25 Mar 2026 CMB International Global Markets | Equity Research | Company Update Xiaomi (1810 HK) Xiaomi (1810 HK) - 4Q25 better 27 4Q25 better than feared; Positive on AI investment to bear fruit in 2026-27 Xiaomi's 4Q25 results were better than feared, with revenue/adj. net profit growth of +7%/-24% YoY, 1%/10% above Bloomberg consensus estimates, thanks to better smartphone ASP (+7% YoY), smart EV's stronger operating income and better operating leverage. Looking into FY26E, while smartphone/auto industry ...

Cogent Communications Conference Call Summary Company Overview - **Company**: Cogent Communications (NasdaqGS:CCOI) - **Industry**: Internet Services - **Market Position**: Manages 25% of global internet traffic, with a focus on providing low-cost internet services and expanding into the Wavelength market Key Industry Trends - **Traffic Growth**: Internet traffic is growing at approximately 10% annually, with historical growth rates around 23% per year over the last 35 years [5][6] - **Technology Transition**: Transition from streaming video as the primary driver of traffic growth to AI, indicating a potential re-acceleration of growth rates above 10% in the future [5][7] - **Streaming Adoption**: Streaming has increased from 18% to 54% of video consumption in developed markets over the past five years [6] Pricing Strategy and Market Dynamics - **Price Compression**: Price per bit has fallen by about 23% per year, leading to flat total addressable market in dollar terms [8][9] - **Competitive Advantage**: Cogent's network architecture allows for the lowest cost of production, pricing at a 50% discount to market average, contributing to its position as the largest carrier of internet traffic globally [9][11] - **Market Share**: Cogent has achieved a 35% market share in 11% of office space in North America, with significant advantages in speed and reliability compared to competitors [13] Wavelength Market Expansion - **Current Market Share**: Cogent holds less than 2% of the Wavelength market, with a target to grow to 25% [16][20] - **Acquisition of Sprint**: The acquisition of Sprint allowed Cogent to enter the Wavelength business, leveraging the dormant Sprint LD voice network for new services [18][19] - **Market Potential**: The total addressable market for Wavelengths is approximately $7 billion, with $3.5 billion in North America [19] Financial Performance and Projections - **Top-Line Growth**: After nine quarters of negative growth, Cogent has reverted to positive growth, projecting a top-line growth rate of 6%-8% per year [22][24] - **EBITDA Margins**: Expected to expand by at least 200 basis points per year, with a focus on on-net sales contributing to profitability [24][25] - **Balance Sheet Management**: Plans to reduce net leverage to 4 times, with a commitment to return capital to shareholders once targets are met [26][30] Capital Allocation and Future Growth - **Investment in Network**: Cogent plans to invest approximately $100 million annually for long-term capital needs, while also focusing on debt reduction [30][31] - **Data Center Portfolio**: Cogent is retrofitting and divesting parts of its data center portfolio, with ongoing negotiations for sales that could yield significant gains [33][34] - **Geographic Expansion**: Continued expansion into new markets, including India and Thailand, with plans to add around 120 carrier-neutral data centers annually [31][32] Conclusion - **Stable Business Model**: Cogent has a consistent business model with a focus on growth and margin expansion, despite recent stock and bond volatility [43] - **Future Outlook**: The company is positioned for growth with a strong focus on net services and profitability, alongside a commitment to return capital to shareholders in the future [44]

Core Viewpoint - Cogent Communications is a significant player in the internet service provider market, with a focus on international operations that are crucial for its financial health and growth potential [1][4]. Group 1: Financial Performance - For the quarter ending December 2025, Cogent's international operations demonstrated significant performance, which is essential for evaluating the company's financial strength [2]. - The stock price is currently at $16.94, reflecting a decrease of approximately 8.85%, with a drop of $1.64 [2]. - The stock has fluctuated between $16.88 and $18.26 on the day of reporting [2]. Group 2: Market Position - Cogent's market capitalization is around $832.1 million, with a trading volume of 894,671 shares on the NASDAQ exchange [3]. - Over the past year, the stock has experienced a high of $80.45 and a low of $15.96 [3]. Group 3: International Operations - The company's ability to penetrate international markets is a key factor in determining its financial health [3]. - Operating in foreign markets provides Cogent with protection against local economic downturns and allows it to benefit from expanding economies, although it also presents management challenges [4]. - Understanding Cogent's reliance on overseas markets is essential for insights into its earnings sustainability and growth potential [4].

Core Insights - Cogent Communications Holdings, Inc. is a significant player in the telecommunications sector, particularly in the Zacks Wireless National industry, providing internet services and data transport solutions to a diverse client base [1] Financial Performance - For the quarter ending February 20, 2026, Cogent reported an earnings per share (EPS) of -$0.64, which was a notable improvement over the Zacks Consensus Estimate of -$1.09, resulting in a positive surprise of 41.28% [2] - The EPS also showed progress from the previous year's figure of -$0.91, and in the prior quarter, Cogent had an EPS of -$0.87 against an anticipated -$1.15, leading to a 24.35% surprise [2] - Cogent's revenue for the quarter was $240.5 million, slightly below the estimated $246.1 million, representing a 1.02% shortfall from the Zacks Consensus Estimate and a decline from $252.29 million reported in the same quarter the previous year [3] - Over the past four quarters, Cogent has only exceeded revenue estimates once, indicating ongoing challenges in meeting market expectations [3] Financial Ratios - The company has a negative price-to-earnings (P/E) ratio of -4.76 and an earnings yield of -21.03%, reflecting ongoing profitability issues [4] - The debt-to-equity ratio stands at -67.61, indicating a high level of debt relative to equity [4] - The enterprise value to operating cash flow ratio is notably negative at -320.72, suggesting potential cash flow difficulties [4] - Despite these challenges, Cogent's price-to-sales ratio of 1.25 and enterprise value to sales ratio of 4.74 indicate that the market still perceives value in the company's sales [5] - The current ratio of 2.02 suggests that Cogent is capable of covering its short-term liabilities with its short-term assets, providing some financial stability amidst broader challenges [5]

Core Insights - KDDI Corporation reported a revenue of approximately $9.8 billion for the period ending February 18, 2026, which was slightly below the estimated $10.1 billion [1][6] Financial Metrics - The company has a price-to-earnings (P/E) ratio of 35.14, indicating a relatively high valuation compared to its earnings, reflecting investor confidence in future growth prospects [2][6] - KDDI's price-to-sales ratio stands at 2.27, showing the market value relative to its sales, suggesting that investors are paying a premium for each dollar of sales [3] - The enterprise value to sales ratio is 3.23, indicating that KDDI is valued higher than its sales alone might suggest [3] - The enterprise value to operating cash flow ratio is 10.65, which is crucial for assessing the company's ability to generate cash to cover debts and fund operations [4] - KDDI's earnings yield is approximately 2.85%, representing the percentage of each dollar invested that was earned by the company [4] Legal Challenges - KDDI faces potential legal challenges as law firms have announced investigations into possible violations of federal securities laws or other unlawful business practices by the company or its senior management [5][6] - The investigations are based on allegations that KDDI may have disseminated materially misleading business information to the public [5]

Core Viewpoint - Eutelsat reported better-than-expected revenue, driven by France's initiatives to develop a European competitor to Elon Musk's Starlink, which supports the company's shift towards internet services [1] Group 1 - Eutelsat's revenue performance exceeded expectations [1] - France's efforts to create a European alternative to Starlink are positively impacting Eutelsat [1] - The company is pivoting its focus towards internet services [1]

Core Viewpoint - KDDI Corporation reported a revenue miss for the quarter, with earnings falling short of expectations, yet the stock has shown resilience despite the decline in price [2][3][6] Financial Performance - KDDIY reported revenue of approximately $9.8 billion, missing the anticipated $10.1 billion [2][6] - The company had expected earnings of $0.33 per share, compared to a previous EPS of $0.37 [2] - The stock opened at $15.71, reflecting an 11.4% decrease, with a 52-week range between $9.06 and $19.09 [3] Stock Performance - The stock's fifty-day simple moving average is $17.15, while the two-hundred-day simple moving average is $16.86 [3] Financial Health Indicators - KDDIY has a quick ratio of 0.54 and a current ratio of 0.56, indicating a moderate ability to cover short-term liabilities [4][6] - The debt-to-equity ratio stands at 0.40, suggesting a balanced approach to financing through debt and equity [4][6] Valuation Metrics - The company's market capitalization is $59.81 billion, with a P/E ratio of 12.47 [4] - KDDIY has a price-to-sales ratio of 2.15 and an enterprise value to sales ratio of 3.11 [5] - The enterprise value to operating cash flow ratio is 10.25, reflecting the company's valuation in relation to its cash flow from operations [5]

Core Insights - Chunghwa Telecom reported its highest fourth quarter revenue in nearly a decade at NT$65.65 billion, achieving full year results that met or exceeded all upper end guidance [4][6] - Full year revenue reached an all-time high of NT$236.11 billion, a 2.7% increase year over year, with full year EPS at NT$4.99, marking an eight-year high [4][11] - The company emphasized its focus on digital innovation and operational excellence as key drivers of its performance [4] Fourth Quarter 2025 Financial Highlights - Total revenue increased by 0.5% to NT$65.65 billion [6][7] - Consumer Business Group revenue rose by 5.9% to NT$39.54 billion, driven by mobile and broadband services [6][8] - Enterprise Business Group revenue decreased by 7.9% to NT$22.02 billion, impacted by prior project recognitions [6][9] - International Business Group revenue increased by 2.5% to NT$2.56 billion, supported by demand for IDC services [6][10] - Operating income decreased by 2.2% to NT$11.38 billion, with a margin of 17.34% [6][13] - Net income attributable to stockholders increased by 3.2% to NT$9.29 billion, with EPS at NT$1.20 [6][13] Full Year 2025 Financial Highlights - Total revenue for 2025 increased by 2.7% to NT$236.11 billion [11] - Consumer Business Group revenue increased by 2.4% to NT$143.37 billion [6][11] - Enterprise Business Group revenue increased by 2.5% to NT$77.24 billion [6][11] - International Business Group revenue decreased by 4.1% to NT$9.52 billion [6][11] - Operating income for 2025 increased by 3.6% to NT$48.55 billion, with a margin of 20.56% [6][14] - Net income attributable to stockholders increased by 4.0% to NT$38.69 billion, with EPS at NT$4.99 [6][14] Cash Flow and EBITDA - Cash flow from operating activities decreased by 2.2% year over year to NT$77.50 billion [15] - EBITDA for the fourth quarter was NT$21.55 billion, a decrease of 0.2% year over year [15][16] - EBITDA for 2025 increased by 2.6% to NT$88.77 billion, with a margin of 37.60% [16] Business Highlights - As of December 31, 2025, mobile subscribers increased by 0.9% to 13.24 million, with mobile service revenue up by 4.7% to NT$17.68 billion [18] - Fixed broadband subscribers slightly increased by 0.5% to 4.45 million, with broadband revenue growing 3.8% to NT$11.88 billion [19] 2026 Guidance - The company expects total revenue to increase by NT$5.88 to NT$7.57 billion, or 2.5% to 3.2%, for 2026 [21][23] - Operating costs and expenses are expected to rise by NT$6.54 to NT$7.01 billion, or 3.5% to 3.7% [21][23] - Net income attributable to stockholders is projected to be between NT$37.39 and NT$38.94 billion, reflecting a potential decrease of NT$1.30 to an increase of NT$0.25 billion year over year [24]

Core Insights - Cogeco anticipates "materially improving financial trends" for its U.S. business starting in the second half of the fiscal year, supported by improved debt outlooks from Moody's and S&P [1][6] - The company is launching a new fully digital brand in the U.S. next month, aiming to enhance sales channels and marketing capabilities [1][6] Financial Performance - Cogeco reported a 4.9% decline in consolidated revenue and a 3.7% decline in adjusted EBITDA in constant currency, while maintaining its fiscal 2026 guidance [5][14] - The company declared a quarterly dividend of CAD 0.987 per share, reflecting a 7% year-over-year increase [4][5] U.S. Operations - The U.S. segment, Breezeline, experienced a 9.9% revenue decline in constant currency, attributed to a shrinking subscriber base and competitive pricing [10] - Despite a decline of 1,100 internet subscribers in the U.S. during the quarter, this was viewed as a significant improvement compared to previous periods [11] Canadian Operations - Canadian operations showed stable revenue with positive year-over-year EBITDA growth, adding 8,900 internet subscribers in the first quarter [6][7] - Adjusted EBITDA for Cogeco Connexion rose by 2% in constant currency, driven by stable revenue and lower operating expenses [8] Market Dynamics - Management noted that competitive intensity in wireline services has increased, leading to expectations of modest customer growth in the near term [8][12] - Fixed wireless access (FWA) has not significantly impacted subscriber churn, although there is ongoing experimentation with resale and promotions in the market [9] Capital Allocation and Debt Management - The company is focused on reducing debt and plans to revisit share buybacks once leverage and cash visibility improve [18][19] - Capital intensity rose to 22.2% from 20.4% a year earlier, but the company remains on track to meet its annual capital expenditure guidance [15]

Xiaomi (1810 HK) Equity Research Summary Industry Overview - **Industry**: Electronic Equipment & Instruments - **Company**: Xiaomi Corporation Key Financial Highlights - **3Q25 Non-IFRS Net Profit**: RMB 11.3 billion, up 81% year-on-year, exceeding consensus by 13% due to higher than expected EV average selling price (ASP) which increased by 9% year-on-year and 2.5% quarter-on-quarter [3][29] - **EV Business**: Achieved its first quarterly operating profit of RMB 0.7 billion in 3Q25, with vehicle deliveries increasing by 34% quarter-on-quarter [3][11] - **Total Revenue**: RMB 113.1 billion in 3Q25, a 22.3% increase year-on-year [29] Segment Performance Smartphone Segment - **Revenue**: RMB 45.97 billion, a decrease of 3.1% year-on-year [29] - **ASP Decline**: From RMB 1,073 in 2Q25 to RMB 1,063 in 3Q25, with gross margin dropping from 11.5% to 11.1% [3][29] - **Profitability Pressure**: Expected due to rising memory costs; prioritizing ASP improvement over shipment growth [4][11] IoT and Lifestyle Products - **Revenue Growth**: Slowed to 5.7% year-on-year, impacted by reduced shipments of smart large home appliances due to subsidy cuts and increased competition [3][4] - **Gross Margin Recovery**: Increased by 1.4 percentage points sequentially [3] EV Segment - **Revenue**: RMB 29.01 billion, a significant increase of 199.2% year-on-year [29] - **Delivery Goal**: On track to meet 2025 vehicle delivery target of 350,000 units, with monthly deliveries expected to rise from approximately 30,000 in July to over 40,000 by October 2025 [4][11] Strategic Insights - **Premiumisation Strategy**: Aimed at alleviating cost pressures in the smartphone segment [4][11] - **Product Mix Optimization**: To mitigate the impact of subsidy reductions in the IoT segment [4] Valuation and Estimates - **Target Price**: Decreased to HKD 62.80 from HKD 65.40, implying a 54% upside from the current share price of HKD 40.78 [5][11] - **Net Profit Estimates**: Lowered by 3%, 6%, and 3% for 2025-2027, respectively, due to reduced revenue estimates [5][30] - **Valuation Method**: Sum-of-the-parts (SOTP) approach; applying a 25x target PE for legacy businesses and DCF for the EV business [5][32] Risks and Challenges - **Component Shortages**: Potential revenue caps due to shortages in key semiconductor components [40] - **Competition**: Increased competition in IoT and internet services from established players like Huawei and Lenovo [40] - **FX Volatility**: Risks associated with foreign exchange fluctuations as Xiaomi expands in overseas markets [40] Conclusion - Xiaomi is positioned for growth in its EV segment while facing challenges in its smartphone and IoT businesses. The company’s strategic focus on premiumisation and product mix optimization is crucial for navigating current market pressures. The revised target price reflects a cautious outlook amid anticipated cost pressures and competitive dynamics.