Investment Ratings - TSMC: Buy with a target price of NT$1,160/US$218, expecting 24% YoY revenue growth for 2024 [2] - China Education: Buy for EDU and TAL, with a robust revenue and profitability outlook driven by favorable market dynamics [3] - Yum China: Buy, forecasting +3.5% YoY sales growth despite SSSG pressure [3] - Roborock: Buy, with robust sales momentum and positive surprises from US offline channel expansion [3] - China Autos: Buy for BYD, Li Auto, and XPeng, monitoring potential inflection points in the industry [3] - Japan Industrial Electronics: Buy for Hitachi and Fujikura, focusing on growth and financial strategies [4] Core Insights - The Third Plenary Session is expected to focus on gradual reforms rather than major structural changes, with an emphasis on fiscal and tax reforms [2] - TSMC's revenue growth is supported by pricing strategies and AI cycle visibility, with expectations of a low single-digit price hike for advanced nodes starting in 2025 [2] - The China education sector is expected to maintain a stable regulatory environment, supporting the profitability outlook for key players [3] - Yum China's store expansion remains solid, with expectations of 400 net store openings in 2Q24 despite margin pressures [3] - Roborock's expansion into US offline channels is projected to significantly contribute to revenue growth, with a total expected growth of over 70% in 2024 [3] - The China auto industry is still above cash cost for many companies, indicating potential for profitability recovery despite some conservative outlooks [3] - Japan's industrial electronics sector is focusing on growth strategies, with Hitachi and Fujikura highlighted for their comprehensive approaches [4] Summary by Sections Third Plenary Session Preview - The focus will be on gradual reforms in the "post-property era," with expectations for fiscal and tax reforms to be signaled [2] TSMC Earnings Preview - TSMC is expected to maintain its full-year guidance with a revenue growth forecast of 24% YoY for 2024, despite a projected decline in gross margin due to N3 ramp dilution [2] China Education Sector - The sector is expected to see robust revenue and profitability driven by favorable supply-demand dynamics and a stable regulatory environment [3] Yum China Earnings Preview - Forecasts indicate a +3.5% YoY sales growth, with KFC and Pizza Hut facing SSSG pressures but maintaining a solid pace of store expansion [3] Roborock Sales Momentum - The company has exceeded expectations in US offline channel expansion, contributing significantly to its projected revenue growth [3] China Autos Analysis - The report indicates that while some companies are cutting capacity, many remain above cash cost and optimistic about profitability recovery [3] Japan Industrial Electronics Insights - Companies like Hitachi and Fujikura are highlighted for their effective growth and financial strategies, despite challenges faced by others in the sector [4]

Investment Rating - The report maintains a "Buy" rating for CATL, Miniso, Hitachi Construction Machinery, and TBO Tek, indicating a positive outlook for these companies [4][6][7]. Core Insights - Listed Chinese corporates returned over Rmb2 trillion to shareholders in the past three years through dividends and buybacks, supported by strong policy initiatives and low payout ratios [2][8]. - CATL is positioned to benefit from the global electrification trend due to its upgraded battery product mix and resilient market share, despite facing cost inflation in Europe [4][6]. - Miniso's management is focused on consistent entrepreneurship and long-term growth, with a year-to-date same-store sales growth tracking around 100% [6][7]. - TBO Tek is expected to achieve a 21% CAGR in revenues from FY24 to FY30, driven by a large and fragmented total addressable market (TAM) [6][7]. Summary by Sections China Shareholder Returns - The report emphasizes the strong position of Chinese companies to return cash to shareholders, with a focus on improving payout ratios and fiscal revenue [2][8]. - The construction of a China Shareholder Returns Portfolio includes three equity cohorts: Stable Cash Cows, Dividend/Buyback Surprise Candidates, and Select Central/Local SOEs [2]. CATL Insights - CATL's efficient production lines and supply-chain advantages are expected to sustain its cost competitiveness in the European market [4][6]. - The company has a 12-month target price of Rmb304, reflecting its growth potential in the battery sector [4]. Miniso Insights - Miniso's store upgrades are driving sales growth, with management optimistic about performance despite challenging consumption conditions [6][7]. - The 12-month target price for Miniso is set at US$31.20/HK$61 [6]. Hitachi Construction Machinery Insights - Hitachi Construction Machinery is expected to see growth in mid-sized and large construction machinery, particularly in the Americas [6][7]. - The company has a 12-month target price of ¥5,250, indicating a bullish outlook [6]. TBO Tek Insights - TBO Tek's business model is characterized by strong execution, asset-light balance sheet, and low competition risks, positioning it as a steady earnings compounder [6][7]. - The 12-month target price for TBO Tek is Rs1,970, reflecting its growth potential in the travel distribution sector [6].

Investment Rating - The report assigns a "Buy" rating to Enphase Energy Inc. (ENPH) with a target price of $106.67 and First Solar Inc. (FSLR) with a target price of $258.87 [15]. Core Insights - The report highlights mixed signals regarding solar demand in Europe, with residential demand appearing weaker than expected due to political and regulatory uncertainties, while commercial and utility-scale segments show more positive trends [3]. - In contrast, the U.S. residential solar market is showing signs of improvement, with sequential trends improving significantly since February/March 2024, particularly in California [4]. - The potential for domestic content requirements is expected to positively impact U.S. residential solar volume growth starting in Q4 2024, with Enphase Energy positioned favorably due to its U.S.-manufactured products [6]. - Utility-scale projects in the U.S. are still facing delays, primarily due to domestic content requirements and uncertainty surrounding anti-dumping and countervailing duties [4]. - Module pricing in the U.S. is on the rise, driven by uncertainties related to tariffs, with price increases ranging from $0.05 to $0.10 per watt depending on the sourcing jurisdiction [5][7]. Summary by Sections European Market Insights - Demand in Europe remains uncertain, with residential solar demand weaker than expected due to various factors, while commercial and utility-scale segments are more constructive [3]. U.S. Market Developments - Positive trends are emerging in the U.S. residential solar market, with improvements noted in inventory levels and market dynamics [4]. - Domestic content requirements are expected to drive volume growth in the U.S. residential solar sector starting in Q4 2024, benefiting companies like Enphase Energy [6]. Pricing and Supply Chain - Utility-scale projects in the U.S. are experiencing pushouts, but the overall backlog remains healthy [4]. - Module pricing is increasing in the U.S. due to tariff uncertainties, with suppliers raising prices to mitigate risks [5][7].

Investment Rating - The report highlights a Buy rating for BONB and CCB, a Sell rating for ICBC and ABC, and a Neutral rating for CMB due to full valuation [46]. Core Insights - The report discusses the impact of recent property funding support measures in China, which are expected to stimulate local government debt financing to address refinancing needs and reduce housing inventory [46]. - It updates FY24-26E PPOP/net profit estimates, reflecting higher government lending in bank portfolios, which positively affects capital through an expansion of lower risk-weighted assets [46]. - The report anticipates a continued reduction in Net Interest Margin (NIM) to 1.4% by 2026, down from 1.7% in 2023, alongside an increase in property loans to RMB 4.5 trillion to aid in housing inventory reduction [46]. - An annual capital release of RMB 0.7 trillion is projected for the covered banks [46]. Summary by Sections Section: NIM Forecast - The report provides a forecast of the average NIM for covered banks, indicating a decline from 1.7% in 2023 to 1.4% in 2026 [46]. Section: Property Loans - It estimates a higher balance of RMB 4.5 trillion in property loans to facilitate the reduction of housing inventory [46]. Section: Capital Release - The report projects an annual capital release of RMB 0.7 trillion for the covered banks, indicating a positive outlook on capital management [46].

Investment Rating - The report maintains a "Buy" rating for certain banks, specifically highlighting BONB and CCB, while rating ICBC and ABC as "Sell" and CMB as "Neutral" [128][132]. Core Insights - The total onshore local government debt is estimated at Rmb 102 trillion, reflecting an 8% increase from prior estimates, driven by a net increase of Rmb 6 trillion in official government debt [117][119]. - The report anticipates a continued decline in net interest margins (NIM) for covered banks, projecting a decrease to 1.4% by 2026 from 1.7% in 2023, due to higher local government debt growth and lower yields [127][128]. - A capital shortfall of Rmb 0.3 trillion is expected for covered banks over 2024-26, necessitating new capital to manage losses and maintain dividends [129][132]. Summary by Sections Local Government Debt - Local government debt has increased significantly, with covered banks growing their local government debt by Rmb 4.4 trillion, a 13% increase from previous estimates [119][120]. - The share of local government debt held by large SOE banks has risen to 33%, while non-covered banks have reduced their exposure to 62% [120]. NIM and Capital Requirements - The report projects a further decline in NIM for covered banks, estimating decreases of 16, 7, and 1 basis points for 2024E, 2025E, and 2026E respectively [7][8]. - Covered banks are expected to release Rmb 0.7 trillion in capital annually, positively impacting their CET1 ratio by 18 basis points each year through 2026 [128]. Property Loans and Losses - The report outlines three scenarios for property loan growth, with estimates of Rmb 2.2 trillion, Rmb 4.5 trillion, and Rmb 6.5 trillion in new property loans over the next three years [36][44]. - A projected loss of Rmb 0.3 trillion is anticipated on the Rmb 4.5 trillion in new property loans, with an implied non-performing loan (NPL) ratio of approximately 6% [23][128]. Capital Management - The report indicates that banks may need to lower their target CET1 ratios to release more capital, which could raise concerns about asset quality and leverage [11][47]. - Convertible bonds have been a popular method for banks to raise new capital, comprising 60% of total new capital raised in the past five years [88][129].

Investment Rating - The report maintains a "Buy" rating for CATL, with a 12-month price target of Rmb304.00, while the current price is Rmb188.77 [1]. Core Insights - Concerns regarding downside risks from Tesla's battery price renewal are considered overstated, as CATL is expected to remain a significant earnings contributor to Tesla, with contributions projected to increase to approximately 11% from 2024 to 2026, up from 8%-10% during 2021-2023 [1][12]. - CATL's battery sales to Tesla are reportedly at discounts to average prices, with estimates showing sales at 9%/17%/17% below average prices in 2021/22/23, indicating limited downside risks [2][14]. - The growth of Energy Storage Systems (ESS) is expected to be a key driver for CATL's battery shipments, with a forecasted 58% CAGR for ESS shipments, which will help offset near-term EV battery headwinds [3][24]. Summary by Sections Financial Projections - Revenue projections for CATL are Rmb400.9 billion in 2023, Rmb396.8 billion in 2024E, Rmb500.7 billion in 2025E, and Rmb624.0 billion in 2026E [5][11]. - EBITDA is expected to grow from Rmb66.8 billion in 2023 to Rmb136.3 billion in 2026E [11]. - Net income is projected to increase from Rmb44.1 billion in 2023 to Rmb100.3 billion in 2026E [11]. Market Position and Competitive Landscape - CATL is positioned as a leading player in the battery market, with a market cap of Rmb830.4 billion and an enterprise value of Rmb645.4 billion [4]. - The report highlights CATL's strong partnership with Tesla, which has evolved over the years, focusing on joint R&D in fast-charging batteries as the next area of collaboration [12][14]. Earnings Contribution from Tesla - Tesla is estimated to contribute 10%-12% of CATL's revenue from 2021 to 2023, with projections indicating an increase to approximately 11% in 2024-2026, supported by around 16% of CATL's total battery shipments [26][28]. - The net profit contributions from Tesla are expected to rise significantly, nearly tripling from Rmb4.4 billion in 2023 to Rmb11.1 billion by 2026 [26].

Investment Rating - The report does not explicitly state an investment rating for the industry or the specific company Apptronik Core Insights - Apptronik is focused on building versatile humanoid robots, leveraging Nvidia's AI technology and aiming for a market with a total addressable market of USD 30 trillion [5][3] - The company anticipates shipping hundreds of robots initially, scaling up to thousands as it develops its product offerings [5] - Apptronik's competitive advantages include its integration of complex robotic systems, partnerships with Nvidia and Mercedes-Benz, and a focus on industrial-grade robots [5][3] Summary by Sections Company Overview - Apptronik, founded in 2016, is a spinout from the Human Centered Robotics Lab at the University of Texas at Austin, and launched its general-purpose humanoid robot Apollo – Alpha in 2023 [3] - The company has developed over 10 previous robots, including NASA's Valkyrie robot, and is collaborating with Mercedes-Benz to explore robotics applications [3] AI/Software Strategy - Apptronik's AI strategy involves using Nvidia's AI offerings and foundation models to enhance robot training and performance [3] - The CEO emphasizes that software is a primary bottleneck for achieving efficient robot applications, which is closely tied to hardware capabilities [5] Product Design and Features - The design of Apptronik's robots focuses on human-centered features, safety certifications, and modularity, allowing for adaptability to various mobility platforms [3] - The robots are designed with 30 degrees of freedom and utilize linear actuators for improved movement efficiency [3] Market Potential - The humanoid robot market is estimated to be USD 30 trillion, with applications ranging from manufacturing to home care [5] - Apptronik aims to initially target industrial applications, particularly in logistics and the automotive industry, before expanding to other sectors [5] Business Model - Apptronik plans to offer a "Robot as a Service" (RAAS) model initially, transitioning to a capital expenditure model later [5] - The company targets a manufacturer's suggested retail price (MSRP) of USD 50,000, positioning itself for high product quality and performance [5] Competitive Landscape - Apptronik believes it has a competitive edge over other humanoid robot startups by producing industrial-grade robots and focusing on data, versatility, and scalability [5] - The company has established significant partnerships with Nvidia and Mercedes-Benz, enhancing its market position [5]

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 28 May 2024 | 7:54PM HKT China Software SaaS and Localization carry better visibility; downgrading Chinasoft Intl/iSoftstone and Thundersoft ： s h u i n u 9 8 7 0 加 V 据 数 报 研 和 要 Lower visibility ahead: We remain positive on Chinasoft Intl. and iSoftstone’s Allen纪 Chang 研 调+852-2978-2930 | allen.k.chang@gs.com business migration towards project-based IT services from traditional IT services, 一 手 Goldman Sachs (Asia) L.L.C. 多 更 and Thundersoft’s diversifying into automotive softw ...

Investment Rating - Kingmed is downgraded to Neutral with a 12-month target price (TP) of Rmb41, down from Rmb75, indicating a 12.9% upside potential [1][24][20] - Dian Diagnostics maintains a Neutral rating with a revised TP of Rmb16, down from Rmb23, reflecting a 19.8% upside [1][24][20] - AmoyDx is rated as Buy with a target price of Rmb36, based on strong growth prospects in the cancer companion diagnostics market [1][28][20] Core Insights - The independent clinical laboratories (ICLs) are facing prolonged headwinds beyond the short-term impacts of Covid, including lower testing volumes, increased competition, and price cuts for diagnostic services [1][2][10] - The number of independent labs in China has surged from approximately 15,000 in 2019 to around 26,000 in 2023, intensifying competition in the market [2][10] - The anti-corruption campaign in healthcare is shifting diagnostics from outsourcing to in-hospital testing, benefiting companies like AmoyDx that focus on companion diagnostics [1][24][20] Summary by Sections Kingmed - Kingmed's revenue is projected to decline from Rmb15.5 billion in 2022 to Rmb8.3 billion in 2024, with a net profit of Rmb447 million expected in 2024 [1][32] - The company's gross profit margin (GPM) is anticipated to decrease due to a 30% price cut on average selling prices (ASP), which will reduce GPM by 4.3 percentage points [10][14] - Kingmed's market share is expected to remain stable despite the competitive pressures, but revenue and net profit estimates have been lowered due to declining total addressable market (TAM) [16][17] Dian Diagnostics - Dian's revenue is expected to decrease from Rmb13.4 billion in 2023 to Rmb13.0 billion in 2024, with a significant drop in net profit from Rmb663 million in 2023 to Rmb374 million in 2024 [1][35] - The company faces challenges from the loss of Covid-related business and increased competition, leading to a decline in GPM and NPM [27][24] - Dian's ability to leverage established relationships with hospitals gained during the Covid period is seen as a potential growth driver for its non-Covid testing business [27][24] AmoyDx - AmoyDx is projected to see a significant increase in the penetration rate of tumor companion diagnostics from 13% in 2020 to 45% by 2031, with expected revenue growth above 20% annually over the next decade [1][28] - The company's domestic sales reached Rmb785 million in FY23, reflecting a year-on-year growth of 23.65%, with in-hospital revenue growing over 40% [24][28] - AmoyDx's overseas business is also expanding, expected to contribute over 20% of its revenue by 2031 [1][28]

Investment Rating - The report assigns a "Buy" rating for Tencent Music Entertainment Group (TME) with a 12-month price target of $16.00 (ADR) and HK$62.30 (H-share) [12][14]. Core Insights - The report highlights healthy subscriber and ARPU growth for FY24, with net adds expected to normalize after a strong 1Q performance [2][4]. - Management anticipates further growth in non-subscription revenue streams, particularly in advertising and artist merchandise, aiming for double-digit percentage growth in overall non-subs business in 2024 [8][9]. - The gross profit margin (GPM) target is set at approximately 42% for FY24, with a long-term online music GPM target of 45% [9][10]. Summary by Sections Subscriber Growth - Management reported a net addition of 6.8 million subscribers in 1Q, driven by promotional activities during the Chinese New Year and effective marketing strategies [3][4]. - Future net adds are projected at 3.5 million in 2Q and 3 million in both 3Q and 4Q, leading to a total for the year that is slightly lower than 2023 but significantly higher than 2022 [4][5]. ARPU Growth - The average revenue per user (ARPU) is expected to stabilize with a healthy upward trend, although the year-over-year growth rate for ARPU in 2024 is likely to be lower than in 2023 [7][8]. - The target for ARPU is set to reach RMB 15 over the next 3-5 years, reflecting evolving user payment habits [8][9]. Non-Subscription Business - The report anticipates normalization in advertising growth following a low base in 1Q, with solid progress in digital albums and offline concerts [8][9]. - Management aims for double-digit percentage growth in overall non-subs business in 2024 [8][9]. Margin Expansion - Management maintains a guidance of 42% GPM for FY24, with expectations for continued improvement in online music GPM [9][10]. - The upward margin trend is supported by strong operating leverage, with revenue growth outpacing content costs [9][10].