterized by high inflation and fiscal challenges, with the government's policies potentially leading to increased economic risks [9][10][11]. - The rising cost of U.S. debt is putting pressure on fiscal sustainability, prompting the government to seek adjustments that may affect its stance towards China [11][12]. Trade Relations and Tariffs - The potential for increased tariffs on Chinese goods poses a significant risk to China's export capabilities, particularly in low-margin consumer goods [16][17]. - The report anticipates that any new tariffs could significantly impact China's GDP, with projections indicating a potential drag of nearly one percentage point on GDP growth due to trade disruptions [18][19]. Recommendations for Investment - The report highlights the importance of identifying Chinese companies that can consistently outperform market expectations, suggesting that these firms may provide a buffer against broader market risks [2][31]. - The Chinese stock market's attractiveness is not solely based on low price-to-earnings ratios; rather, it requires a combination of favorable geopolitical conditions and effective domestic policies to enhance investor confidence [29][30].

Investment Rating - The report indicates a positive outlook for emerging market (EM) sovereign credits, particularly for BB-rated credits, with the highest net upgrades since 2011 [21][29][39] Core Insights - The report highlights that 2024 has seen significant upgrades in sovereign credit ratings, particularly for BB-rated countries, driven by improved fiscal fundamentals [21][29][39] - The report emphasizes that while upgrades are occurring, many are already priced into the market, suggesting limited upside for certain credits [21][29][39] - The focus on valuations over anticipated rating changes is noted, with specific recommendations for cheaper credits like Colombia and Ivory Coast [21][29][39] Summary by Sections Sovereign Credit Strategy - The report discusses the momentum of credit upgrades, particularly for BB-rated sovereigns, and notes that fiscal improvements are key drivers [21][29][39] - It mentions that while upgrades are positive, many are already reflected in current market prices, limiting potential gains [21][29][39] FX & EM Strategy - The report outlines strategies for managing currency risks, particularly in relation to the upcoming US elections and their potential impact on EM currencies [5][7][8] - It suggests that the USD may strengthen if trade tensions escalate post-election, impacting EM currencies [5][7][8] Macro Strategy - The report indicates that the US economy is diverging from other major economies, which could support the USD against EM currencies [7][8][9] - It highlights the importance of local narratives in EM markets to justify currency strength or weakness [7][8][9] Regional Focus - The report provides insights into specific regions, noting that Turkey's currency (TRY) is expected to perform better than bonds, with a forecast of USD/TRY at 36 by year-end [11][12][13] - It discusses the outlook for various currencies in the CEEMEA region, emphasizing the need for careful positioning given the uncertain macro environment [11][12][13] Trade Recommendations - The report includes specific trade recommendations, such as long positions in certain currencies and bonds, reflecting a cautious but optimistic outlook for select EM assets [21][29][39] - It suggests maintaining a neutral stance on certain bonds while favoring others based on current valuations and market conditions [21][29][39]

Investment Rating - The report maintains an "Overweight" (OW) rating for Apple and its iPhone supply chain in Asia, including Hon Hai and TSMC, while also favoring MediaTek, Xiaomi, and Sunny Optical in the China smartphone supply chain [8][9][22]. Core Insights - The report highlights that Apple Intelligence, set to launch on October 28, 2024, is expected to significantly influence iPhone upgrade decisions, with 60% of surveyed iPhone owners indicating its importance [22][24]. - The report notes that while new AI features are anticipated to drive a long-term smartphone replacement cycle, immediate changes are not expected due to the gradual rollout of Apple Intelligence and the lack of compelling applications in the Android ecosystem [8][9][12]. - The report identifies three major trends in the China AI smartphone app development: the ability to call other apps via AI agents, edge training for privacy, and the use of AI emojis/avatars [8][9][12]. Summary by Sections AI Supply Chain Overview - The report discusses the strong demand for AI infrastructure, particularly from hyperscalers, with a projected operating cash flow of $176 billion in 2025 for the top four US hyperscalers [26][37]. - It emphasizes the importance of edge AI applications for monetization and the ongoing investment in data centers for AI purposes [8][9][26]. Apple Intelligence Features - Key features of Apple Intelligence include new writing tools, a revamped Siri interface, text summarization capabilities, and enhanced natural language support in Safari and the App Store [22][24]. - The report anticipates that several highly sought-after features will not be available until the iOS 18.2 update in December 2024 [22][24]. China Smartphone AI Development - The report expresses skepticism about whether Chinese Android smartphones can match the user experience offered by Apple Intelligence, citing challenges in integrating various local LLMs [12][22]. - It notes that while the replacement cycle for Chinese AI smartphones could occur, it may be slower than anticipated due to the current lack of "killer apps" [12][22]. Stock Implications - The report suggests that TSMC's strong guidance for Q4 2024 indicates robust demand for high-end smartphones, although a seasonal decline is expected in Q1 2025 [8][9]. - It highlights potential market share loss for Largan in Q4 2024, which may be attributed to its own issues rather than broader market trends [8][9].

Investment Rating - The report maintains a positive outlook on copper, forecasting a price rebound to $10,100 per ton for Q1 2025, with potential upside from China stimulus measures and inventory draws [2][4][20]. Core Insights - China stimulus is expected to positively impact copper demand, particularly if property prices stabilize, which could help boost domestic consumption [2][7][9]. - The recent pullback in copper prices incentivized demand in China, but rapid price increases could lead to demand destruction [3][10]. - The annual Treatment Charge (TC) for copper concentrate is projected to settle at a record low of $30 per ton for 2025 due to persistent concentrate tightness [4][22][25]. - The report highlights that smelter demand for copper concentrate is expected to outpace supply growth, with smelter demand rising at 6-7% per year compared to mine supply growth of only 2-4% [22][24]. Summary by Sections China Stimulus Impact - The report emphasizes that stimulus measures in China could help stabilize property prices and boost domestic consumption, which is crucial for copper demand [2][7][9]. - China's household saving rate remains high at 36.5%, which could be moderated by effective consumption support policies [7][9]. Demand Dynamics - The report notes that the Q2 copper price rally led to a buyers' strike in China, but demand has since rebounded as prices pulled back [3][10]. - China's apparent copper consumption has shown signs of recovery, with indicators such as grid tendering activity and rising physical premiums suggesting improved demand [14][18]. Supply and Treatment Charges - The report forecasts that the 2025 annual TC will be the lowest on record, driven by a tightening concentrate balance as smelter demand continues to exceed mine supply [4][22][25]. - The gap between spot and annual TCs indicates significant adjustments are likely in the upcoming negotiations [25][26]. Market Positioning - Current market positioning is noted to be biased towards long positions, with shorts at the lower end of the recent range, suggesting potential for price increases [4][20]. - The report indicates that while there is room for copper prices to rise, achieving all-time highs will require more aggressive stimulus from China and a recovery in global construction and manufacturing activity [20][22].

Investment Ratings - Semiconductor Industry: Attractive [3] - Semiconductor Capital Equipment: Cautious [3] Core Insights - The semiconductor industry is experiencing strength in AI and cloud sectors, while other areas are gradually bottoming out [1] - Texas Instruments (TXN) is expected to see a mixed setup with a seasonal decline forecasted for the December quarter, despite signs of a bottoming out in analog revenue [1][8] - Lam Research (LRCX) faces potential downward revisions for 2025 estimates due to NAND capex pushouts and risks associated with a slowdown in China [1][25] - Teradyne (TER) is anticipated to have a good year in 2025, but the extent of growth remains uncertain [1][17] - Western Digital (WDC) is expected to have a weak outlook due to ongoing strength in HDDs being offset by weaker NAND demand [1][38] Summary by Company Texas Instruments (TXN) - Forecasted revenue for the September quarter is $4.120 billion, reflecting a 7.8% increase quarter-over-quarter but a 9.1% decrease year-over-year [9] - December quarter revenue is projected at $3.986 billion, down 3.2% quarter-over-quarter and 2.2% year-over-year [9] Lam Research (LRCX) - Expected NAND shipments to increase by 47% year-over-year in 2025, but near-term increases in NAND spending are unlikely [1][25] - Revenue for the June quarter is modeled at $4.046 billion, with a gross margin of 47.0% [25][26] Teradyne (TER) - Anticipated revenue for the September quarter is $718 million, with a gross margin of 59.0% [18] - December quarter revenue is projected at $775 million, reflecting an 8.0% increase quarter-over-quarter [19] Western Digital (WDC) - September quarter revenue is expected to be $4.109 billion, with HDD growth of 3.0% quarter-over-quarter and NAND growth of 16.1% [40] - December quarter revenue is projected to increase to $4.274 billion, with HDD growth of 3.0% and NAND growth of 5.1% [40] ON Semiconductor (ON) - Revenue for the September quarter is modeled at $1.756 billion, with a gross margin of 45.5% [55] - December quarter revenue is projected at $1.770 billion, reflecting a slight increase quarter-over-quarter [55] General Semiconductor Industry Trends - The semiconductor industry is witnessing a gradual recovery, with specific segments like AI and cloud computing driving growth [1] - The overall outlook for 2025 remains cautious, with potential headwinds from geopolitical factors and market dynamics [1][25]

Investment Rating - The report indicates a long positioning bias for USD, with tactical investors being most long on USD (DXY) and NOK (versus EUR) while being short on EUR and JPY [1][7]. Core Insights - In the week ending October 18, investors reduced short positions in CAD and GBP, while adding short positions in NOK and SEK against EUR. In the futures market, short USD positions were reduced, and long positions in AUD and NZD were cut back [1][7]. - The options data suggests that tactical investors are predominantly long on USD (DXY) and NOK (versus EUR), while being short on EUR and JPY. In the futures market, positioning is long on EUR and GBP, and short on CAD and CHF [1][7]. Summary by Sections - **Options Positioning**: As of October 18, 2024, the net options positioning for DXY USD was at 47%, indicating a strong long bias among investors [2][11]. - **Futures Market Positioning**: Speculative USD futures positioning was reduced to -2.2% of open interest, a significant improvement from -11.2% the previous week, reflecting a shift in sentiment towards USD [13]. - **Daily Sentiment Index**: The Daily Sentiment Index showed the largest improvement for USD, while sentiment for EUR and JPY deteriorated the most among G10 currencies [13].

Investment Rating - The report maintains an "In-Line" rating for the Greater China Semiconductors industry [2]. Core Insights - The report anticipates a deep sub-seasonal fourth quarter for PC semiconductors, primarily due to ongoing inventory digestion outside of China, with a conservative outlook for the first half of 2025 [2]. - There is a slight pickup in PC demand in China, likely driven by government stimulus, but AI PC disappointments and high inventory levels in non-China markets are expected to pressure growth in Q4 2024 [2][3]. - Desktop semiconductors are viewed as more stable compared to notebook semiconductors, with a recommendation to stay Overweight (OW) on ASMedia and Underweight (UW) on Realtek and Parade [2]. Summary by Sections Market Demand and Supply - PC semiconductors are expected to show a sequential decline in Q4 2024, primarily due to ongoing inventory digestion and disappointing AI PC demand from key US SoC vendors [2]. - The report notes that while there are signs of demand recovery in China, it may not be sufficient to reverse the overall downtrend in the market [2]. Company Recommendations - ASMedia is recommended as Overweight due to stable chipset business for desktop PCs, while Realtek and Parade are rated Underweight due to weaker-than-expected demand [2][3]. - The report suggests that new server opportunities may emerge in the second half of 2025, which could provide a boost to certain companies in the semiconductor supply chain [2]. Earnings Forecasts - The report indicates that earnings forecasts for Realtek may see downside due to weaker-than-expected demand for PC semiconductors [2]. - Parade's premium notebook exposure might cushion some downside, but overall growth drivers outside of notebooks appear limited [2].