Chinese firms are mostly less profitable than comparable US companies, according to new research from Bloomberg Economics https://t.co/WyUb0St5Ju ...

Summary of Key Points from the Conference Call Company and Industry Overview - **Company**: Inner Mongolia Yili (600887 CH) - **Industry**: Dairy sector in China Core Insights and Arguments - **Market Conditions**: The dairy sector is facing challenges such as lukewarm demand and intense competition, with small brands gaining market share through price cuts due to raw milk oversupply [2][9] - **Sales Forecast**: Yili's sales are expected to grow by 2.3% year-over-year in Q3 2025, with liquid milk sales decline narrowing and strong milk powder sales continuing [2][6] - **Earnings Outlook**: Recurrent earnings are forecasted to decline by 4.7% year-over-year, primarily due to flat raw milk costs impacting gross profit margins [2][9] - **Full-Year Guidance**: Yili aims for a 2.8% year-over-year sales increase in 2025, with a reported net margin of 9% [2][9] - **Valuation**: Trading at 15x 2025 consensus earnings, the valuation reflects known sector headwinds, with a price target of Rmb35 [2][9] Financial Performance and Projections - **Liquid Milk Sales**: Expected decline to narrow from -3.1% in Q1 2025 to -0.5% in Q3 2025, with Yili opting not to engage in nationwide discounting [6][9] - **Milk Powder Sales**: Forecasted to grow by 9% in Q3 2025, driven by a Rmb1.6 billion subsidy program and a growing B-to-B business [6][9] - **Raw Milk Costs**: Current costs at Rmb3.02/kg, the lowest since 2011, with expectations of stability in Q3 2025 and slight decline in Q4 2025 [2][18] Investment Thesis - **Management Alignment**: The top four senior management members hold 8% equity, aligning their interests with public shareholders [9][26] - **Profitability**: Yili is recognized for superior profitability and equity return profile, with expectations of sales and earnings growth in the coming years [9][26] - **Market Recovery**: Anticipated demand recovery and potential raw milk cost increases in mid-2026 could favor Yili's sales growth and margins [9][26] Risks and Catalysts - **Downside Risks**: Include intensifying competition, input cost volatility, management changes, and potential food safety issues [30] - **Upside Catalysts**: Stronger-than-expected liquid milk sales, earlier inflection points in raw milk prices, and successful product innovations could positively impact performance [31] Valuation Metrics - **Price Target**: DCF-based price target of Rmb35 implies an 18x/17x P/E for 2026/27 and a 2.0x PEG for 2026 [10][27] - **WACC**: Estimated at 9.0%, with a risk-free rate of 3.0% and a risk premium of 7.0% [10][27] Additional Important Information - **Market Performance**: Yili's share price has underperformed relative to the SHSZ300 Index, with a year-to-date decline of 10.6% [8][20] - **Financial Estimates**: Revenue is projected to grow from Rmb115.4 billion in 2024 to Rmb128.1 billion in 2027, with adjusted net income expected to rise from Rmb6.0 billion to Rmb13.3 billion over the same period [8][15]

Core Insights - MercadoLibre (MELI) is facing challenges in sustaining its aggressive credit expansion strategy, with signs that rapid lending growth may negatively impact profitability in upcoming quarters [1][4] Group 1: Credit Portfolio and Profitability - The total credit portfolio increased by 91% year over year to $9.3 billion in Q2 2025, but the Net Interest Margin After Losses decreased to 23% from 31.1% a year ago, indicating potential erosion of returns [1][8] - The credit card segment grew 118% year over year to $4 billion, now representing 43% of the total portfolio, up from 37% last year; however, credit cards have lower margins and only recently reached breakeven [2][4] - Provisions for doubtful accounts rose by 57% year over year to $690 million, suggesting that underwriting discipline will be tested as the company expands in volatile markets [2][3] Group 2: Earnings and Economic Environment - Net income for Q2 slipped 1.6% year over year to $523 million, as credit costs offset growth in commerce and payments [3] - Economic uncertainty in Argentina, following corruption charges against President Javier Milei, and Brazil's history of delayed credit card payments add to the challenges for MELI [3][4] Group 3: Competitive Landscape - Regional fintech competition is intensifying, with Sea Limited and Nu Holdings navigating margin pressures; Nu Holdings has maintained stronger credit discipline compared to MELI's aggressive credit card growth strategy [5] - Sustainable lending growth is suggested to depend on balanced risk management, highlighting vulnerabilities in MELI's current approach [5] Group 4: Stock Performance and Valuation - MELI shares have increased by 46.5% year-to-date, outperforming the Zacks Internet–Commerce industry and the Zacks Retail-Wholesale sector, which rose by 12.2% and 8.6%, respectively [6] - The stock is currently trading at a forward 12-month Price/Sales ratio of 3.8X, compared to the industry's 2.26X, indicating a higher valuation [10] - The Zacks Consensus Estimate for 2025 earnings is $44.43 per share, reflecting a 17.88% year-over-year growth, with a Zacks Rank of 4 (Sell) [13]

Group 1 - The real-estate listings company is focusing on increasing revenue while managing head count growth to achieve profitability goals [1]

I disagree with this view for a few reasons.(1) First, fast topline growth businesses are rare. Often they have a thesis on how margins can improve. And sometimes that thesis plays out. AI costs are highly dynamic, for example.(2) Second, yes, from today’s vantage point we can see that ride-sharing worked out but scooters made less money. However, even Uber lost money for many years. And the micromobility companies did create enormous consumer value, and Lime is apparently going public.(3) Third, just about ...

Company Overview - Meta Platforms is the largest social media company globally, with nearly 4 billion monthly active users [2] - The core business, "Family of Apps," includes Facebook, Instagram, Messenger, and WhatsApp, which are used for various purposes, including social interaction and digital business [2] - Meta generates revenue by selling ads based on customer data collected from its applications, while its Reality Labs business remains a minor part of overall sales [2] Financial Metrics - Meta's Price to Earnings (P/E) ratio is 27.76, which is 0.42x lower than the industry average, indicating potential undervaluation [5] - The Price to Book (P/B) ratio is 9.85, 2.09x the industry average, suggesting overvaluation in terms of book value [5] - The Price to Sales (P/S) ratio is 11.1, which is 0.14x the industry average, indicating strong revenue generation relative to market capitalization [5] - Return on Equity (ROE) stands at 9.65%, 7.09% above the industry average, reflecting efficient equity use for profit generation [5] - Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is $25.12 billion, 7.12x above the industry average, showcasing strong profitability [5] - Gross profit is $39.02 billion, 6.94x above the industry average, highlighting robust earnings from core operations [5] - Revenue growth is 21.61%, surpassing the industry average of 11.32%, indicating strong sales expansion and market share gain [5] Debt and Financial Health - Meta's debt-to-equity (D/E) ratio is 0.25, indicating a lower reliance on debt financing compared to peers, which is favorable for investors [10] - The comparison of financial metrics shows that Meta has a stronger financial position with lower debt levels relative to its top competitors [10]

Company Overview - Petronas Dagangan Berhad is the petrol retailer and marketing subsidiary of Petronas, Malaysia's national oil and gas conglomerate, and one of the largest energy companies globally [1] - The company holds the number one market share in the petrol market in Malaysia, focusing all its business operations within the country [1] Performance Metrics - The company achieved a Profitable Growth rank of 2, maintaining the same rank as the prior period, indicating World Class performance compared to 310 large energy companies worldwide [5] - The Profitability rank of 2 was consistent with its Growth rank of 2, reflecting strong performance in both profitability and growth metrics [5] - The Growth rank improved to 2 from the previous period's 3, showcasing an upward trend in growth performance compared to peers [5]

Core Insights - C3.ai, Inc. (AI) started fiscal 2026 with profitability concerns as non-GAAP gross margin decreased to 52%, down 1,800 basis points from 70% in the previous year, primarily due to higher initial production deployment costs and reduced revenues from demonstration licenses [1][9] - The shift towards initial production deployments (IPDs) indicates both growth potential and margin risks, with management expecting moderate gross margins in the near term as support capacity is built [2] - Subscription revenues remained strong, contributing $60.3 million, or 86% of total revenues, while liquidity is robust with $711.9 million in cash, although negative free cash flow of $34.3 million highlights ongoing investment intensity [3] Financial Performance - C3.ai's gross margin contraction reflects the challenges of scaling new deployments, impacting the path to achieving non-GAAP profitability and free cash flow [1][3] - The company’s reliance on upfront-cost-heavy IPDs contrasts with peers like Palantir and Snowflake, which are demonstrating profitable scaling with strong margins [7] - C3.ai's stock has declined 23.6% over the past three months, compared to a 6.1% decline in the industry [8] Peer Comparison - Palantir Technologies Inc. reported an adjusted gross margin of 82% in Q2 2025, enabling a 46% adjusted operating margin and robust free cash flow of $569 million [5] - Snowflake Inc. achieved a non-GAAP product gross margin of 76.4% in Q2 fiscal 2026, with a modest operating margin of 11% but strong gross margin fundamentals [6] - C3.ai's current stage of maturity, characterized by negative free cash flow and moderated gross margins, places it at a disadvantage compared to peers with proven operating models [7] Valuation and Estimates - C3.ai trades at a forward price-to-sales ratio of 7.86X, significantly lower than the industry average of 17.20X [11] - The Zacks Consensus Estimate for C3.ai's fiscal 2026 earnings per share (EPS) indicates a year-over-year decline of 224.4%, while fiscal 2027 EPS is expected to rise by 23.7% [12]

I'm not saying we're going to figure out how to make money along the way. We will make money. We have like some couple good bets already.We'll launch more of them. I'm not saying I have like a hope and a dream of profitability. Like it's very much a for-profit company.We'll figure it out. Businesses should not exist to make money. Businesses should make money to deliver on a mission.And those are important things. We are a missiondriven company and we'll make a profit such that we can deliver on our mission ...

Core Insights - A consortium led by Oracle, Silver Lake, and Andreessen Horowitz plans to acquire 80% of TikTok's US operations to prevent a ban in the US [2][3] - Oracle's stock has increased by 21% over the past month, supported by a strong five-year forecast and a 359% year-over-year rise in remaining performance obligations (RPO) to $455 billion [2][10] - The current market capitalization of Oracle is $852 billion, with a diverse range of offerings including cloud software applications and enterprise databases [5][10] Valuation - Oracle's stock valuation appears very high, raising questions about its attractiveness at the current price level around $300 [4][6] - The company has demonstrated strong operating performance and financial health, but its current valuation may be considered expensive [4][10] Growth - Oracle has experienced an average top-line growth rate of 10.2% over the past three years, with revenues increasing from $54 billion to $59 billion over the last 12 months [10] - Quarterly revenues rose by 12.2% to $15 billion in the most recent quarter compared to $13 billion a year prior [10] Profitability - Oracle's operating income over the last 12 months was $19 billion, resulting in an operating margin of 31.6% [10] - The company generated approximately $12 billion in net income, indicating a net margin of about 21.1% [10] Financial Stability - Oracle had $105 billion in debt at the end of the last quarter, leading to a Debt-to-Equity Ratio of 12.3% [10] - The company's cash (including cash equivalents) constitutes $11 billion of $180 billion in total assets, resulting in a Cash-to-Assets Ratio of 6.1% [10] Resilience - Oracle has shown greater resilience than the S&P 500 index during various economic downturns, recovering quickly from declines [8][11]