M N 11 Mar 2024 CMB International Global Markets | Equity Research | Company Update ZTE (000063 CH) Improved margins in 2023 Target Price RMB34.20 ZTE released its FY23 results. Revenue grew by 1.1% YoY to RMB124bn, in line with consensus and 3% higher than our forecast. Net profit increased by 15.4% (Previous TP RMB36.90) YoY to RMB9.3bn, 5% lower than consensus and in line with our forecasts. Gross Up/Downside 13.3% margin for 2023 was 41.5%, representing a 434bps increase from FY22. NPM Current Price RMB ...

M N 8 Mar 2024 CMB International Global Markets | Equity Research | Company Update Prada SpA (1913 HK) 4Q23 cFX revenue +18%; Miu Miu overshot 4Q results were a beat to us and consensus, with the quarter’s net revenue Target Price HK$65.2 expanding by cFX +18.1%. The strength was mainly driven by 82% growth in Miu (Previous TP HK$64.5) Miu (vs CMBIe 50%+). All regions marked robust growth, especially Japan (cFX Up/Downside 17.1% +38%) and APAC (cFX +32%), when the US continued to record sequential Current P ...

Investment Rating - Maintain BUY rating with an adjusted target price of HK$24.8, based on 10x 2024E P/E, close to its 3-year average [3][4] Core View - ZTE is expected to capitalize on emerging trends in the telecom industry, focusing on the evolution towards 5.5G/6G and AI compute power [3] - The company's profitability improved steadily due to operation optimization and cost reduction, including the use of self-developed components [3] - Revenue growth is projected to be steady, with FY24E revenue expected to reach RMB133.7bn, a 7.6% YoY increase [1][3] Financial Performance - FY23 revenue grew by 1.1% YoY to RMB124.3bn, in line with consensus and 3% higher than forecasts [3] - FY23 net profit increased by 15.4% YoY to RMB9.3bn, 5% lower than consensus but in line with forecasts [3] - Gross margin for FY23 was 41.5%, a 434bps increase from FY22, driven by cost optimization and favorable revenue mix [3] - FY24E net profit is projected to grow by 16.3% YoY to RMB10.8bn, with a net margin of 8.1% [1][3] Segment Performance - Carrier segment revenue increased by 3.4% YoY, driven by domestic market share gains and overseas progress [3] - Consumer segment sales declined by 1.3% YoY due to overseas inventory digestion and intensified competition, partially offset by domestic growth in family network business [3] - Enterprise & government segment sales declined by 7.1% YoY in 2023 due to a slowdown in investment [3] Valuation Metrics - FY24E P/E is projected at 7.3x, with ROE expected to reach 14.3% [1] - FY25E P/E is projected at 6.5x, with ROE expected to reach 14.5% [1] Market Data - Current price is HK$17.92, with an upside potential of 38.4% to the target price of HK$24.8 [4] - Market capitalization is HK$13.5bn, with an average 3-month turnover of HK$162mn [5]

Investment Rating - The report upgrades the investment rating for Contemporary Amperex Technology Co. Ltd. from Equal-weight to Overweight [2][3] - The price target is raised from Rmb184.00 to Rmb210.00, implying a 34% upside potential [2][4] Core Insights - Price competition in the battery market is nearing an end, allowing CATL to enhance cost efficiency and return on equity (ROE) [3][10] - The company is expected to restore EBIT growth year-over-year after a slowdown in the first quarter of 2024 [3][23] - CATL's new generation mega production lines are anticipated to significantly improve cost advantages and ROE [3][12] Financial Performance - Revenue estimates for 2024 and 2025 are raised by 11% and 21%, respectively, to Rmb390.8 billion and Rmb49 billion [23][24] - The report projects a free cash flow yield increasing from 6% in 2024 to 10% in 2026 [4][28] - CATL's market capitalization is currently Rmb779.949 billion, with a share price of Rmb158.00 as of March 8, 2024 [7] Market Share and Competitive Position - CATL maintains a stable market share of approximately 46% in China and 37% globally as of 2023 [10][82] - The company is expected to account for 63% of new models launched in 2024, up from 45% in 2023, indicating strong demand for "CATL Inside" models [58][77] - CATL's market share in the EU rose to 36% in 2023, driven by strong sales from Tesla and other OEMs [60][62] Cost Efficiency and Production Capacity - CATL's new mega production lines are projected to reduce capital expenditures by over 40% while increasing production capacity significantly [12][44] - The company is expected to achieve unit operating expenses of US$55/kWh and capital expenditures of US$30/kWh in the coming years, which are substantially lower than global competitors [12][44] - CATL's R&D expenses are approximately US$3 billion annually, significantly higher than other global battery manufacturers, contributing to its competitive edge [36][37] Future Outlook - The report anticipates a robust growth trajectory for electric vehicle (EV) battery demand, projecting a 22% compound annual growth rate (CAGR) to approximately 3 TWh by 2030 [15][21] - CATL is expected to maintain a market share of 45% in China and 35% in the EU by 2030, with potential growth in the US market if technology licensing opportunities arise [15][72] - The company's bull case scenario values the stock at Rmb320, reflecting its potential as a cash cow or contract manufacturer in the EV supply chain [25][26]

Investment Rating - Maintain HOLD rating for NIO Inc (NIO US) with a revised target price of US$6 20, down from US$6 80 [2] Core Views - NIO's cash burn has accelerated despite the capital injection from CYVN, and the company shows no clear strategy to achieve profitability [2] - The company's 4Q23 earnings missed expectations, particularly in other income and SG&A expenses, with an operating loss of RMB6 6bn, RMB1 9bn higher than projected [2] - Management's FY24E gross profit margin (GPM) guidance of 15-18% is considered overly optimistic, especially given the failure to achieve 15% GPM in 3Q23 and 4Q23 [2] - Even with a 15% vehicle GPM and disciplined R&D and SG&A spending, NIO's FY24E net loss is expected to exceed RMB10bn, far from profitability [2] Financial Performance - 4Q23 revenue and gross profit from vehicles were in line with forecasts, but vehicle GPM of 11 9% missed the guidance of 15% [2] - Gross margin for other revenue was -34%, below the projected -25%, indicating that the elimination of service benefits is impacting margins more than expected [2] - R&D and SG&A expenses in 4Q23 were RMB720mn higher than estimates, contributing to the larger-than-expected operating loss [2] - FY24E sales volume forecast has been cut from 0 21mn units to 0 19mn units due to delayed deliveries of the second brand Alps [2] Earnings and Valuation - FY24E net loss revised from RMB14 7bn to RMB17 2bn, reflecting higher-than-expected costs and lower margins [2] - Target price cut to US$6 20 based on 1 4x revised FY24E revenue estimates, compared to Li Auto's 1 3x FY24E P/S [2] - NIO's profitability remains significantly weaker than peers like Li Auto, which trades at a lower P/S multiple [2] Quarterly Results - 4Q23 sales volume was 50,045 units, down 9 7% QoQ but up 25 0% YoY [7] - Overall ASP in 4Q23 was RMB341,756, down 0 6% QoQ and 14 8% YoY [7] - Gross margin improved to 7 5% in 4Q23, up 3 6ppt YoY but down 0 5ppt QoQ [7] - Operating margin was -38 7% in 4Q23, a decline of 13 3ppt QoQ [7] Financial Summary - FY23E revenue is projected at RMB55,618mn, with a gross margin of 5 5% [9] - FY24E revenue is expected to grow 17 3% to RMB65,239mn, with a gross margin of 8 1% [9] - FY24E operating profit is forecast at a loss of RMB18,814mn, improving from FY23E's loss of RMB22,655mn [9] - Net profit for FY24E is projected at a loss of RMB17,170mn, slightly better than FY23E's loss of RMB21,147mn [9] Cash Flow and Balance Sheet - FY23E net cash from operations is expected to be negative at RMB1,872mn, worsening to RMB10,446mn in FY24E [10] - Cash and equivalents are projected to decline from RMB32,935mn in FY23E to RMB22,783mn in FY24E [9] - Total liabilities are expected to decrease slightly from RMB87,787mn in FY23E to RMB74,228mn in FY24E [9] Growth and Profitability - FY24E revenue growth is forecast at 17 3%, with gross profit growth of 72 8% [10] - Operating margin is expected to improve from -40 7% in FY23E to -28 8% in FY24E [10] - Adjusted net profit margin is projected to improve from -33 2% in FY23E to -23 4% in FY24E [10]

M N 6 Mar 2024 CMB International Global Markets | Equity Research | Company Update Yuexiu Transport (1052 HK) 2023 core profit +91% YoY but below estimates; >7% yield + potential asset injection Target Price HK$7.20 Yuexiu Transport’s net profit in 2023 grew 69% YoY to RMB765mn. Adjusted (Previous TP HK$7.50) for RMB100mn of non-cash impairment on Shantou Bay Bridge, the core net Up/Downside 57.2% profit would be RMB865mn (+91% YoY), 10%/8% below our/consensus Current Price HK$4.58 forecast as the gross mar ...

Investment Rating - The report indicates that the company is expected to achieve AGI (Artificial General Intelligence) by 2027, with significant advancements anticipated in the near future [30][32]. Core Insights - The company has started training a 125 trillion parameter multimodal model, originally planned for release in 2025, but the launch was canceled due to high inference costs [31]. - The training of GPT-5 was completed in December 2023, achieving a proto AGI with an IQ of 48 [30][33]. - The report discusses the correlation between the number of parameters in AI models and their performance, suggesting that a model with around 100 trillion parameters could match human-level intelligence [6][9]. Summary by Sections Model Development - The company has been working on a model with 125 trillion parameters, which is significantly larger than previous models like GPT-3 and GPT-4 [31][32]. - The original GPT-5 was planned for release in 2025 but has been renamed due to the cancellation of its launch [31]. Performance Metrics - The report highlights that the performance of AI models tends to reach human-level capabilities when the parameter count approaches that of the human brain, estimated at around 100 trillion synapses [6][9]. - The training of GPT-4 was completed with a parameter count of 1 trillion, while the full model is expected to be much larger [99][101]. Future Projections - The company aims to achieve full AGI by 2027, with various stages of model development planned leading up to that date [30][32]. - The report suggests that the advancements in AI capabilities are driven by increased computing power and data availability, which have been significantly enhanced in recent years [39][40].

M N 1 Mar 2024 CMB International Global Markets | Equity Research | Company Update Salesforce (CRM US) 4Q results in-line; eye on AI development Target Price US$350.00 Salesforce reported 4QFY24 financial results: total revenue was up 10.8% YoY (Previous TP US$329.30) to US$9.29bn, in line with consensus estimate of US$9.22bn. FY24 total revenue Up/Downside 16.8% was up 11.2% YoY to US$34.9bn. Non-GAAP operating income grew by 19.3% Current Price US$299.77 YoY to US$2.92bn in 4QFY24, also in line with conse ...

29 Feb 2024 Earnings Summary CMB International Global Markets | Equity Research | Company Update iQIYI (IQ US) Improving profitability with solid guidance iQIYI (IQ) delivered better-than-feared 4Q23 results with inline topline and upbeat margin. Looking into 1Q24E, we expect both revenue and earnings to see sequential growth, with solid ARM trend. We keep confident on IQ's previous FY24E OP target (at RMB5bn), with disciplined content cost and ARM expansion. Given already-low expectation and clear profitab ...

M N 1 Mar 2024 CMB International Global Markets | Equity Research | Company Update Budweiser APAC (1876 HK) 4Q23 a slight miss; S. Korea undershoot Target Price HK$14.5 Stripping off mainly the US$66mn tax provision, Bud APAC 4Q results came in (Previous TP HK$16.9) c.3%/6% below us/consensus. Operations in South Korea (esp. home channel) Up/Downside 14.2% looked increasingly challenging upon the return of Japanese brands, with Current Price HK$12.7 volume consecutively edging down by MSD% since 3Q23 (1H23: ...