February 21, 2025 09:03 PM GMT European Economics Weekly | Europe How Investors See Europe This week, Jens Eisenschmidt and Chiara Zangarelli discuss recent investor debates from marketing in the US and Europe. The focus next week will be on the outcome of the German election and February inflation prints in some countries. In the UK, we will follow a range of BoE speeches. This week in Europe: Key debates with investors across US and Europe We spent the last two weeks travelling, meeting investors in Berli ...

21 February 2025 Asian Industrial Technology Humanoid Robots - Figure AI Helix shows exciting progress, now we dare it to... Jay Huang, Ph.D. +852 2918 5746 jay.huang@bernsteinsg.com Dien Wang, Ph.D. +852 2918 5743 dien.wang@bernsteinsg.com 2) Object generalization. Helix claims to be able to "pick up anything, including thousands of items they have never encountered before", which is, as Figure pointed out, important for household tasks and deployment in unstructured environments. The progress, in our view ...

21 February 2025 Big tech builds AGI Disruptive Technologies Global AI infrastructure accelerates The "compute" economy It has been a whirlwind start to 2025 in the race for big tech to build AGI (artificial general intelligence). The Trump administration announced Project Stargate, which promised to fund American AI infrastructure. Then a few weeks ago, the highly market disruptive Chinese AI model DeepSeek was released, sending investors and corporate stakeholders to take stock of the AI boom. What else? ...

China EV Tracker Equities Autonomous driving push for mass market adoption Autonomous driving (AD)'s DeepSeek moment. Penetration of higher-level AD functions in EV is 17% (incl Tesla), a level we see breaking the 10% inflection point (The battle of attrition reaches the knockout stage, 7/1/25). BYD's aggressive AD push makes higher level (above L2) autonomy functions like Highway navigation, valet parking and city manoeuvre standard configuration for its mass market model range with price points less than ...

FICC Research Economics 21 February 2025 Emerging Asia Outlook Caution is the mantra against uncertainty Facing certain uncertainty, policymakers in the region are turning more cautious. BI surprised with a hold, following the BSP. Next week, we expect the BoT to also hold, but for the BoK to likely cut with more neutral guidance. Risk sentiment turned modestly positive with Russia-US ceasefire discussions, even as US President Trump continued to provide more details about his tariff plans. With President T ...

Summary of HSBC Holdings plc Conference Call Company Overview - **Company**: HSBC Holdings plc - **Industry**: Banks & Financial Services - **Date of Call**: 19 February 2025 - **Analyst**: Katherine Lei Key Points Financial Performance - **4Q Results**: Clean pretax profits of $7.3 billion, beating consensus by 9% and JPMe by 10% [1] - **Revenue Growth**: 4Q revenue growth exceeded expectations with Net Interest Margin (NIM) up 8 basis points quarter-over-quarter (q/q) and wealth revenue increasing by 23% year-over-year (y/y) [1] - **New Guidance**: Management provided guidance for 2025 Net Interest Income (NII) of $42 billion, above consensus of $40.8 billion, and expects wealth fee and other income to grow at a double-digit CAGR from 2025 to 2027 [1][2] - **Cost Management**: Cost growth is projected at 3%, leading to a cost base of $33.1 billion for 2025, slightly below consensus of $33.8 billion [1][6] - **Return on Tangible Equity (RoTE)**: Expected to be in the mid-teens for 2025-2027, compared to consensus estimates of 13.5% and 13.9% for 2025 and 2026, respectively [1][6] Market Position and Valuation - **Valuation Metrics**: HSBC is trading at 1.1x Price-to-Book (P/B) with a 12.5% Return on Equity (ROE) for 2025 consensus, compared to a 10-year mean P/B of 0.9x and mean ROE of 8.7% [2] - **Potential for Re-rating**: If compared to developed market banks, HSBC could be re-rated to 1.3x book value [2] - **Total Return Estimate**: Despite a recent 24% rally in the past three months, HSBC is expected to offer a ~10% total return over the next 12 months [2] Risks and Concerns - **Cost Savings Guidance**: Management's guidance on cost savings from reorganization was seen as a slight disappointment, with expected savings of $1.5 billion by FY27 [1] - **Impairments**: Impairments of $1.4 billion were 27% above consensus, primarily due to wholesale single name charges in the UK and mainland China commercial real estate (CRE) [6] - **China CRE Exposure**: China CRE accounted for 0.8% of HSBC's loan book in 4Q24, with a non-performing loan (NPL) ratio decreasing to 25.3% from 33.7% in the previous quarter [6][15] Segment Performance - **Asia Business Review**: Pre-provision profit (PPoP) and clean pretax profit growth were 5% and 4% y/y in 4Q24, respectively, with a contraction in net interest income of -2% y/y [8] - **Wealth Management**: Wealth income grew by 27% y/y, indicating strong momentum in this segment [6] Outlook - **Medium-Term Growth**: Management expects mid-single-digit loan growth and double-digit CAGR in wealth fees over the medium to long term [6] - **Cost Program**: Targeting $1.5 billion in annualized simplification savings by 2026, with a focus on reallocating costs from non-strategic activities to priority growth areas [6] Conclusion - **Investment Rating**: HSBC remains a top pick among APAC banks with an Overweight rating, supported by strong financial performance and growth prospects despite some risks related to cost management and impairments [1][2]

Summary of Earnings Call for C&S Paper and Hengan Industry Overview - The report focuses on the consumer goods sector in China, specifically the paper and hygiene products industry, highlighting the competitive landscape and operational challenges faced by companies in this sector. C&S Paper Key Points - **Earnings Forecasts**: C&S Paper's earnings are projected to decline significantly from Rmb333 million in 2023 to Rmb60-80 million in 2024, indicating intense competition and operational challenges [2][23] - **Sales Decline**: Expected sales decline of 12% in 2024 due to aggressive sales growth strategies in 2023 leading to destocking pressures [2][23] - **Gross Profit Margin (GPM)**: GPM is anticipated to improve by 1.5 percentage points year-on-year to 31.8% in 2025, driven by a decline in pulp prices [3][23] - **New Price Target**: The price target has been reduced from Rmb7.70 to Rmb5.10, reflecting earnings estimate cuts [3][27] - **Net Profit Margin (NPM)**: NPM is expected to improve to 4.2% in 2025 from 0.8% in 2024, aided by ongoing expense control measures [24][23] Financial Metrics - **2024 Estimates**: Revenue is expected to be Rmb8.649 billion, down 21.6% from previous estimates, with net profit projected at Rmb67 million, an 88% decline [13][25] - **2025 Estimates**: Revenue forecasted at Rmb9.081 billion, with net profit expected to recover to Rmb377 million, a 45.3% decline from previous estimates [13][25] Hengan Key Points - **Sales Weakness**: Hengan's sales in Q3 were impacted by deeper discounts offered to channels, with a projected 3% decline in core HPC sales in the second half of 2024 [4][34] - **Earnings Decline**: Expected earnings decline of 37% in 2H24, with overall sales and earnings projected to decline by 3% and 14% respectively in 2024 [4][34] - **Price Target Adjustment**: The price target has been reduced from HK$27.00 to HK$24.00, reflecting lower earnings estimates [6][36] - **Dividend Payout**: Hengan has committed to a dividend payout of HK$1.4 per share, providing support to the share price despite lukewarm earnings outlook [6][36] Financial Metrics - **2024 Estimates**: Revenue expected to be Rmb22.938 billion, a 6.9% decline from previous estimates, with net profit projected at Rmb2.407 billion, a 13% decline [34][36] - **2025 Estimates**: Slight sales growth of 1% is anticipated, with stable earnings expected despite increased advertising and promotion expenses for premium products [5][34] Additional Insights - **Market Dynamics**: Both companies are facing intense competition and pricing pressures, particularly in the tissue and hygiene product segments, which are affecting their profitability and market share [2][4][34] - **Pulp Prices**: The decline in pulp prices is expected to positively impact GPM for both companies in 2025, although the competitive landscape remains challenging [3][5][34] - **Long-term Outlook**: C&S Paper is expected to experience modest revenue growth in the coming years, while Hengan's growth is projected to be stable but under pressure from competition and pricing strategies [3][5][23][34]

Summary of J.P. Morgan's Asia Pacific Equity Research on China Medtech Industry Overview - The report focuses on the China Medtech industry, particularly the performance of multinational corporations (MNCs) and domestic players like Mindray in the context of recent earnings reports for Q4 2024 [2][5]. Key Points Market Dynamics - MNC medtech companies are adopting a cautious outlook for their operations in China for 2025, primarily due to volume-based procurement (VBP) policies and increasing domestic competition, which may lead to flat or declining sales expectations in areas such as in vitro diagnostics (IVD) [2][5]. - Companies like GE Healthcare and Danaher have reported negative impacts on their sales due to these challenges, with Danaher anticipating a US$150 million impact from VBP in 2025 [2][5]. Domestic Players' Performance - In contrast, domestic companies like Mindray are expected to benefit from import substitution dynamics and are positioned to gain market share in China [2][5]. - Mindray, as the largest domestic IVD player, is optimistic about its growth prospects, although it has not provided specific guidance for 2025 [5][6]. Technological Advancements - Mindray is leveraging AI technology in healthcare, having launched the QiYuan, a large language model (LLM) for critical care, in collaboration with Tencent. This positions Mindray favorably as hospitals increasingly adopt AI solutions [2][5]. - The company also introduced an AI-enabled platelet-counting technology in the EU, aimed at improving cancer diagnosis accuracy [5][6]. Tariff Risks - MNCs view US tariff risks as manageable. For instance, GE Healthcare expects a minor negative impact on its adjusted EBIT margin due to tariffs, while Siemens and Intuitive Surgical have strategies in place to mitigate these risks [6][7]. - Mindray's exposure to US tariffs is limited, with only about 7% of its total revenue coming from the US, suggesting that tariffs are not a significant concern for investors [6][7]. Earnings Summary - The report includes a summary of MNC medtech performance in China and globally, highlighting challenges faced by companies like GE Healthcare and Danaher, contrasted with the growth expectations for domestic players like Mindray and Microport [7]. Additional Insights - The report indicates that while MNCs face headwinds in China, they continue to experience robust growth in other regions, driven by technological advancements [2][5]. - The overall sentiment suggests that domestic medtech companies are well-positioned to capitalize on favorable local market dynamics, while MNCs may need to adapt their strategies to navigate the challenges in the Chinese market [5][6]. Conclusion - The China Medtech industry is characterized by a divergence in outlook between MNCs and domestic players, with domestic companies like Mindray poised to benefit from local market dynamics and technological innovations, while MNCs face challenges from regulatory policies and competition [2][5][6].

Summary of China Tower Corp Ltd Conference Call Company Overview - **Company**: China Tower Corp Ltd (Ticker: 0788.HK) - **Industry**: Greater China Telecoms Key Points Risk Reward Update - The risk-reward scenario for China Tower Corp Ltd has been updated with new price targets: - **Bull Case**: HK$15.00 - **Base Case**: HK$13.00 - **Bear Case**: HK$10.00 [1][2] Earnings Forecasts - Adjusted EPS forecasts post a 1:10 reverse stock split: - **2024**: Rmb0.62 - **2025**: Rmb0.72 - **2026**: Rmb1.12 [2] Stock Performance - Current stock price (as of February 19, 2025): HK$1.21 - 52-week range: HK$0.86 - HK$1.23 [3] Financial Metrics - **Price Target**: HK$13.00 based on discounted cash flow (DCF) valuation with a WACC of 10.1% and terminal growth rate of 1.0% [6]. - **Revenue Growth**: - Tower revenue expected to grow by 1-2% over the next few years due to continuous tower construction [10]. - DAS revenue projected to grow in the teens after a normalized base for the energy business [10]. - **DPS Growth**: Expected ample growth in 2026 due to depreciation savings and stable dividend payout ratio [10]. Tenancy and Revenue Insights - Average revenue per TSP tenant is expected to decline slightly: - **2025**: -1.0% - **2026**: -0.5% [8][9] - New TSP tenants forecast: - **2025/26**: 100k in bull case, 75k in base case, and 50k in bear case [8][14]. Consensus and Ratings - **Stock Rating**: Overweight [3]. - **Industry View**: Attractive [3]. - **Consensus Price Target Distribution**: - Mean target: HK$1.25, with Morgan Stanley's target at HK$13.00 [7]. Investment Drivers - Positive secular growth and self-help themes identified [13]. - Risks include slower-than-expected non-telecom revenue growth and 5G development [20]. Key Earnings Inputs - **Tower Revenue YoY**: - 2023: -2.8% - 2024e: 1.2% - 2025e: 1.5% - 2026e: 1.6% [16]. Institutional Ownership - Institutional ownership stands at 50.7% [19]. Analyst Insights - Analysts express confidence in the company's ability to maintain resilient top-line growth compared to operators, with visible DPS upside [10]. Conclusion China Tower Corp Ltd presents a favorable investment opportunity with a solid growth outlook, despite some challenges in revenue per tenant. The updated price targets and earnings forecasts reflect a positive sentiment towards the company's future performance in the telecom sector.

Summary of Key Points from the Conference Call Industry Overview - **Commodities Sector**: The report discusses various commodities, including iron ore, thermal coal, lithium, copper, aluminum, nickel, and gold, highlighting their current prices and market trends [2][3][4]. Key Insights - **Iron Ore**: Prices for iron ore (62% cfr Qingdao) remain stable at $108/dmt, with expectations of improving demand and fewer portside arrivals contributing to market stability [2][2]. - **Coal Prices**: Thermal coal prices increased by 2.6% to $104/t, indicating a positive trend in the coal market [2][2]. - **Lithium Prices**: Lithium carbonate battery grade prices rose by 2.6% to $9,800/t, while lithium hydroxide battery grade saw a 4.5% increase to $9,300/t, reflecting strong demand in the battery sector [2][2]. - **Base Metals**: Aluminum prices reached a one-month high due to the EU's agreement to ban Russian primary aluminum imports, impacting supply dynamics [3][3]. - **Gold Market**: Gold prices experienced a slight decline after reaching record highs earlier in the session, indicating volatility in the precious metals market [4][4]. Company-Specific Highlights - **SSR Mining**: The company reported Q4 gold equivalent production of 124,000 ounces at an all-in sustaining cost (AISC) of $1,857/oz, exceeding market expectations. The forecast for 2025 anticipates production of 540,000 ounces at an AISC of $1,900/oz [10][10]. - **Rio Tinto**: The company announced a full-year dividend of $4.02 per share, which was ahead of market expectations and reflects a 60% payout ratio [9][9]. Regulatory and Market Dynamics - **China's Rare Earth Regulations**: China has initiated public consultation on new regulations aimed at protecting its domestic rare earth industry, which may impact global supply chains [5][5]. - **U.S. Tariffs**: The U.S. government is considering imposing auto tariffs of around 25% and similar duties on semiconductors and pharmaceuticals, which could affect various sectors, including automotive and technology [7][7]. Economic Indicators - **Global Economic Trends**: The report includes various economic indicators such as U.S. housing starts, unemployment rates, and inflation metrics, which provide context for the commodities market [11][11]. Risks and Valuation - **Investment Risks**: The mining sector is noted for its inherent risks, including commodity price volatility, political instability, and operational challenges, which could significantly impact company performance [13][13]. - **Valuation Methodology**: The report emphasizes the use of discounted cash flow (DCF) and enterprise value/EBITDA methods for valuing companies in the mining sector [13][13]. Conclusion - The commodities market is currently experiencing mixed trends, with some sectors like lithium and coal showing positive momentum, while others like gold exhibit volatility. Companies like SSR Mining and Rio Tinto are performing well, but the overall market remains sensitive to regulatory changes and economic indicators. Investors should remain cautious of the inherent risks in the mining sector while considering potential opportunities.