+1-212-816-8830 veronica1.clark@citi.com US Economics Weekly Freezing temperatures, frozen markets CITI'S TAKE As Fed officials and markets are in a holding pattern awaiting more data and policy clarity, the limited data that was released this week if anything reinforced our expectation for slowing growth this year. Housing construction and sales fell, and weaker homebuilder sentiment suggests limited upside. Manufacturing PMI remains modestly expansionary, but services PMI surprisingly fell into contractio ...

Summary of Unity Software Inc Conference Call Company Overview - **Company**: Unity Software Inc (U.N) - **Industry**: Internet and Gaming - **Market Cap**: $11.345 billion as of February 20, 2025 - **Current Stock Price**: $28.00 - **Price Target**: Raised from $26.00 to $32.00, with a bull case of $45.00 [1][2][13] Key Points and Arguments 1. **Introduction of Vector**: Unity announced an earlier-than-expected rollout of its new GPU-enabled ad algorithm, Vector, at the end of Q1 2025, which is expected to significantly enhance its advertising business and drive competitive return on ad spend (ROAS) for advertisers [4][9]. 2. **Impact on Financials**: The transition to Vector may create short-term challenges in Q1 as legacy ad products are phased out, but it is anticipated to lead to growth against easier comparisons in 2025 [4][12]. 3. **Growth in Ad Business**: The company is expected to leverage unique data from its Create game engine, which powers 70% of the market, to enhance the effectiveness of its ad campaigns [10][9]. 4. **Competitive Landscape**: Unity is viewed as a minimal competitive threat to AppLovin (APP), as it only needs to defend its market share to achieve growth, particularly in the gaming ads market [9][11]. 5. **4Q Results**: Unity reported strong 4Q results, with revenue and EBITDA exceeding prior estimates by 2% and 20%, respectively. Strategic portfolio revenue grew 4% year-over-year, with the Create segment growing 9% year-over-year [12][13]. 6. **Cost Management**: Stock-based compensation (SBC) decreased by 39% year-over-year, contributing to improved margins. The company also executed layoffs of approximately 300 employees in the Grow segment [12][13]. 7. **Future Guidance**: The company is shifting to quarterly guidance, which disappointed some analysts due to a 6% revenue and 19% EBITDA miss for Q1 estimates. However, this is attributed to the rapid rollout of Vector [12][13]. 8. **Long-term Outlook**: Analysts remain optimistic about Unity's strategy, raising revenue forecasts for 2025 and 2026 by 1%. The long-term estimates are largely unchanged as the company awaits results in the coming quarters [13][12]. Additional Important Insights - **Revenue Projections**: For FY 2025, Unity's revenue is estimated at $1.858 billion, with an EBITDA of $401 million and an EBITDA margin of 21.6% [31]. - **Valuation Methodology**: The price target is based on an enterprise value/sales (EV/Sales) methodology, applying different multiples for the Create and Grow businesses [13][19]. - **Market Positioning**: Unity's unified game engine and ad network are positioned as leading offerings in the gaming and interactive content space, with a consensus rating distribution showing 43% overweight, 50% equal-weight, and 7% underweight [25][26]. Risks and Considerations - **Market Competition**: The competitive landscape remains a concern, particularly with the strong performance of APP's advertising business [11]. - **Execution Risks**: Successful deployment and scaling of the Vector algorithm are critical for achieving projected growth and maintaining competitive advantages [10][9]. This summary encapsulates the key takeaways from the conference call, highlighting Unity Software Inc's strategic initiatives, financial performance, and market outlook.

Nick Maciunas AC (1-212) 834-5671 nicholas.m.maciunas@jpmorgan.com J.P. Morgan Securities LLC Alex Kraus (1-212) 834-5954 alexander.d.kraus@jpmorgan.com J.P. Morgan Securities LLC Sanjana Prasad (1-212) 834-5720 sanjana.t.prasad@jpmchase.com J.P. Morgan Securities LLC David Kaminsky (1-212) 834-5116 david.kaminsky@jpmchase.com J.P. Morgan Securities LLC North America Securitized Products Research J P M O R G A N 21 February 2025 Agency MBS There's a first time for everything Views • Mortgages are on the tig ...

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? ...

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 ...

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 ...

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 ...

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 ...

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]