Deutsche Bank Research 7T2se3r0Ot6kwoPa North America United States Industrials Multi - Industry & Electrical Equipment Industry DeBLASEing the Trail Date 22 September 2024 Industry Update The First (Fed) Cut Is the Deepest? | --- | --- | |------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------- ...

M Update Global Biopharma | North America September 22, 2024 10:25 PM GMT P/E – Metric of the Week; Biopharma Comp Clearinghouse Our weekly Comp Clearinghouse includes valuation based upon both MS and consensus ests for our global pharma / large biotech coverage universe spanning North America, Europe, Japan, China, India and Australia. Exhibit 1: Top 10 companies with the lowest P/E | --- | --- | --- | --- | --- | |-------|---------------------------------------------|-------|-------------------|-------| | ...

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Europe Equity Research 23 September 2024 J P M O R G A N Source: Company reports. Source: J.P. Morgan. European Autos Global Truck / Construction Equipment Monthly (Sep'24): Mixed leading indicators | --- | --- | |---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...

Summary of HTSC Conference Call Company Overview - **Company**: HTSC (Haitong Securities Company) - **Ticker**: 6886.HK (H-shares), 601688.SS (A-shares) - **Industry**: Financial Services, specifically Brokerage and Asset Management Key Points Financial Performance and Projections - **Asset Sale Impact**: HTSC closed the sale of its US subsidiary, AssetMark, for US$1.79 billion, generating US$795 million in investment gains expected to be booked in Q3 2024, which will support 2024 earnings despite a year-over-year drop in investment income due to weaker equity market performance and regulatory tightening [2][4][16] - **Revenue Forecasts**: - 2024 earnings forecast raised by 28.5% due to the sale-related gains - 2025 earnings forecast lowered by 5.8% due to expected declines in asset management revenue and investment-related income [4][16] - **Revenue Breakdown**: AssetMark contributed approximately 45-50% of HTSC's asset management net revenue in 2023, generating Rmb3.79 billion in gross revenue and Rmb862.9 million in net profit [2][16] Market Conditions and Regulatory Environment - **Regulatory Normalization**: There are signs of regulatory normalization, but ongoing uncertainties remain regarding the earnings cycle and market conditions, particularly as A-share average daily trading (ADT) has dropped over 20% year-over-year in Q3 2024 [12][13] - **Future Deployment of Proceeds**: The proceeds from the AssetMark sale may be reserved for future capital needs, with potential deployment into cross-border equity and derivatives businesses, contingent on improved market conditions and regulatory environments [3][17] Valuation and Ratings - **Current Valuation**: HTSC's shares are considered fairly valued, with a price target of HK$9.60 for H-shares and Rmb13.10 for A-shares, implying a 14% upside for H-shares and 1% for A-shares [8][9] - **Rating**: Equal-weight (EW) rating for both H- and A-shares, reflecting cautious optimism due to expected ROE trends [15][18] Earnings Estimates and Ratios - **Earnings Estimates**: - 2024: Net profit expected to increase by 28.5% - 2025: Net profit expected to decrease by 5.8% - 2026: Estimates largely unchanged [4][6] - **Key Ratios**: - 2024 ROE projected at 8.2%, declining to 6.2% in 2025 due to the one-off gains from the AssetMark sale [15][24] Risks and Opportunities - **Upside Risks**: - Earlier-than-expected regulatory relaxation could enhance HTSC's capital deployment capabilities and improve profit margins [18] - Potential market share gains from competitors undergoing mergers [18] - **Downside Risks**: - Weaker equity market performance could negatively impact investment income and overall profitability [19] - Further declines in market ADT and margin finance volume could adversely affect brokerage and interest income [19] Conclusion - HTSC is navigating a challenging environment with significant changes due to the recent asset sale. While the immediate outlook for 2024 appears positive due to one-off gains, the company faces headwinds in 2025 and beyond, necessitating careful monitoring of market conditions and regulatory developments. The current valuation reflects a balanced view of these factors, with modest upside potential.

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Gongniu Group Research Summary Company Overview - Gongniu Group is a leading brand in China's civil electrical industry, primarily involved in the production of sockets, switches, and LED lighting [10][11]. Key Industry Insights - **Revenue Exposure**: Gongniu has over 40% revenue exposure to the property sector, particularly through its core categories of sockets & switches and LED lighting [2][8]. - **Residential GFA Completions**: A significant decline in residential Gross Floor Area (GFA) completions is expected, with a projected decrease of 22% in H124 compared to a 17% increase in 2023. This decline is attributed to a 30-40% year-over-year drop in residential new starts since 2022, leading to a 2.5-year time lag in completions [2][12]. - **Sales Growth Projections**: Gongniu's socket & switch sales growth is projected at 7% in 2024, 0% in 2025, and 5% in 2026, a significant slowdown from a 16% CAGR in 2020-2023 [2][5]. Financial Performance and Projections - **Earnings Growth**: The projected EPS CAGR for Gongniu is expected to moderate to 8% for 2024-2026, down from 19% for 2020-2023 [1][5]. - **Price Target Adjustment**: The price target has been lowered from Rmb83.00 to Rmb64.50, reflecting anticipated sales slowdowns and margin contraction risks [5][19]. - **Market Capitalization**: As of September 19, 2024, Gongniu's market cap is approximately Rmb84.9 billion (US$12.0 billion) [4]. Margin and Pricing Risks - **ASP Risks**: There are potential risks to margins and average selling prices (ASPs) due to a consumption trade-down, as consumers increasingly prioritize "good value for money" [3][8]. - **Consumer Behavior**: The average furniture budgets of consumers have moderated since 2022, indicating a shift in purchasing behavior that may impact sales [3][8]. Strategic Insights - **Category Expansion**: Gongniu is expected to leverage its strengths in branding, product innovation, and channel expansion to fuel growth in new categories such as EV chargers and no-main lamps, which could contribute 13% of revenue by 2026, up from 4% in 2023 [7][19]. - **Competitive Positioning**: The company has gained market share from private brands through expanded product lines and channel strategies, particularly in lower-tier cities [3][7]. Valuation Metrics - **PEG Ratio**: Gongniu's PEG ratio is currently at 19x for 2024E PE, which is a premium compared to its historical average of 27x. This premium is justified by its improving return on equity (ROE) and higher payout ratio [1][19]. - **Earnings Estimates**: The earnings estimates for 2025E and 2026E have been reduced by 1% and 3%, respectively, primarily due to anticipated sales slowdowns in sockets and switches [5][19]. Conclusion - Gongniu Group faces significant challenges due to its exposure to the property market and declining residential completions, which are expected to impact its core sales categories. However, strategic category expansion and a focus on value-driven consumer preferences may provide avenues for growth despite the current headwinds. The downgrade to a Neutral rating reflects these mixed prospects [1][5][7].

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Container Shipping in Asia Pacific - **Company**: SITC International Holdings Company (Ticker: 1308.HK) Core Insights and Arguments - **Correlation with Timecharter Rates**: SITC's share price performance is positively correlated with vessel timecharter rates, as competitors charter in capacity to provide services in the intra-Asia market [2][5] - **Recent Rate Increase**: The timecharter rate for a 4,400 TEU containership rose by 2% week-over-week to US$51,000 per day [2][5] - **Earnings Impact**: Higher timecharter rates are expected to support intra-Asia spot rates and positively impact SITC's earnings [5] Additional Important Information - **Market Context**: The report indicates that SITC's performance is in line with the broader market, as reflected in the Hang Seng Index [4][5] - **Analyst Ratings**: SITC is rated as Equal-weight, indicating that its total return is expected to be in line with the average total return of the industry coverage universe over the next 12-18 months [20] - **Investment Banking Relationships**: Morgan Stanley has received compensation for investment banking services from various companies in the transportation and infrastructure sector, which may present potential conflicts of interest [9][19] Data and Metrics - **Timecharter Rate**: 4,400 TEU containership timecharter rate at US$51,000/day, reflecting a 2% increase [2] - **SITC Share Performance**: The performance of SITC shares is tracked against the timecharter rates, indicating a direct relationship [2][5] This summary encapsulates the essential insights from the conference call, focusing on the container shipping industry, SITC's performance metrics, and the implications of market dynamics on the company's earnings.

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Greater China IT Services and Software - **Current View**: Cautious outlook on the A-share software and IT sector, influenced by IT localization themes [2][3] Core Insights - **MIIT Policy**: The Ministry of Industry and Information Technology (MIIT) has mandated the replacement of 2 million sets of industrial software licenses and 800,000 industrial operating systems by 2027. This is part of a broader initiative to enhance supply chain resiliency and security [3][5] - **Recent Market Activity**: The China Securities Xinchuang Index (CSI931247) increased by 4% from September 18-20, compared to a 1% rise in the CSI300. This surge is attributed to geopolitical events and speculation regarding local government funding for IT localization [4][5] - **Investment Recommendations**: - Avoid investments in the Xinchuang theme until financial contributions become clearer due to a poor track record [2][5] - Preference for Baosight (EW) over ZWsoft (UW) for industrial software, and Kingsoft Corp (OW) over Kingsoft Office (UW) for localization [5] Financial Performance and Risks - **Bottlenecks**: Key challenges for IT localization include budget constraints for local governments and performance issues with domestic industrial software. Previous MIIT targets, such as those for cybersecurity growth, have been missed [5] - **Market Sentiment**: The current market environment resembles that of September 2022, where the software sector rallied on localization policies without subsequent financial benefits [5] Company-Specific Insights - **Kingsoft Corp Ltd (3888.HK)**: - Valuation based on a sum of parts approach, with online games valued at 10x 2024e P/E and WPS using DCF with a 9.0% WACC [7] - Risks include slower game revenue growth and competition in cloud services [8][9] - **Shanghai Baosight Software Co Ltd (600845.SS)**: - Valuation derived from a 10-year DCF model with a WACC of 10.5% [10] - Upside risks include faster customer utilization and potential M&A activity [11] - **ZWSOFT Guangzhou Co Ltd (688083.SS)**: - Valuation based on a 10-year DCF with a WACC of 10.8% [13] - Upside risks include stronger IP protection and technology evolution [14] - **Beijing Kingsoft Office Software Inc (688111.SS)**: - Valuation methodology aligns with other Chinese SaaS companies, applying a 10.2% WACC [16] - Risks include slower AI penetration and intensified competition [18] Additional Considerations - **Market Dynamics**: The software sector is experiencing high valuations despite being one of the worst-performing segments over the past two years, indicating a potential market correction if demand does not materialize [5] - **Investment Banking Relationships**: Morgan Stanley has disclosed its investment banking relationships with several companies mentioned, which may influence research objectivity [6][19] This summary encapsulates the critical insights and recommendations from the conference call, providing a comprehensive overview of the current state and outlook of the Greater China IT Services and Software industry.

ab 20 September 2024 Global Research and Evidence Lab | --- | --- | --- | |----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...