The 720_ China Consumer, US Elections, Korea Batteries, Toyota, Honda, Coupang, Omron, Nvidia

Summary of Key Points from the Conference Call Industry Overview - China Consumer Sector: The overall consumption sector in China showed weakness in 3Q24, with average year-on-year sales growth at 5%, down from 5% in 2Q24 and 14% in 1Q24. The margin performance was mixed, and while a sequential growth improvement is anticipated in 4Q24 due to an easier base, a significant rebound is not expected. Policy stimulus is awaited to support consumption recovery [2][2][2]. Core Insights - Preferred Sub-sectors: The most preferred sub-sectors within the consumer coverage include white goods, diversified retailers, super premium spirits, sports brands, and dairy, with dairy being upgraded. Top buy ideas include Anta, Midea, Hisense, Miniso, YUMC, Mengniu, Moutai, CRB, Giant Biogene, Laopu, Wuliangye, UPC, Robam, and Yankershop Food [2][2][2]. - Consumer Staples Performance: The 3Q24 results for consumer staples were largely in line with expectations, showing a quarter-on-quarter recovery in some subsectors like dairy, condiments, and snacks. There was a divergence in results, with selective margin beats observed in pet food, dairy, and condiments. The focus remains on policy stimulus measures impacting fundamentals and earnings upside, particularly for dairy and fertility support [2][2][2]. Additional Insights - China Sportswear: Sales in the sportswear sector were softer, with year-on-year trends deteriorating. Niche brands continued to outperform, and there is an expectation for recovery in 4Q24, aided by earlier promotions. However, the balance between increasing retail discounts and sales recovery is critical [6][6][6]. - Korea Batteries: Earnings from cell and cathode companies in Korea were below expectations, leading to further cuts in earnings estimates. The near-term demand for EV batteries in 2025 is seen as regulation-dependent, with risks associated with EU carbon emission targets and the sustainability of US IRA tax credits [8][8][8]. - Toyota and Honda Earnings: - Toyota: Reported operating profits of ¥1.16 trillion for 2Q, which fell short of estimates but exceeded expectations when excluding one-off costs. The company set a medium-term ROE target of 20% [9][10][10]. - Honda: Reported operating profits of ¥257.9 billion, below expectations. The company is focusing on EV sales in the US, with higher-than-expected per-unit incentives for EVs [10][10][10]. - Coupang: The 3Q24 results were in line with expectations, but profitability was lower than anticipated. The company is experiencing strong growth in e-commerce market share despite mixed segment results [10][10][10]. - Omron: Reported operating profits of ¥13.0 billion, exceeding expectations, particularly in the industrial automation business, which showed signs of recovery [10][10][10]. - Wanhua Chemical: Revised estimates and target prices downward due to prolonged weakness in certain product segments and higher-than-expected expenses [10][12][12]. Conclusion The conference call highlighted a cautious outlook for the China consumer sector, with expectations for gradual recovery supported by policy measures. Key companies in various sectors, including automotive and consumer staples, are navigating mixed results, with some showing resilience while others face challenges. The focus remains on strategic adjustments and market conditions that could influence future performance.