Asia Pacific Equity Research 20 February 2025 Correction (See disclosures for details) BYD- H&A Lift PTs to HK$600/Rmb560 on expectations that BYD will become the 'Toyota' of the global EV marketplace Share price strength set to continue: We have spoken to nearly 200 investors over the past one week on calls and in meetings following placing BYD on Positive Catalyst Watch on 7 Feb (here) and the company's reverse roadshow where we had the chance to test drive BYD's latest models (here). All in all, we belie ...

A c t i o n | 20 Feb 2025 16:33:13 ET │ 22 pages Alibaba Group Holding Stepped-up Capex Spend to Capture AI & Cloud Inflection Growth CITI'S TAKE FY3Q25 result marks a pivotal change of sentiment with CMR reaccelerated to +9% yoy and TTG EBITA returned to positive 2% yoy growth, AIDC targets to turn quarterly profitable in FY2026 and stepped-up capex investment to capture the inflection point of AI transformation era. Being the Asia No. 1 and world No. 4 cloud service provider and having developed the propr ...

China Materials Flash | 19 Feb 2025 22:39:53 ET │ 9 pages 2025 On-ground Demand Monitor Series #19– Funding Availability Rate Data Tracker CITI'S TAKE In this series of notes, we aim to track and analyze high-frequency, on- ground demand trends in China – market expectation on a demand recovery has been mostly cautious. Our revised near-term sector pecking order is: Steel, Cement, Coal, Gold, Copper, Aluminum, and Lithium stocks (see our notes: China Steel – Shifting Our Near-term Sector Pecking Order and C ...

Summary of China Auto Sector Conference Call Industry Overview - The conference call focused on the **China Auto Sector**, particularly the long-term outlook for Chinese carmakers in the context of global competition and innovation [1][8]. Core Debates and Insights 1. **Innovation and Competitiveness** - Chinese carmakers are seen as leading in innovation, potentially surpassing Western leaders like Tesla due to fierce market competition and a robust industry ecosystem [2][3]. - The global volume of Chinese autos is projected to expand from **18 million to 40 million units**, indicating significant growth potential [2]. 2. **Long-term Addressable Market and Profit Pool** - Chinese carmakers currently hold **20% of global market share** and over **60% of the EV market share**, but only **11% of global market cap** and **8% of profit pool** [4][73]. - The potential for profit growth exists through market share gains in China and emerging markets, premiumization, and eventual penetration into developed markets [24][30]. 3. **Competition Dynamics** - Large OEMs in China are agile adopters of technology, leveraging partnerships and scale to democratize innovations faster than new entrants [3][48]. - The competition is shifting from electric powertrains to intelligence, particularly in smart cockpit and autonomous driving technologies [13][14]. 4. **Profit Allocation** - The report discusses the balance of power between OEMs and suppliers, suggesting that OEMs currently retain significant bargaining power [49][56]. - Suppliers, while becoming more competitive, often face challenges in achieving high pricing power against OEMs [50][52]. 5. **Comparison with US Peers** - The report argues against directly benchmarking Chinese companies against US peers due to differing market dynamics and competitive advantages [60][64]. - Chinese carmakers are viewed as more agile than their Western counterparts, benefiting from a less burdensome legacy of internal combustion engines [68][72]. Key Financial Insights - **Stock Recommendations**: - BYD is favored for its scale and cost leadership, while Li Auto is highlighted for its AI initiatives [4]. - **Market Cap Rankings**: As of February 19, 2025, the market cap ranking is: Xiaomi > BYD > Li Auto > Geely > XPeng > Great Wall Motor [36][42]. Additional Considerations - **Market Challenges**: - The report acknowledges potential barriers such as Western protectionism, tariffs, and the inability of Chinese carmakers to access lucrative Western markets [21][23]. - **Future Outlook**: - Despite current challenges, there is optimism regarding the long-term growth potential of Chinese carmakers, with expectations that their share of the global profit pool could rise significantly [73][78]. Conclusion - The China Auto Sector is positioned for significant growth driven by innovation, competitive dynamics, and market expansion opportunities, despite facing challenges from global market access and competition. The long-term outlook remains positive for leading Chinese carmakers, particularly in the EV segment.

Key Takeaways from the Conference Call Industry Overview - The report focuses on the **China Express industry** for January 2025, highlighting the performance of major players in the sector [1][8]. Volume Growth - All major players in the express delivery sector achieved **year-over-year (YoY) volume growth** despite the earlier Chinese New Year (CNY) [2]. - **SF Express** led the market with a **16% YoY volume growth**, attributed to more stable service during CNY [2][12]. - **STO Express** replaced **Yunda** as the third-largest player in the industry, achieving **12% YoY volume growth** [2][12]. - **Yunda** lagged behind with only **3% YoY volume growth**, while **YTO Express** recorded a **6% YoY increase** [2]. Revenue Performance - **SF Express** also outperformed in terms of revenue, reporting a **6.5% YoY revenue growth** [3]. - **STO Express** and **YTO Express** followed with **5.1% YoY** and **1.5% YoY revenue growth**, respectively [3]. - **Yunda** experienced an **8% YoY revenue drop**, indicating a significant underperformance compared to its peers [3]. Average Selling Price (ASP) - The ASP for **Yunda** saw the largest decline, with an **11% YoY drop**, making it the lowest among its competitors [4]. - Other players also experienced ASP declines: **SF** at **8.2%**, **STO** at **6%**, and **YTO** at **4%** [4]. - Despite the overall decline, all players except Yunda achieved **month-over-month (MoM) ASP growth** due to price hikes during CNY [4]. Market Share Insights - As of January 2025, the market shares were as follows: - **SF Express**: 8.1% (up 0.3 percentage points YoY) - **Yunda**: 12.2% (down 1.1 percentage points YoY) - **STO**: 12.3% (no change YoY) - **YTO**: 13.8% (down 0.9 percentage points YoY) [5][6]. Industry Consolidation - The negative revenue growth of Yunda is viewed as a sign of **industry consolidation**, which is considered a positive signal for the industry and leading players [12]. - The overall performance indicates strong industry volume growth, despite the challenges faced by some players [12]. Conclusion - The express delivery sector in China is experiencing a dynamic shift, with leading players like SF Express capitalizing on stable service and growth opportunities, while others like Yunda face challenges that may lead to further consolidation in the industry [12].

Flash | 20 Feb 2025 10:55:55 ET │ 11 pages China Battery Materials Lithium into 3rd week of Feb – Looming pressure on ASP amid rising inventory CITI'S TAKE Lithium prices surprisingly remained largely flattish WoW last week, hovering at ~Rmb76k/t for battery-grade, even as we saw the supply was scheduled to come back online as expected (+17% WoW). We believe the transactions in the spot market should be limited, and downstream players are holding a wait-and-see attitude, evidenced by (1) downstream inventor ...

Summary of Key Points from the Conference Call Industry Overview - The focus is on the small-cap perspective in tech-related subindustries, particularly semiconductor-related companies [3][4] - The overall industry view is categorized as "In-Line" by Morgan Stanley MUFG Securities [1] Semiconductor Industry Insights - There is no change in earnings growth trends at semiconductor testing and cutting-edge package companies [5] - Orders for electrical power equipment have been increasing due to production capacity constraints and future delivery projects, with demand driven by the replacement of aging equipment, renewable energy, data centers, and power grid battery systems [7] - The market for front-end semiconductor processing equipment (SPE) is dull in 2025, with risks including a slowdown in China and ongoing adjustments in SPE for power chips [8] - Strong demand for high-bandwidth memory (HBM) in DRAM SPE is noted, but a cautious outlook is maintained for commodity DRAM [8] - A recovery in NAND is observed after a prolonged downturn, with advancements in cryogenic etching and hybrid bonding technologies [8] - Demand for photoresist-related materials remains strong, particularly for EUV applications [8] - The timing of recovery in automotive and industrial equipment demand has been delayed, with strong demand noted only for testing-related components [9] Market Forecasts - Forecasts for various end markets indicate fluctuations in unit sales, with notable projections for servers, PCs, smartphones, and light vehicles [10] - For example, smartphone sales are projected to decline from 1,206 million units in 2023 to 1,164 million in 2024, before recovering to 1,283 million by 2026 [10] - The forecast for electric vehicles (BEV) shows significant growth, with projections increasing from 8 million units in 2024 to 14 million by 2026 [10] Stock Price Trends - Stock price trends for semiconductor equipment-related companies are tracked, with various companies showing different performance metrics [12][15][21] - The Nikkei average serves as a benchmark for comparison, with specific companies like Tokyo Electron and ASML highlighted for their stock performance [13][14] Company-Specific Performance - Detailed sales performance data for specific companies in the semiconductor supply chain is provided, showing year-over-year changes in sales [27][28] - For instance, Shinko Electric Industries reported a significant decline in plastic packaging sales, dropping by 40% in one quarter [28] - Other companies like AJINOMOTO and Taiyo Holdings also show varying performance metrics, indicating a mixed outlook across the sector [28] Conclusion - The semiconductor industry is experiencing a complex landscape with both challenges and opportunities, particularly in the context of evolving technologies and market demands [8][9] - Continuous monitoring of demand trends, stock performance, and company-specific earnings will be crucial for investors looking to navigate this sector effectively [8][27]

February 20, 2025 02:43 PM GMT Asia Technology | Asia Pacific Memory – False Dawn, No Recovery HBM revisions – more excess capacity. We update our HBM TAM analysis with the latest GPU/ASIC shipment numbers as well as improved yield rates from suppliers. We forecast 2025e HBM TAM at US$29bn while current capacity implies 66% oversupply at full capacity. Our previous CoWoS implied GPU shipment scenario is our bull case, which implies a US$81bn TAM in 2027e and our bear case assumes more aggressive pricing com ...

Asia Pacific Equity Research February 2025 This material is neither intended to be distributed to Mainland China investors nor to provide securities investment consultancy services within the territory of Mainland China. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. Humanoid Robots: Hype or the Next Frontier? Karen Li, CFA AC Head of HK Equity Research, Head of Asia Infra, Industrials and Transport +852 2800 8589 karen.yy.li@jpmor ...

Summary of the Conference Call on US Reshoring and Humanoids Industry Overview - **Industry**: Multi-Industry, focusing on US Manufacturing and the impact of Humanoid robots on reshoring efforts in North America [1][3][10] Key Points and Arguments 1. **Reshoring Opportunity**: The US has a $10 trillion reshoring opportunity, significantly enhanced by the introduction of Humanoid robots, which can lower manufacturing costs and drive protectionism [1][10][29] 2. **Cost Comparison**: There is a mid-single-digit (MSD) cost delta between US manufacturing and Chinese exports, which can be offset with approximately 20% Humanoid penetration [1][14][39] 3. **Total Cost of Ownership (TCO)**: Humanoid adoption could lead to around 85% TCO savings compared to US human workers, allowing the US to achieve cost parity with China at about 20% Humanoid penetration [5][13][36] 4. **Market Growth**: The Humanoid market is projected to grow into an $80 billion industry over the next decade, contributing approximately 50 basis points (bps) of annual growth to the US industrial economy [21][58] 5. **Power Supply as Competitive Advantage**: The US's abundant low-cost hydrocarbons position it favorably in terms of power supply for manufacturing, which is expected to become a critical factor as Humanoids are deployed [23][68] 6. **Electricity Demand Growth**: The adoption of Humanoids is anticipated to reverse the decline in US manufacturing electricity consumption, contributing to a projected 2% annual growth in electricity demand from 2025 to 2050 [23][65] 7. **Investment Trends**: The US has experienced a significant under-investment in manufacturing over the past 25 years, with a cumulative shortfall of approximately $3 trillion since 2000 [55][60] 8. **Geographic Shift in Manufacturing**: The reshoring process is expected to shift manufacturing activity back to the US, enhancing market share and profit margins for US industrials [8][72] 9. **Preferred Stocks**: ETN and ROK are identified as preferred stocks within the reshoring theme, with other beneficiaries including HUBB, FAST, FTV, and TT [8][72] Additional Important Insights - **Historical Context**: The US manufacturing sector has lost share over the last 45 years as capital expenditures chased low-cost labor, but this trend is expected to reverse with the rise of Humanoid technology [7][30] - **Sensitivity Analysis**: A sensitivity analysis indicates that achieving a 20% global manufacturing share by 2050 could be conservative, given the US's significant share of global GDP and goods consumption [17][50] - **Labor Market Dynamics**: The production of Humanoids is projected to require a substantial fixed asset base, with an estimated annual capital expenditure of $25 billion over the next decade [58][59] This summary encapsulates the critical insights from the conference call regarding the potential impact of Humanoid robots on US manufacturing and reshoring efforts, highlighting both opportunities and challenges in the evolving industrial landscape.