Core Viewpoint - The U.S. is considering eliminating the penal import tariff on Indian goods and reducing the reciprocal tariff to 10-15% from the current 25% according to India's Chief Economist Adviser V. Anantha Nageswaran [1] Group 1 - The potential removal of the penal import tariff could enhance trade relations between the U.S. and India [1] - The reduction of the reciprocal tariff from 25% to 10-15% may lead to increased exports from India to the U.S. [1]

Core Viewpoint - Mercedes-Benz is maintaining its premium strategy in China despite a pricing war that has led to a loss of market share to cheaper domestic models [1][4]. Group 1: Market Strategy - CEO Ola Kaellenius emphasized that the new electric GLC SUV will be crucial for regaining lost market share in China, the world's largest auto market [2]. - The company is committed to its premium pricing strategy, indicating that existing GLC customers will find the new electric model familiar in terms of pricing [3]. - Mercedes-Benz experienced a 19% decline in vehicle sales in China, with sales dropping to 140,400 units in Q2 2025 [3]. Group 2: Tariff Impact - The company is awaiting a reduction of U.S. auto import tariffs from 27.5% to 15%, which is part of a broader trade agreement with the European Union [4]. - Kaellenius expressed hope that the U.S. administration would soon sign an executive order to lower the tariffs, although he did not specify the financial impact of the tariffs on the company's results [5].

Financial Data and Key Metrics Changes - Net income increased by 77% year on year, reaching BRL 2.1 billion, driven by financial asset bifurcation, lower amortization from the extended concession agreement, and interest and monetary correction from the reversal of legal accruals [5][6] - EBITDA growth was supported by price increases and disciplined cost control, with a year-on-year contribution of approximately BRL 200 million from changes in legal claims management [4][6] - CapEx totaled BRL 3.6 billion in Q2 2025, a 178% increase year on year, indicating a strong commitment to infrastructure investment [5][9] Business Line Data and Key Metrics Changes - Volume growth contributed 3.5%, with 1.5% from new connections for water and sewage, and a 2% increase in consumption despite lower temperatures [2][3] - Average prices rose by 5% due to tariff adjustments, although a decline was noted in June due to a 1% tariff decrease [2][3] - The removal of discounts for large clients resulted in an average price increase of 47% compared to Q4 2024 [3] Market Data and Key Metrics Changes - The company reported a significant reduction in complaints about water shortages by 18% and water leaks by 23% quarter over quarter [10] - The introduction of smart metering technology is expected to enhance operational efficiency and customer service [11][60] Company Strategy and Development Direction - The company’s strategy focuses on three priorities: meeting new concession agreement challenges, raising operating standards, and boosting financial efficiency [8][9] - The CapEx execution is accelerating, with a backlog of BRL 35 billion across 542 projects scheduled for completion by 2029 [9] - The company aims to enhance customer experience through technology-driven initiatives, including a new customer service channel via WhatsApp [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company’s transformation and progress towards universalization targets, with over 1.3 million people gaining access to water and 1.4 million to sewage treatment [14][82] - The company is focused on balancing efficiency gains with annual targets amidst a heated demand for services in São Paulo [77][78] Other Important Information - The company is ahead of schedule on its 2425 U factor targets, with water units target already met and significant progress in sewage collection and treatment [5][6] - The leverage remains under control, with net debt to adjusted EBITDA at 1.9 times, reflecting a strong balance sheet [6] Q&A Session Summary Question: Details on OpEx performance and future expectations - Management highlighted that the efficiency program is crucial for sourcing funds for investments, with personnel expenses reflecting voluntary dismissal plans [20][21] - The impact of social tariff evolution was discussed, with BRL 170 million invested in discounts for vulnerable populations [26][27] Question: Universalization CapEx and project completion - Management confirmed that the company is on track to meet sewage connection targets, with 15 projects in the northern metropolitan region of São Paulo expected to deliver 500,000 connections by year-end [33][34] Question: General and administrative expenses - The negative BRL 50 million expense was attributed to a reversal of provisions, with expectations for future levels discussed [44][45] Question: Increase in delinquency rates - The increase was attributed to prior settlements with delinquent customers and the removal of discounts, with expectations for a change in delinquency profile in Q3 [54][55] Question: Smart metering agreement details - The company has partnered with Vivo for the rollout of smart meters, which will enhance operational efficiency and customer service [58][60] Question: Tariff review process and public disclosure - Management clarified the timeline for the tariff review process and the importance of public hearings for stakeholder input [62][66]

Investment Rating - The report downgrades the EUR overweight to neutral [9][30]. Core Insights - The reduction of US tariffs on China from 145% to 30% effectively lowers the tariff rate from 25% to 12%, significantly altering the tactical risk landscape [2][3]. - The economic outlook in China appears more favorable, leading to adjustments in currency positions, particularly closing EURUSD longs and USDCNH call spreads [3][6]. - The de-escalation of trade tensions is expected to benefit small-cap equities, prompting the closure of short positions in RTY1 while maintaining a long position in VG1 [4][23]. - In commodities, the report suggests unwinding short positions in copper due to a positive growth outlook and downgrading precious metals from overweight to neutral due to potential risks in growth and USD strength [26][27][30]. Summary by Sections FX - The report indicates a shift in positioning, closing EURUSD longs and USDCNH call spreads, as the outlook for CNH depreciation diminishes [6][7]. - A structural EUR underweight and USD overweight may be trimmed over time, but the timeline for these adjustments is expected to be slow [7]. Rates - The report emphasizes the importance of hedging against US rates for various receivers in Canada, Norway, Mexico, and Brazil, reflecting a more optimistic outlook on the US economy [13][16]. Equities - The report highlights the positive impact of de-escalation news on small-cap stocks, leading to the closure of short positions in RTY1 while remaining long in VG1 [4][23]. Commodities - The report suggests unwinding short copper positions due to a rebound in prices and a more favorable growth outlook, while also downgrading precious metals from overweight to neutral due to potential risks [26][27][30].

Investment Rating - The report assigns a 12-month target price of US$152 for PDD Holdings based on a sum-of-the-parts (SOTP) valuation approach [2][22]. Core Insights - The report highlights the narrowing pricing gap between Temu and major U.S. eCommerce platforms, now at approximately 25% compared to 40% previously, following recent price adjustments by Temu [1][14]. - Temu's business model is shifting towards a semi-entrusted model in the U.S., which presents operational challenges compared to the full-entrusted model, including a reduced selection of SKUs and increased working capital pressure for merchants [1][16]. - Temu has been expanding into non-Western markets, particularly in Europe, Africa, and Southeast Asia, with significant growth observed in Japan, where it has achieved a 40-50% year-over-year growth rate over the past two years [1][18]. Summary by Sections Pricing Dynamics - Post-tariff pricing adjustments have led to a more manageable cost structure for cross-border eCommerce, with potential tariff rates of 40-50% translating to a 15-20% increase in prices, which can be absorbed by the value chain [1][19]. Business Model Transition - Temu's transition to a semi-entrusted model in the U.S. is expected to require additional working capital and may limit SKU availability, impacting merchant operations [1][16]. Market Expansion - Temu's geographical diversification strategies include rapid growth in niche markets in Europe, such as Cyprus and Georgia, and a strong presence in Japan [1][18]. Financial Projections - The report provides financial estimates for Temu, projecting significant growth in GMV from US$307 million in 2022 to US$50.5 billion in 2025, with a compound annual growth rate (CAGR) of 165% for 2023 [20][21].