ab 24 February 2025 First Read China Industrials Quick take on USTR's proposed actions on investigation of China's shipping supply chain Potential impacts from USTR actions may be significant USTR confirmed findings on Section 301 investigation of China's targeting of the maritime, logistics and shipbuilding sectors on 21 Feb., and will hold a public hearing about the proposed actions on 24 Mar. The proposed service charges on shipping companies with China exposure (i.e. Chinese shipping companies and all s ...

Summary of Key Points from the Conference Call Industry Overview - **Industry**: China Financials - **Outlook**: Attractive [3][5] Core Insights - **Local Government Financing**: The bottom of local government financing is expected to have occurred in the first half of 2024, with a more sustainable financing structure emerging that balances near-term and long-term risks [5][6] - **Financial Clean-Up**: The financial clean-up process is believed to be over 90% complete, having eliminated most financial risks since its initiation in 2016 [34][37] - **Infrastructure Investments**: There remains room for infrastructure investments, but they will be more balanced across regions and sectors, with total infrastructure investments projected at Rmb23 trillion in 2024 [17][18] - **Debt Management**: The shift from Local Government Financing Vehicles (LGFVs) to official local government bonds is expected to reduce financial uncertainty and improve market stability [26][29] Financial Metrics - **Interest Burden**: The net interest burden of the Chinese government is projected to decline to 2% of GDP in 2024, down from 2.3% in 2022, due to improved cash flows from infrastructure projects [24][30] - **Credit Demand**: Long-term credit demand is expected to stabilize between 5-6%, with total credit growth rationalizing to 7.5% in 2025 and further to 7% in 2026 [52][54] Market Re-Rating - **Bank Valuations**: A potential price-to-book (P/B) re-rating of 0.1x-0.2x for banks is anticipated, which could translate into a 30-40% upside in share prices over the next two years [61][64] - **Insurance Sector**: A shift in preference towards insurance stocks is expected, with companies like Ping An likely to outperform due to their healthy in-force business and attractive valuations [67][68] Regulatory Environment - **Policy Adjustments**: Policymakers have been addressing key risks annually since 2015, which has contributed to the current financial stability and growth model transition [41][37] - **HKEx Upgrade**: The Hong Kong Stock Exchange (HKEx) has been upgraded to Overweight due to lower risks and a more innovative growth model in China, with expectations for increased trading volume and IPO activity [75][76] Additional Insights - **Infrastructure-Related Risks**: The improvement in local government funding is expected to alleviate risks associated with LGFVs and peripheral sectors, enhancing credit quality in infrastructure-related manufacturing [45][47] - **Market Sentiment**: The transition from a property-driven to an innovation-driven growth model is anticipated to support market sentiment and trading volume in Hong Kong [77][78] This summary encapsulates the key points discussed in the conference call, highlighting the current state and future outlook of the China financial sector, particularly focusing on local government financing, infrastructure investments, and market re-rating potential.

Nickel Industries | Asia Pacific February 25, 2025 05:30 AM GMT Risk Reward Update What's Changed | Nickel Industries (NIC.AX) | From | To | | --- | --- | --- | | Price Target | A$1.05 | A$1.00 | | Bull Case | A$2.55 | A$2.30 | | Updated Components | | | | EPS | | | | Bull Base Bear Scenarios | | | Risk Reward for Nickel Industries (NIC.AX) has been updated Reason for change We have updated our model to reflect CY24 actual numbers after the CY24 result. Our CY25-27e EPS forecasts fall 9.8%, 4.7% and 5% resp ...

February 23, 2025 08:06 PM GMT 2024 preliminary net income up 10% YoY Foxconn Industrial Internet Co. Ltd. | Asia Pacific Reaction to earnings Unchanged In-line Largely unchanged Impact to our investment thesis Financial results versus consensus Impact to next 12-month consensus EPS Source: Company data, Morgan Stanley Research FII announced preliminary 2024 revenue of Rmb609.1bn (+27.9% YoY) and net income of Rmb23.2bn (+10.3% YoY). This implies 4Q24 revenue of Rmb172.8bn (+1% QoQ, +17% YoY) and net income ...

Summary of Key Points from the Conference Call on Co-Packaged Optics Technology Industry and Company Involved - **Industry**: Co-Packaged Optics (CPO) Technology - **Company Discussed**: TSMC (Taiwan Semiconductor Manufacturing Company) Core Insights and Arguments - **Definition and Importance of CPO**: CPO utilizes semiconductor technology to create optical engines (OE) that function as optical transceivers, significantly reducing the size of key components such as signal modulators and light generation systems. This technology addresses issues like space constraints in data centers and rising power consumption, particularly as data rates increase to 3.2T to 6.4T, where CPO becomes advantageous, and beyond 6.4T, it becomes essential [4][5][6] - **Stages of Adoption**: The implementation of CPO is categorized into three stages: 1. OE on circuit boards (already deployed) 2. OE on substrates (expected meaningful adoption in data center switches) 3. OE on interposers (in R&D phase, earliest deployment expected in 2027 or later) [4][5] - **Role of TSMC**: TSMC is anticipated to play a crucial role in OE production due to its capabilities in various process nodes and hybrid bonding. The company has developed the COUPE (Compact Universal Photonic Engine) platform, which is already in its second generation [4][5] - **Challenges Facing CPO**: - **Thermal Management**: Critical issue as optical signals are sensitive to heat, complicating heat dissipation when close to electronic ICs. - **Manufacturing Complexity**: Involves sophisticated integration techniques due to different process nodes for PICs (65nm) and EICs (7nm). - **Repairability**: Traditional optical modules are easily replaceable, necessitating some level of pluggability for OEs [4][5] - **Beneficiaries of CPO Technology**: Foundries and OSATs (Outsourced Semiconductor Assembly and Test) are positioned to benefit from the development of CPO technology. Additionally, larger IC substrates will be required to accommodate the increased number of components [4][5] Other Important but Potentially Overlooked Content - **Market Context**: The discussion highlights the growing demand for efficient data transmission solutions in the context of rising data center power consumption and the need for reduced latency in AI data transmission [4][5] - **Analyst Certification and Disclosures**: The report includes standard disclaimers regarding potential conflicts of interest and the objectivity of the research, emphasizing that J.P. Morgan may have business relationships with TSMC [3][10][12] This summary encapsulates the critical points discussed in the conference call regarding CPO technology and its implications for TSMC and the broader semiconductor industry.

Summary of TCL Tech Conference Call Company Overview - **Company**: TCL Tech - **Industry**: LCD and OLED display panel manufacturing - **Market Position**: Second-largest LCD display panel supplier in China, largest gaming monitor and LTPS panel maker globally [doc id='34'] Key Financial Insights - **Earnings Forecast**: Earnings forecast raised by 12-18% for 2025-26, reflecting a positive outlook on TCL's panel business [doc id='1'][doc id='31'] - **Revenue Growth**: Expected panel business revenue CAGR of 16% from 2024-26, driven by large panel area shipments and improved ASP [doc id='9'][doc id='2] - **Free Cash Flow (FCF)**: Anticipated sustained improvement in FCF due to disciplined capex and enhanced operating cash flow [doc id='3'][doc id='1'] Valuation and Price Target - **Price Target**: Increased from Rmb4.00 to Rmb6.00, implying a 1.9x 2025E P/BV [doc id='4'][doc id='28] - **Current Stock Price**: Rmb4.88 as of February 24, 2025 [doc id='6'] - **Market Capitalization**: Rmb91.6 billion (approximately US$12.7 billion) [doc id='6'] Panel Business Insights - **Panel Shipments**: Large panel area shipments expected to grow at a CAGR of 15% from 2024-26, supported by the acquisition of LGD Guangzhou G8.5 fab and ramp-up of T9 fab [doc id='2'][doc id='9] - **Average Selling Price (ASP)**: Anticipated increase in large-size LCD panel ASP by 3% in 2025 and 1% in 2026 due to improved product mix [doc id='2'][doc id='9] - **Gross Profit Margin (GPM)**: Expected GPM growth of 2.7ppt in 2025 and 1.7ppt in 2026, driven by product mix improvement and peak depreciation in 2026 [doc id='17'][doc id='2] Risks and Market Sentiment - **Stock Performance**: TCL's stock has underperformed the A-share Electronics Index by 22ppt since October 2024, indicating market skepticism about the sustainability of panel price recovery [doc id='20'][doc id='9] - **Debt Levels**: Net debt projected to decrease from Rmb144.8 billion in 2024E to Rmb138.6 billion in 2025E [doc id='5'] Industry Outlook - **Supply-Demand Dynamics**: Expected undersupply in large panels in 2024, with a potential oversupply in 2025, followed by another round of undersupply from Q3 2026 [doc id='35'] Additional Insights - **Capex Plans**: Total capex expected to decline by Rmb5 billion in 2025, stabilizing in 2026 [doc id='3] - **Depreciation Trends**: Combined depreciation for the panel business expected to peak in 2026, allowing for faster revenue growth compared to depreciation [doc id='2'][doc id='9] This summary encapsulates the critical insights from the TCL Tech conference call, highlighting the company's financial performance, market position, and future outlook.

February 25, 2025 12:36 AM GMT Greater China Materials | Asia Pacific DRC Suspends Cobalt Exports; Impacts on CMOC and Huayou Key Takeaways What's new? Bloomberg reported DRC has suspended cobalt exports for four months, effective from Feb 22, to rein in the oversupply, according to the country's Authority for the Regulation and Control of Strategic Mineral Substances' Markets. DRC accounted for ~70% of global cobalt production in 2024. What's the impact? CMOC produced 114kt cobalt in 2024 and plans for 110 ...

February 23, 2025 09:41 PM GMT China Equity Strategy | Asia Pacific Sector Allocation & Focus List Changes - Rotating from Defensive to Tech Adoption Upgrade Media&Ent, IT & Cons Disc, downgrade Materials, Energy, Telecom & Utilities on more positive stance on China equity given tech adoption and equity risk premium alleviation. Add Meitu, HKEX, Espressif and Alibaba to China/HK Focus List, and Espressif and Tuopu to A-share Thematic list. Following our China upgrade report (China Equity Strategy: Getting O ...

24 February 2025 REMD Michelle Kwok* Head of Asia Real Estate and HK Equity Research The Hongkong and Shanghai Banking Corporation Limited michellekwok@hsbc.com.hk +852 2996 6918 Oliver Yu* Analyst, Asia Real Estate The Hongkong and Shanghai Banking Corporation Limited oliver.y.o.x.yu@hsbc.com.hk +852 2288 2050 China Real Estate Equities 10 signs the market has bottomed China We highlight 10 signals that the China housing market has bottomed. Three years on, national new home sales have shrunk 48% vs the 20 ...

ab 24 February 2025 Global Research China Outlet Sector Can outlets continue to expand in China? 239 outlets in China in 2023; still less penetration than in the US | Stock Code | Company name | Close Price Market Cap | | EPS | | 24-26 EPS | | PE | | PEG | | PB | | ROE | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | （lc） US$ mn | 2024E | 2025E | 2026E | CAGR | 2024E | 2025E | | | | 2026E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E | | | ...