Technology Asia Pacific Equity Research 28 August 2025 Huaqin Technology - A Strong growth across segments in 1H25; optimistic on AI momentum and growth outlook; reiterate OW ▲ Key takeaways from Huaqin's earnings call include: 1) strong earnings growth of 46% yoy in 1H25 was driven by accelerating AI server delivery and strong momentum in smartphone/PC/wearable areas; 2) GPM dropped sequentially in 2Q25, due to product mix change, but is expected to recover with a better mix; 3) management expects >Rmb40bn ...

Summary of Apple, Inc. Conference Call Company Overview - **Company**: Apple, Inc. - **Industry**: IT Hardware - **Market Cap**: $3,468,858 million - **Stock Rating**: Overweight - **Price Target**: $240.00 - **Current Price**: $232.78 - **Fiscal Year Ending**: September 2024 Key Points iPhone Build and Shipment Forecasts - September quarter iPhone builds revised 8% higher from 50 million units to 54 million units, with a forecast of 55 million shipments for the same period, reflecting a flat year-over-year change [1][2][10] - The positive revision is attributed to stronger sell-through in the June quarter and reduced channel inventory, creating a larger fill opportunity for September [1][2] - December quarter iPhone builds are expected to range from 73 million to 92 million units, with a more conservative estimate of 73-81 million builds based on historical seasonality [3] Financial Performance and Projections - Current EPS estimates for fiscal years 2025 and 2026 are $7.36 and $8.00 respectively, with a projected growth of 9.1% and 8.6% year-over-year [6][25] - Total revenue growth is expected to be 6.1% in 2025 and 6.5% in 2026, with iPhone revenue growth at 4.2% and 5.5% respectively [25] - Gross margin is projected to improve slightly from 46.7% in 2025 to 46.9% in 2026 [25] Market Sentiment and Risks - The sentiment around Apple is turning more bullish, with expectations of upward revisions in estimates due to pent-up demand and elongated replacement cycles [4][9] - Risks include potential tariff impacts, regulatory concerns, and competition in the AI space, which could affect future growth [4][9][29] Investment Drivers - Key drivers for growth include the introduction of the iPhone 17, expected acceleration in replacement cycles, and a strong focus on services revenue, which is projected to grow at double-digit rates [20][28] - The company is seen as having significant pricing power, particularly in its services segment, which has not seen price increases in two years [9] Valuation and Price Target - The price target of $240.00 is based on a 7.9x EV/Sales multiple for FY26, implying a P/E of 28.9x on projected EPS of $8.30 [14] - The current valuation is not stretched compared to the S&P 500, trading at a 37% premium, which aligns with historical averages [12][14] Conclusion - Apple is positioned for potential growth driven by new product launches and a recovering demand environment, despite facing some near-term uncertainties. The overall outlook remains positive with a focus on innovation and market expansion.

Could a tariff pull-forward have driven its strong results? Although Apple (AAPL -0.27%) recently reported strong fiscal third-quarter results, the stock struggled to gain traction on a tough day on Wall Street that was overshadowed by a weak jobs report. The stock is down nearly 20% on the year, as of this writing. iPhone sales growth impresses Apple's service segment -- which consists of its App Store, iCloud storage, Google Search revenue sharing, Apple Pay, Apple TV, and more -- was once again a bright ...

Summary of Apple, Inc. Earnings Call Company Overview - **Company**: Apple, Inc. (AAPL.O) - **Market Cap**: $3,093,182 million - **Current Stock Price**: $207.57 - **Price Target**: Increased from $235.00 to $240.00 [1][2][6] Key Financial Highlights - **Strong Quarterly Performance**: Apple reported its strongest quarterly results in over two years, with revenue of $94.0 billion, representing a 10% year-over-year increase [2][13]. - **Earnings Per Share (EPS)**: EPS for the quarter was $1.57, which was 8% above Morgan Stanley estimates and 10% above consensus [13]. - **Revenue Guidance**: For the September quarter, Apple guided revenue to be between $101 billion at midpoint, with gross margins expected to be around 46.5% [4][13]. - **Product Performance**: iPhone revenue was 8% above estimates, while Services revenue grew by 13%, significantly better than anticipated [9][13]. Operational Insights - **Broad-Based Outperformance**: The company showed operational outperformance across all product categories, with notable growth in Services and iPhone sales [4][9]. - **AI Investments**: Management provided more detailed insights into AI investments, indicating a ramp-up in infrastructure spending and openness to potential M&A to enhance AI capabilities [4][17]. - **Regulatory Risks**: Significant risks remain, particularly concerning the imminent announcement of Section 232 tariffs and the US v. GOOGL ruling [4][11]. Growth Projections - **Fiscal Year 2025 EPS**: Increased by 3% to $7.36, with FY26 EPS projected at $8.00, which is 3% above Street estimates [9][12]. - **Future Catalysts**: Key upcoming events include the Section 232 announcement, the US v. GOOGL ruling, and the iPhone 17 launch scheduled for September [9][11]. Market Sentiment - **Investment Thesis**: Despite excellent results, the stock is expected to remain range-bound in the near term due to regulatory uncertainties. However, clarity on these issues could lead to a potential outperformance [10][11]. - **Long-Term Outlook**: The company is expected to benefit from pent-up iPhone demand and new AI features, with projections for sustained growth in Services and overall revenue [24][27]. Risks and Considerations - **Regulatory Overhang**: Ongoing regulatory scrutiny, particularly related to the App Store and GOOGL, poses a risk to future growth [15][16]. - **Consumer Spending**: Weak consumer spending could impact iPhone upgrade rates and overall product revenue growth [34]. Conclusion - **Overall Assessment**: Apple, Inc. is positioned for strong growth driven by robust product performance and strategic investments in AI, despite facing regulatory challenges and market uncertainties. The revised price target reflects confidence in the company's ability to navigate these challenges and capitalize on future opportunities [18][24].

Core Insights - Apple Inc. reported a revenue of $94.036 billion for Q3 of FY2025, marking a year-over-year increase of approximately 9.63% [1] - The net profit for the same period was $23.434 billion, reflecting a year-over-year growth of about 9.26% [1] Revenue Breakdown - iPhone sales increased from $39.296 billion in the previous fiscal year to $44.582 billion, showing a growth of over 13% [1] - Service revenue rose from $24.213 billion to $27.423 billion, also exceeding a 13% increase [1] - Computer sales grew from $7.009 billion to $8.046 billion [1] - Sales of wearables, home, and accessories decreased from $8.097 billion to $7.404 billion [1] Market Performance - Revenue growth was observed across major markets, including Greater China, the Americas, Japan, and other Asia-Pacific regions [1] - Specifically, revenue in Greater China increased from $14.728 billion to $15.369 billion year-over-year [1] Challenges - CEO Tim Cook indicated that the company faced an $800 million loss in Q3 due to U.S. tariff measures, with an expected loss of $1.1 billion in Q4 attributed to tariffs [1] - Apple is also facing competitive pressures from rivals such as Samsung and Google [1] - Additionally, the company is encountering regulatory pressures from the European Union regarding its business operations [1]

Core Insights - Apple reported $94.04 billion in revenue for the quarter ended June 2025, a year-over-year increase of 9.6%, with an EPS of $1.57 compared to $1.40 a year ago, exceeding Zacks Consensus Estimates for both revenue and EPS [1] Financial Performance - Revenue exceeded the Zacks Consensus Estimate of $88.92 billion by 5.75% [1] - EPS surpassed the consensus estimate of $1.42 by 10.56% [1] Geographic Revenue Breakdown - Greater China: $15.37 billion, +4.4% year-over-year, above the estimate of $15.27 billion [4] - Europe: $24.01 billion, +9.7% year-over-year, exceeding the estimate of $22.75 billion [4] - Rest of Asia Pacific: $7.67 billion, +20.1% year-over-year, above the estimate of $6.64 billion [4] - Japan: $5.78 billion, +13.4% year-over-year, compared to the estimate of $5.63 billion [4] - Americas: $41.2 billion, +9.3% year-over-year, exceeding the estimate of $38.49 billion [4] Net Sales by Category - Total Net Sales: $66.61 billion, +8.2% year-over-year, above the estimate of $61.56 billion [4] - Services: $27.42 billion, +13.3% year-over-year, exceeding the estimate of $26.95 billion [4] - Mac: $8.05 billion, +14.8% year-over-year, above the estimate of $7.16 billion [4] - iPhone: $44.58 billion, +13.5% year-over-year, exceeding the estimate of $40.61 billion [4] - Wearables, Home and Accessories: $7.4 billion, -8.6% year-over-year, slightly above the estimate of $7.34 billion [4] - iPad: $6.58 billion, -8.1% year-over-year, below the estimate of $6.78 billion [4] Stock Performance - Apple shares returned -1.6% over the past month, while the Zacks S&P 500 composite increased by 2.7% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market [3]

Core Insights - MP Materials (MP) has entered a significant long-term agreement with Apple (AAPL) to supply rare earth magnets made entirely from recycled materials, valued at $500 million, marking a pivotal development for MP in scaling its recycling platform and magnet production business [1][10]. Group 1: Agreement and Production - The magnets will be produced at MP's Fort Worth, TX facility using recycled rare earth feedstock sourced from post-industrial and end-of-life magnets processed at its Mountain Pass site in California [2][10]. - MP Materials and Apple have collaborated for five years to develop advanced recycling technology that meets Apple's stringent standards for recycled rare earth magnets [3][10]. - To fulfill the agreement with Apple, MP will construct a dedicated commercial-scale recycling line at Mountain Pass, allowing for the processing of various inputs, including magnet scrap [3][4]. Group 2: Strategic Partnerships and Capacity Expansion - MP Materials has formed a public-private partnership with the U.S. Department of Defense (DoD) to expedite the development of a domestic rare earth magnet supply chain, supported by a multibillion-dollar investment package [4]. - The partnership with Apple will lead to a significant expansion of MP's Fort Worth magnetics facility to meet the increased demand [4]. Group 3: Market Impact and Future Projections - Magnet shipments are anticipated to commence in 2027, with production ramping up to support hundreds of millions of Apple devices, highlighting the critical role of rare earth magnets in various electronic products [5][10]. - MP's stock has surged by 305.2% this year, significantly outperforming the industry average growth of 18.7% [9]. - The Zacks Consensus Estimate for MP's 2025 earnings indicates a projected loss of $0.42 per share, while the estimate for 2026 shows a potential profit of $0.41 per share, reflecting positive revisions in earnings estimates over the past 60 days [13].

Investment Rating - The report maintains a "Buy" rating for Xiaomi Corp. (1810.HK) with a target price raised to HK$65 from HK$62, indicating a 26% upside potential [1][18]. Core Insights - Xiaomi's 1Q25 results exceeded expectations, with revenue growing by 47% year-over-year (yoy) to Rmb111 billion, and adjusted net profit increasing by 65% yoy to Rmb10.7 billion [1]. - Key growth drivers included AIoT and electric vehicles (EV), with AIoT revenue growing by 59% yoy, significantly outperforming the market [2][34]. - The gross profit margin (GPM) for AIoT reached a record high of 25.2%, up 5.4 percentage points yoy, making it the largest gross profit contributor for Xiaomi [3][58]. Financial Performance - Revenue from smart EVs showed a gross profit margin expansion to 23.2%, attributed to strong pricing power and lower bill of materials (BOM) costs [4]. - Smartphone revenue grew by 9% yoy to Rmb50.6 billion, with a market share increase in China to 19%, marking Xiaomi's first position in the market after 10 years [28]. - Internet services revenue increased by 13% yoy to Rmb9.1 billion, driven by a 20% growth in advertising revenue [67]. Segment Analysis - AIoT and lifestyle products contributed significantly to revenue, with smart large home appliances seeing a revenue growth of 114% yoy [42]. - Tablet shipments grew by 56% yoy, with Xiaomi achieving the No.3 market share globally and in China [47]. - Wearables revenue increased by 56.5% yoy, with Xiaomi maintaining a leading position in the global market [58]. Future Outlook - The company anticipates continued growth in AIoT, projecting a 22% compound annual growth rate (CAGR) for overseas revenue from 2024 to 2027 [61]. - Upcoming events to watch include the 6.18 shopping festival and a new product release event, which are expected to drive further consumer interest and sales [19].

Core Insights - Apple reported second-quarter fiscal 2025 adjusted earnings of $1.65 per share, exceeding the Zacks Consensus Estimate by 2.48% and reflecting a year-over-year increase of 7.8% [1] - Net sales rose 5.1% year over year to $95.36 billion, surpassing the Zacks Consensus Estimate by 1.16% [1] Sales Performance - Product sales, which constitute 72.1% of total sales, increased by 2.7% year over year to $68.71 billion [1] - Services revenues grew 11.6% year over year to $26.65 billion, accounting for 27.9% of total sales, although it fell short of the consensus mark by 0.43% [2] - iPhone sales rose 1.9% year over year to $46.84 billion, making up 49.1% of total sales and beating the Zacks Consensus Estimate by 0.84% [3] - Greater China sales decreased by 2.3% year over year, while revenues from Japan and the Americas increased by 16.5% and 8.2%, respectively [4] - Non-iPhone revenues (iPad, Mac, and Wearables) collectively increased by 4.5% year over year, with Mac sales at $7.95 billion (up 6.7%) and iPad sales at $6.4 billion (up 15.2%) [5] - Wearables, Home, and Accessories sales declined by 4.9% year over year to $7.52 billion [6] Margin Analysis - Gross margin expanded by 50 basis points year over year to 47.1%, with a sequential increase of 20 basis points due to a favorable product mix [7] - Products' gross margin contracted by 340 basis points sequentially to 35.9% due to unfavorable foreign exchange impacts, while Services' gross margin improved by 70 basis points sequentially to 75.7% [7] - Operating margin increased by 30 basis points year over year to 31% [8] Financial Position - As of March 29, 2025, Apple had cash and marketable securities of $132.92 billion against term debt of $92.2 billion [9] - The company returned nearly $29 billion in the reported quarter through dividend payouts and share repurchases [9] - The board authorized an additional $100 billion for share repurchases and raised dividends by 4% to 26 cents per share [10] Future Outlook - For the third quarter of fiscal 2025, Apple expects net sales to grow low to mid-single digits year over year, with a gross margin forecast of 45.5-46.5% [11] - The Zacks Consensus Estimate for third-quarter fiscal 2025 revenues is $89.22 billion, indicating a 4.02% growth year over year [13]

Core Insights - For the quarter ended March 2025, Apple reported revenue of $95.36 billion, reflecting a year-over-year increase of 5.1% and an EPS of $1.65, up from $1.53 in the same quarter last year [1] - The reported revenue exceeded the Zacks Consensus Estimate of $94.26 billion by 1.16%, while the EPS surpassed the consensus estimate of $1.61 by 2.48% [1] Revenue Performance - Geographic Revenue: - Americas: $40.32 billion, exceeding the estimate of $39.46 billion, with an 8.2% year-over-year increase [4] - Europe: $24.45 billion, slightly below the estimate of $24.80 billion, with a 1.4% year-over-year increase [4] - Rest of Asia Pacific: $7.29 billion, below the estimate of $7.45 billion, with an 8.4% year-over-year increase [4] - Japan: $7.30 billion, exceeding the estimate of $6.55 billion, with a significant 16.5% year-over-year increase [4] - Greater China: $16 billion, below the estimate of $16.55 billion, reflecting a 2.3% year-over-year decline [4] Sales by Category - Net Sales: - Products: $68.71 billion, exceeding the estimate of $67.61 billion, with a 2.7% year-over-year increase [4] - Services: $26.65 billion, slightly below the estimate of $26.76 billion, with an 11.6% year-over-year increase [4] - Sales by Category: - Mac: $7.95 billion, exceeding the estimate of $7.79 billion, with a 6.7% year-over-year increase [4] - iPhone: $46.84 billion, exceeding the estimate of $46.45 billion, with a 1.9% year-over-year increase [4] - Wearables, Home and Accessories: $7.52 billion, below the estimate of $7.76 billion, with a 4.9% year-over-year decline [4] - iPad: $6.40 billion, exceeding the estimate of $5.92 billion, with a 15.2% year-over-year increase [4] Stock Performance - Over the past month, Apple's shares have returned -5.1%, compared to the Zacks S&P 500 composite's -0.7% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]