Asia Tech Hardware Sunny Optical Technology Group Co Ltd Rating Outperform Price Target Shirley Yang, CFA +852 2123 2660 shirley.yang@bernsteinsg.com Ethan Xu +852 2123 2634 ethan.xu@bernsteinsg.com Sunny Optical 1H25: Premiumization powers profit surge. PT raised to HK$110 Solid 1H25 results. Total revenue grew 4% YoY and is in line with consensus. GM improved by +2.6ppts YoY to 19.8%. Handset lens GM increased to 25-30% (vs. 20-25% in 2024), fueled by higher mix of 6P+ lens (rev. up 9% YoY) and more than ...

China Resources Beer (0291.HK) Earnings Review: Look for sequential acceleration in beer and gradual normalizing policy impact; Strong cash flow and potential for yield; Buy 0291.HK 12m Price Target: HK$37.00 Price: HK$28.28 Upside: 30.8% 20 August 2025 | 12:58AM HKT On Aug 19, CR Beer reported 1H25 results with better-than-expected core EBIT on cost tailwinds and operating efficiency, and we attended the earnings briefing. While the macro situation remains fluid and deflation risks persists, we remain posi ...

Financial Data and Key Metrics Changes - Total revenue reached RMB 116 billion, up 30.5% year on year, marking the fifth consecutive quarter of record-breaking performance [4][22] - Adjusted net profit was RMB 10.8 billion, up 75% year on year, achieving a new record high for the third consecutive quarter [4][31] - Gross margin improved to 22.5%, an increase of 1.8 percentage points year on year [4][22] Business Line Data and Key Metrics Changes - Smartphone revenue was RMB 45.5 billion, accounting for 39.3% of total revenue, with global smartphone shipments reaching 42.4 million units, marking the eighth consecutive quarter of year-on-year shipment growth [23][22] - AIoT revenue reached RMB 38.7 billion, up 44.7% year on year, with a gross margin of 22.5%, up 2.8 percentage points year on year [24][25] - Revenue from smart large appliances grew 66.2% year on year, with air conditioning shipments exceeding 5.4 million units, up over 60% year on year [25][26] Market Data and Key Metrics Changes - In Mainland China, smartphone market share for devices priced between RMB 4,000 and 6,000 increased by 4.5 and 6.5 percentage points year on year, respectively [12] - Xiaomi ranked first in smartphone activations in Mainland China and maintained a strong presence in Southeast Asia, Europe, and Latin America [7][8] - Global MAUs for Internet services reached 731 million, up 8.2% year on year, with MAUs in Mainland China reaching 185 million, up 12.4% year on year [27] Company Strategy and Development Direction - The company aims to achieve steady annual increases in market share in China and is focused on premiumization and technological advancements [9][10] - Xiaomi plans to enter the European market by 2027 and is committed to enhancing its international market infrastructure [19][20] - The company emphasizes innovation driven by user needs and aims to transform the home appliance industry through intelligent transformation [15][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the intense competition in the smartphone industry and the need for continuous investment in core technology and product innovation [8][9] - The company expects the smartphone market to remain flat globally, with a target of 175-180 million shipments for the year [81][82] - Management expressed confidence in the long-term growth of the large appliance business despite current market challenges [16][99] Other Important Information - Xiaomi's R&D expenses reached RMB 7.8 billion, up 41.2% year on year, with a record high number of R&D personnel [30] - The company was included in the Fortune 500 list for the seventh consecutive year, ranking 297th, an improvement of 100 places from the previous year [19] Q&A Session Summary Question: Performance of AIoT segment in Chinese and overseas markets - Management noted strong growth rates in both markets, with a focus on expanding offline retail channels to enhance efficiency [34][37] Question: Smartphone gross margin trends - Management indicated that rising costs for components are a concern, but premiumization efforts are expected to help improve margins in the long term [36][44] Question: AIoT gross margin pressure - Management attributed quarter-on-quarter pressure to seasonal factors and promotional activities, but year-on-year growth remains strong [46][55] Question: EV business gross margin and overseas development - Management expressed confidence in maintaining satisfactory gross margins through competitive product offerings and economies of scale [88][90] Question: Brand strength in overseas markets - Management highlighted high brand awareness in Europe and plans to enhance the reputation of Xiaomi EVs before entering the market [90][91]

Financial Data and Key Metrics Changes - Total revenue reached RMB 116 billion, up 30.5% year on year, marking the fifth consecutive quarter of record-breaking performance [6][24] - Adjusted net profit was RMB 10.8 billion, up 75% year on year, achieving a new record high for the third consecutive quarter [6][32] - Gross margin improved to 22.5%, an increase of 1.8 percentage points year on year [6][24] Business Line Data and Key Metrics Changes - Smartphone revenue was RMB 45.5 billion, accounting for 39.3% of total revenue, with global smartphone shipments reaching 42.4 million units, marking the eighth consecutive quarter of year-on-year shipment growth [25][24] - AIoT revenue reached RMB 38.7 billion, up 44.7% year on year, with a gross margin of 22.5%, up 2.8 percentage points year on year [26][24] - Smart large appliances revenue grew 66.2% year on year, with air conditioning shipments exceeding 5.4 million units, achieving over 60% year-on-year growth [27][15] Market Data and Key Metrics Changes - In Mainland China, smartphone market share for devices priced between RMB 4,000 and 6,000 increased by 4.5 and 6.5 percentage points year on year, reaching 24.7% and 15.4% respectively [13] - Xiaomi ranked first in smartphone activations in Mainland China and maintained strong positions in Southeast Asia, Europe, and Latin America [9][10] - Global MAUs for Internet services reached 731 million, up 8.2% year on year, with MAUs in Mainland China reaching 185 million, up 12.4% year on year [29] Company Strategy and Development Direction - The company aims to achieve steady annual increases in market share in China and is focused on premiumization and technological advancements [11][12] - Xiaomi plans to enter the European market by 2027 and is committed to enhancing its brand and product competitiveness [21][85] - The company emphasizes innovation driven by user needs and aims to transform the home appliance industry through intelligent transformation [16][17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the intense competition in the smartphone industry and the need for continuous investment in core technology and product innovation [10][11] - The company expects the smartphone market to show little growth overall, with a target of 175-180 million shipments for the year [81] - Management expressed confidence in the long-term growth of the large appliance business despite current market challenges [17][98] Other Important Information - Xiaomi's R&D expenses reached RMB 7.8 billion, up 41.2% year on year, with a record high of 22,641 R&D personnel [31] - The company was included in the Fortune 500 list for the seventh consecutive year, ranking 297th, an improvement of 100 places from the previous year [21] - The company is committed to corporate social responsibility and has made significant contributions to disaster relief efforts [33] Q&A Session Summary Question: Performance of AIoT segment in China and overseas - Management noted strong growth in both markets, with a focus on expanding the new retail system to enhance AIoT business [36][38] Question: Long-term smartphone gross margin outlook - Management indicated that while there are short-term pressures on gross margin, premiumization and product structure adjustments are expected to support future growth [37][45] Question: AIoT gross margin pressure and R&D investment direction - Management explained that the pressure on AIoT gross margin was due to market conditions, and R&D investments are focused on core technologies and product lines [48][52] Question: EV business gross margin and overseas development - Management expressed confidence in maintaining satisfactory gross margins through competitive products and emphasized the importance of brand awareness for EVs in overseas markets [88][90] Question: Robotics opportunities and large appliances strategy - Management is optimistic about robotics opportunities and highlighted the rapid growth of air conditioning sales, with plans to enhance competitiveness further [94][98]

Core Strategy - Colgate-Palmolive Company's innovation strategy for 2025 aims to boost market share amid macroeconomic challenges by focusing on impactful innovation, data analytics, AI, and omni-channel demand generation to support its 2030 strategic plan [1][4] - The company is introducing core and premium products across regions to enhance brand health and household penetration, with notable launches in oral care such as Colgate Max White Clinical in the U.K. and Miracle Repair serum-infused toothpaste in China [1][2] Product Innovation - The innovation drive extends beyond oral care to personal and home care, as well as Hill's Pet Nutrition, with products like Sanex Skin Therapy in Europe and relaunches of Protex bar soap and Suavitel Superior Care in Latin America [2] - In the Hill's Pet Nutrition segment, innovations like ActivBiome+ Multi-Benefit in Science Diet target niche therapeutic needs, appealing to veterinarians and pet owners [2] Premiumization Strategy - Colgate's approach includes premiumization to capture higher-margin sales and differentiate from value-tier competitors, with brands like Colgate Total and elmex leading premium growth in markets like Latin America and Europe [3] - The company maintains robust advertising investment over 13% of net sales to reinforce consumer awareness and trust amid intense competition [3] Future Outlook - The 2025 guidance acknowledges weaker category growth in the first half and potential raw material inflation headwinds, but management expects innovation-led volume gains and targeted pricing strategies to offset these pressures [4] - If executed effectively, Colgate's innovation pipeline across various segments could serve as a primary catalyst for market share gains in 2025, enhancing its competitive positioning in both mature and emerging markets [4] Competitive Landscape - Key competitors in the global market include Church & Dwight, Procter & Gamble, and Clorox, each driving growth through their own innovation strategies [5][6][7][8] - Church & Dwight focuses on both premium and value segments, while Procter & Gamble leverages a "superiority" strategy with digital-first marketing [6][7] - Clorox emphasizes value-driven offerings and sustainability across its portfolio, aiming to strengthen brand relevance and capture new users [8][9]

Financial Data and Key Metrics Changes - The company is reducing its top and bottom line guidance for 2025, now expecting net sales revenue to decline by 3% to 4% on a constant currency basis, compared to a previous low single-digit decline [11] - Underlying pretax income is now expected to decline by 12% to 15% on a constant currency basis, a significant change from the previous low single-digit decline [12] - Underlying earnings per share are anticipated to decline by 7% to 10%, contrasting with earlier expectations of low single-digit growth [12] - The company reaffirms its underlying free cash flow guidance of $1,300 million plus or minus 10% [36] Business Line Data and Key Metrics Changes - Core power brands, including Coors Light, Miller Lite, and Coors Banquet, maintained a 15.2% volume share of the industry for the first half of the year, up from 13.4% three years ago [15] - Banquet has shown strong performance with over 15% distribution growth in the first half of the year [16] - The company is experiencing a shift to value-seeking behaviors in the U.S., focusing on pack size rather than brand loyalty [18] Market Data and Key Metrics Changes - The U.S. beer industry is down approximately 5% year-to-date, which is worse than previously expected [9] - The Midwest premium pricing has increased by over 180% since January, significantly impacting costs [10] - In Canada, the Molson family of brands gained volume share despite a challenging industry backdrop [17] Company Strategy and Development Direction - The company continues to focus on premiumization in both beer and beyond beer categories, despite current market pressures [18] - The strategy includes leveraging capabilities and partnerships to support profitable growth and maintaining the health of core brands [24] - The company is committed to executing its share repurchase program and has repurchased 9.4% of its outstanding shares [25] Management's Comments on Operating Environment and Future Outlook - Management views the current softness in industry performance as cyclical, driven by macroeconomic factors [13] - Consumer sentiment in the U.S. remains low, particularly affecting lower-income and Hispanic consumers [6][7] - Management believes that consumer confidence will eventually improve, although the timing is uncertain [42] Other Important Information - The company has raised its quarterly dividend each year since 2021 and continues to execute its share repurchase plan [25] - The integration of Fever Tree is progressing well, and it is expected to contribute positively to brand mix in the Americas [23] Q&A Session Questions and Answers Question: Can you unpack the updated guidance and the profit headwinds, specifically regarding aluminum and the Midwest premium? - Management indicated that the industry did not improve as expected, and the dramatic increase in the Midwest premium significantly impacted Q2 and future assumptions [39][40] Question: Have you seen any increases from the Midwest premium in Q2, or is that expected in the back half of the year? - Management confirmed that the Midwest premium increased unexpectedly, with an anticipated impact of $20 million to $35 million for the remainder of the year [58] Question: What is the company's confidence level regarding the cyclical nature of the current industry decline? - Management maintains that the current decline is cyclical and believes consumer confidence will eventually recover [42][56] Question: How is the company addressing the competitive environment and potential changes in marketing strategies? - Management is focusing on driving brand campaigns and leveraging partnerships to improve market share, particularly in the on-premise channel [96] Question: Can you provide insights on the volume deleverage impact for the second half of the year? - Management expects to reverse a volume deleverage of approximately 300,000 hectoliters in the second half, mainly in Q3 [103]

Financial Data and Key Metrics Changes - The company is reducing its top and bottom line guidance for 2025, now expecting net sales revenue to decline by 3% to 4% on a constant currency basis, compared to a previous low single-digit decline expectation [10][12] - Underlying pretax income is now expected to decline by 12% to 15% on a constant currency basis, a significant change from the previous low single-digit decline forecast [12] - Underlying earnings per share are anticipated to decline by 7% to 10%, contrasting with earlier expectations of low single-digit growth [12] Business Line Data and Key Metrics Changes - The U.S. beer industry is experiencing a decline of approximately 5% in the second quarter, which is worse than previously expected [8][10] - Core power brands, including Coors Light, Miller Lite, and Coors Banquet, have retained a 15.2% volume share of the industry for the first half of the year, up from 13.4% three years ago [15] - Banquet has shown strong performance, gaining over 15% distribution in the first half of the year and being a top five volume share growth brand [16] Market Data and Key Metrics Changes - Consumer sentiment in the U.S. remains low, particularly affecting lower-income and Hispanic consumers, leading to reduced consumption trends [5][6] - In Canada, the Molson family of brands has posted volume share gains despite a challenging industry backdrop [17] - The UK market remains highly competitive, with brands like Carling and Ajusco maintaining segment leadership despite regional softness [17] Company Strategy and Development Direction - The company is focusing on premiumization across its portfolio, with plans to develop both beer and beyond beer products [18][20] - The strategy includes leveraging capabilities and partnerships to support profitable growth, particularly in the U.S. market [14] - The company aims to maintain the health of its core power brands while navigating macroeconomic pressures [25] Management's Comments on Operating Environment and Future Outlook - Management views the current softness in industry performance as cyclical, driven by macroeconomic factors, and expects consumer confidence to eventually improve [13][44] - The company is committed to protecting and growing its underlying free cash flow while making prudent capital allocation decisions [37] - Management acknowledges the challenges posed by the Midwest premium pricing, which has increased significantly, impacting cost structures [9][12] Other Important Information - The company has executed a share repurchase program, repurchasing 9.4% of its outstanding shares since its announcement in October 2023 [27] - The company has raised its quarterly dividend each year since 2021, reflecting confidence in its financial health [27] Q&A Session Summary Question: Can you unpack the updated guidance and profit headwinds? - Management indicated that the industry did not improve as expected, with a significant increase in the Midwest premium impacting guidance negatively [40][41] Question: What is the impact of Midwest Premium increases? - The company expects an incremental impact of $20 million to $35 million from the Midwest premium for the balance of the year, with a full-year impact of $40 million to $55 million [55] Question: Are there signs of improvement in consumer confidence? - Management noted that overall consumer confidence has not improved, with value-conscious behaviors continuing among consumers [61][62] Question: How is the company addressing competitive pressures? - The company is focusing on marketing strategies for key brands and leveraging partnerships to enhance market presence [91] Question: What are the drivers of margin contraction? - Management highlighted that volume deleverage, higher COGS due to premiumization, and Midwest premium costs are significant factors affecting margins [75]

Financial Data and Key Metrics Changes - The company is planning for a more cautious consumer environment in the US for fiscal 2026, indicating a focus on managing inventory levels and achieving normalized stock levels [10][11] - Organic sales guidance for fiscal 2026 is expected to be similar to fiscal 2025, with a potential acceleration in the second half of the year [15][16] - The company anticipates a $50 million reduction in starting EBIT due to disposals, with additional impacts from the sale of Ghana and Seychelles breweries [21][22] Business Line Data and Key Metrics Changes - The spirits segment in Europe has faced pressure, but the company views this as an opportunity to better control outcomes by focusing on local markets and consumer dynamics [11][12] - The company is focusing on driving growth in key brands such as Don Julio and Guinness, despite organic sales declines [19][20] Market Data and Key Metrics Changes - The US market is expected to be cautious, with a stretched consumer wallet impacting sales [28][29] - The company is optimistic about the potential for growth in the Asia Pacific region, particularly in China, despite recent challenges [30][31] Company Strategy and Development Direction - The company is reorganizing to capture growth opportunities by being more locally focused and occasion-led in various markets [12][13] - There is a clear strategy to enhance commercial execution at the point of sale, with a focus on training and upskilling resources [17][18] - The company is committed to premiumization and expanding its portfolio, particularly in the tequila segment [40][41] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the current macroeconomic pressures but believes that moderation trends in consumer behavior present new opportunities [65][66] - The company remains confident in the long-term growth potential of the US spirits market despite short-term pressures [79][80] Other Important Information - The company is implementing changes to its currency hedging strategy to reduce volatility and align hedge targets with operating profit exposure [36][37] - The company plans to reinvest 50% of cost savings into better commercial execution and digitization efforts [70][71] Q&A Session Summary Question: US depletion outlook and inventory message - Management indicated that inventory levels have normalized and they are planning for a cautious consumer environment in the US for fiscal 2026 [10][11] Question: Investment in Europe and spirits portfolio - Management acknowledged the pressure on the spirits portfolio in Europe but sees it as an opportunity for better control and growth [11][12] Question: Organic sales guidance for fiscal 2026 - Management expects organic sales guidance for fiscal 2026 to be similar to fiscal 2025, with potential acceleration in the second half [15][16] Question: Impact of disposals on EBIT - Management confirmed a $50 million reduction in starting EBIT due to disposals, with additional impacts from recent sales [21][22] Question: Focus on moderation trends - Management noted that moderation trends are here to stay and the company is looking to tap into this with a broader range of products [65][66] Question: Reinvestment of cost savings - Management stated that 50% of cost savings will be reinvested into commercial execution and digitization efforts [70][71]

Financial Data and Key Metrics Changes - The company is planning for a more cautious consumer environment in the US for fiscal 2026, indicating a focus on managing inventory levels and achieving normalized stock levels [8][9] - Organic sales guidance for fiscal 2026 is expected to be similar to fiscal 2025, with a potential acceleration in the second half of the year [14][30] - The company anticipates a $50 million reduction in starting EBIT due to disposals, with additional impacts from recent sales in Ghana and Seychelles [22][30] Business Line Data and Key Metrics Changes - The spirits segment in Europe has faced pressure, but the company sees this as an opportunity to better control outcomes by focusing on local markets and consumer dynamics [9][10] - The company is focusing on driving growth in key brands such as Don Julio, Guinness, and Johnny Walker, despite organic sales declines [20][30] Market Data and Key Metrics Changes - The US market is expected to be cautious, with consumer wallets still stretched, impacting sales performance [28][30] - In Asia Pacific, particularly China, the market has been more challenged outside of the Chinese New Year, but the company is optimistic about future growth opportunities [29][30] Company Strategy and Development Direction - The company is reorganizing to capture growth opportunities by being more locally focused and occasion-led, particularly in Southern Europe [10][11] - There is a clear strategy to enhance commercial execution at the point of sale, with a focus on training and upskilling resources [18][47] - The company is committed to premiumization and expanding its portfolio, particularly in the tequila segment [40][42] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the current macroeconomic pressures but believes that moderation trends in consumer behavior present new growth opportunities [62][70] - The company is focused on balancing growth across its portfolio, with an emphasis on both volume and price mix [56][59] Other Important Information - The company is actively managing its portfolio, with ongoing disposals of non-core assets while maintaining a focus on core brands [86] - There is a commitment to reinvest 50% of cost savings into better commercial execution and digitization efforts [70][71] Q&A Session Summary Question: US depletion outlook and inventory message - Management indicated that inventory levels have normalized and they are planning for a cautious consumer environment in the US for fiscal 2026 [8][9] Question: Organic sales guidance for fiscal 2026 - Management expressed confidence in achieving a similar organic sales performance to fiscal 2025, with expectations for acceleration in the second half [14][30] Question: Impact of disposals on EBIT - Management confirmed a $50 million reduction in EBIT due to disposals, with additional impacts from recent sales in Ghana and Seychelles [22][30] Question: Focus on the Astral brand in the US - Management sees significant growth potential for the Astral brand in the super premium segment and is optimistic about its scaling [40][41] Question: Changes in US route to market - Management highlighted the importance of both increasing the number of salespeople and enhancing their effectiveness through training and focused execution [46][47] Question: Structural headwinds and moderation trends - Management acknowledged the ongoing moderation trend but emphasized the company's ability to innovate and adapt to consumer preferences [62][70]

Core Insights - Diageo plc is set to release preliminary results for fiscal 2025 on August 5, with expectations of declines in both top and bottom lines, as well as lower organic operating profit in the first half of fiscal 2025 [1][7] - The Zacks Consensus Estimate for quarterly earnings is $6.75 per share, reflecting a 2.3% decline from the previous year's quarter, while revenues are expected to rise by 0.7% to $20.4 billion [2][3] Group 1: Financial Performance - Diageo's price-led strategy is central to its premiumization approach, allowing for consistent revenue growth despite softer consumer demand [3][4] - The company has reported strong organic net sales growth and positive price/mix contributions, particularly in higher-end offerings like tequila and Guinness [4][10] - The consensus estimate for quarterly revenues is $20.4 billion, indicating a slight increase from the prior year [2] Group 2: Strategic Initiatives - Diageo is refining its productivity program to enhance efficiency and achieve sustainable growth, focusing on balancing cost savings with strategic reinvestment in marketing and brand activation [3][5] - The introduction of the Accelerate program aims to set clear cash delivery goals and improve operational excellence and cost efficiency [5][10] Group 3: Regional Insights - The Asia-Pacific region has shown signs of softness due to downtrading and an unfavorable market mix, highlighting the sensitivity of premiumization efforts to regional economic conditions [6] - Management has indicated that near-term industry pressures are largely driven by macroeconomic factors, affecting the timing and pace of recovery [7]