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 | | | ...

Summary of Key Points from the Conference Call Industry and Company Focus - **Industry Focus**: The report primarily discusses the **China equity market**, with a specific emphasis on sectors such as **Media & Entertainment**, **Information Technology**, and **Consumer Discretionary**. It also addresses **Materials**, **Energy**, **Telecoms**, and **Utilities** sectors. - **Companies Highlighted**: Key companies mentioned include **Alibaba**, **Meitu**, **Espressif Systems**, **HKEX**, and **Ningbo Tuopu Group**. Core Insights and Arguments - **Sector Upgrades**: - **Media & Entertainment** and **IT** sectors upgraded from **Equal Weight (EW)** to **Overweight (OW)** due to anticipated inflows driven by China's tech competitiveness and lower AI costs [2][10]. - **Consumer Discretionary** sector also upgraded to **OW** with increased active risk, favoring companies that are quick to adopt technology [2][10]. - **Sector Downgrades**: - **Materials** downgraded to **Underweight (UW)** due to construction slowdowns and capex delays [3][10]. - **Energy** sector downgraded to **UW** based on cautious oil price outlook [3][10]. - **Telecoms** and **Utilities** moved to **EW**, reflecting a less defensive stance [3][10]. - **Valuation Improvements**: - Structural improvements in **Return on Equity (ROE)** and a shift in valuation regime for offshore Chinese equities are expected, with MSCI China's 12-month forward P/E ratio projected to sustain a range of **10-12x**, up from **8-10x** [4][10]. Notable Company Additions and Rationale - **Meitu (1357.HK)**: - Maintains over **50%** market share in China's photo application market, with a successful monetization strategy and improving governance. Expected to achieve a **44% CAGR** in net profit by 2026 [14][10]. - **HKEX (0388.HK)**: - Anticipated growth in trading volume due to a more sustainable growth model in China and rising IPO volumes [15][10]. - **Alibaba (BABA.N)**: - Positioned to capture AI cloud opportunities with a forecasted doubling of cloud revenue from **Rmb118 billion** in F25 to **Rmb240 billion** in F28 [16][10]. - **Espressif Systems (688018.SS)**: - Expected to benefit from edge AI opportunities and a comprehensive product portfolio, despite current supply-demand imbalances [17][10]. - **Ningbo Tuopu Group (601689.SS)**: - Positioned to capitalize on the commercialization of humanoid robots, with a projected **31% YoY** earnings growth in 2025 [20][10]. Performance Metrics - **Focus List Performance**: - The **China/HK Focus List** and **China A-share Thematic Focus List** have performed on par with their respective benchmarks over a rolling 12-month basis. However, both underperformed by **4.3 percentage points** and **4.4 percentage points** respectively over the last month [25][26]. Additional Important Insights - **Market Sentiment**: The report indicates a shift in market sentiment towards a more positive outlook for China equities, driven by technological advancements and government support for the private sector [4][10]. - **Investment Strategy**: The focus is on companies that are proactive in tech adoption and have strong market momentum, while avoiding traditional business models that are negatively impacted by deflation [2][10]. This summary encapsulates the key points from the conference call, highlighting the strategic shifts in sector allocations, company-specific insights, and overall market performance metrics.

Summary of Semiconductor Capital Equipment Conference Call Industry Overview - The focus is on the Semiconductor Capital Equipment industry, specifically the Wafer Fabrication Equipment (WFE) segment - The WFE forecast for 2025 has been revised from $96 billion (down 6% year-over-year) to $99 billion (down 3%), and for 2026 from $101 billion (up 6%) to $103 billion (up 4%) [1][2][35] Key Insights - **NAND Market Dynamics**: - There is a tactical setup for NAND, but concerns about its durability due to end-market trends persist [1][35] - The revision in forecasts is primarily driven by NAND ($1 billion) and DRAM ($2 billion) adjustments [2][35] - Brownfield investments in NAND are occurring earlier than expected, leading to an increase in upgrade assumptions from $12 billion to $15 billion for 2025-2026 [3][41] - Major players like Samsung, Kioxia, and YMTC have resumed spending, which may drive near-term spending despite profitability concerns [3][46] - **DRAM Market Outlook**: - DRAM remains a contentious topic, with forecasts varying significantly among companies [4][29] - Some companies predict growth in DRAM WFE, while others forecast flat or declining trends [4][29] - The expectation is that 2025 will be a digestion year for DRAM after a record 2024, with a projected WFE of $25 billion [38][39] - **Company Forecast Divergence**: - Companies have differing forecasts for 2025 WFE, with TEL and Kokusai predicting flat growth, while LAM, KLA, and SCREEN expect moderate growth [28][29] - The consensus is that leading logic will see growth, trailing logic will decline, and NAND will increase [22][28] Additional Important Points - **Record Shipments**: - Q4 2024 saw stronger-than-expected shipments, with total Core-5 shipments reaching $21.7 billion, marking an 11% quarter-over-quarter increase and a 21% year-over-year increase [21][22] - NAND shipments from LAM, AMAT, and TEL totaled $1.11 billion, up 101% quarter-over-quarter and 63% year-over-year [22] - DRAM shipments reached $3.35 billion, up 35% quarter-over-quarter and 8% year-over-year [22] - **Geopolitical Factors**: - There is a noted decline in China’s contribution to Core-5 revenue, dropping from 40% to 32%, while South Korea's share increased from 15% to 22% [24][26] - **Future Considerations**: - The industry is unlikely to see significant greenfield investments outside of China during 2025-2026, with a focus on upgrades instead [39] - The competitive dynamics in NAND may lead to increased spending, potentially reigniting a layers race that could affect long-term industry health [46] This summary encapsulates the key points discussed in the conference call regarding the Semiconductor Capital Equipment industry, highlighting the current trends, forecasts, and potential risks.

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 ...

Summary of Key Points from the Expert Call on DeepSeek and Embodied AI Industry Overview - The discussion focuses on the **humanoid robot industry** and the role of **embodied AI** in enhancing the commercial value of humanoid robots [1][2]. Core Insights and Arguments 1. **Importance of Embodied AI**: Embodied AI is critical for humanoid robots, as it determines their intelligence and commercial value. The process involves four steps: sensing, decision-making, planning, and execution [2][3]. 2. **Sub-models of Humanoid Robots**: - **Strong Reasoning Model**: Enhances decision-making and planning, reducing model hallucinations [3]. - **Multi-modal Large Model**: Processes various types of information, allowing robots to perceive their environment [3]. - **World Model**: Provides a physical understanding of the world, improving human-robot interaction [4]. 3. **Challenges in Developing Embodied AI**: - **Data Collection Difficulties**: Obtaining physical world data is challenging, impacting model training and optimization. Simulated data is not yet viable for training due to discrepancies with real-world data [5]. - **Insufficient Reasoning Capabilities**: Current embodied AI models are in early development stages, lacking the reasoning capabilities needed for complex real-world interactions [6]. 4. **Technological Advancements from DeepSeek**: - **Chain-of-Thought Models**: DeepSeek's models improve decision-making and planning efficiency for humanoid robots [7][9]. - **Enhanced Understanding**: These models can surpass human experts in specific tasks, such as solving math and science problems [9]. - **Cost Efficiency**: DeepSeek's architecture reduces model parameters and training costs, accelerating the development of embodied AI [10][13]. 5. **Future Expectations**: - **Timeline for All-Purpose Humanoid Robots**: Full realization of all-purpose humanoid robots is projected to be 5-10 years away due to data collection and computational challenges [14]. - **Increased R&D Investment**: The breakthrough from DeepSeek is expected to boost R&D in specialized scenarios, enhancing technology advancements in embodied AI [14]. Value Chain Positioning 1. **Sensing and Data Collection**: Essential for humanoid robots to interact with their environment. Data collection factories are being established in major Chinese cities, benefiting sensor and dexterous hand companies [15]. 2. **Edge-side Computing Chips**: With the rise of edge-side embodied AI, there is a growing demand for chips that support this technology [17]. 3. **Motion Control Units**: As humanoid robots perform more complex tasks, the accuracy of motion control systems becomes increasingly critical [18]. Additional Important Insights - The emergence of strong inference models due to DeepSeek's advancements is expected to enhance market confidence in achieving embodied AI [14]. - The development of a positive ecosystem for embodied AI is being fostered by the use of DeepSeek datasets and methodologies by various edge-side models [12].

Summary of Key Points from the Conference Call Industry and Company Involved - **Industry**: Global Economics and Strategy - **Companies**: BAE Systems, Mitsubishi Heavy Industries Core Insights and Arguments 1. **German Election Outcomes**: Preliminary results indicate a two-party coalition, with CDU/CSU, SPD, and Greens failing to secure a two-thirds majority for constitutional changes, potentially leading to market disappointment regarding fiscal stimulus [3][4] 2. **US Economic Indicators**: Anticipation of a benign US core PCE release, with a forecasted year-over-year decrease from 2.8% to 2.5% [4] 3. **Global Growth Forecast**: Expected slowdown in global growth for 2025/2026, primarily due to US tariffs on China, which may negatively impact an already struggling economy [7] 4. **Defence Spending in Europe**: EU Commission's suggestion to exempt defence spending from fiscal rules could lead to increased defence budgets, supporting a bullish outlook on European equities and non-US defence stocks [7] 5. **BAE Systems Valuation**: BAE faces risks including government defence budget uncertainties, contract execution capabilities, and political risks in Saudi Arabia, with approximately 40% of its business derived from North America [11] 6. **Mitsubishi Heavy Industries Risks**: Risks include sluggish capital expenditure due to economic downturns in major markets, rising costs, and yen appreciation [12] Additional Important Content 1. **Market Dynamics**: The report highlights the potential for fiscal easing in Germany and the implications of higher defence spending on market narratives, particularly for bond yields and equity spreads [3][7] 2. **Investment Ratings**: Both BAE Systems and Mitsubishi Heavy Industries are rated as "Buy," indicating positive expectations for their stock performance [26][33] 3. **Geopolitical Considerations**: The report emphasizes the need for increased self-reliance in European defence spending, with current EU spending at 2.0% of GDP compared to 3.4% in the US, suggesting a significant gap that needs to be addressed [7] 4. **Emerging Market Sentiment**: Optimism in China tech equities is noted, with MSCI China gaining 25% since mid-January, although the broader emerging market sentiment remains mixed [7] This summary encapsulates the critical insights and data points from the conference call, providing a comprehensive overview of the current economic landscape and specific company outlooks.

February 25, 2025 Global | Sustainability & Transition Strategy What's the Market Paying For? February 2025 1) EU ETS has had the strongest performance over 12M (+41%), while Bloomberg Commodity Index (+9%) has been strongest YTD (i.e. 2025). 2) Improvers in our universe over the last 1M include Solar (TAN), Global Alternative Energy (MS700750), and Global Clean Energy (ICLN), up 6.8%, 3.5%, and 4%, respectively, vs the S&P 500. 3) For 4/4/24-2/21/25, the 100 Best Companies to Work For 2024 list has underpe ...

24 February 2025 | 7:18AM HKT The 720: China Autos, A vs. H shares, Miniso, Hengli downgrade, China Insurance, NetEase, Global growth vs. inflation/tariffs In Focus | China Autos China Autos - 4Q24E Preview: volume & margin improvement in 4Q24, with autopilot to be the focus in 2025. We preview 4Q24E results for our China auto OEMs coverage and roll forward our valuation by one year across the space. For this set of results, we expect investor focus to be on (1) Gross margin: the strong sales volume in 4Q s ...

Summary of Key Points from the Conference Call Industry Overview - The focus is on the **Autos & Shared Mobility** sector, particularly regarding **China-US cooperation on electric vehicles (EVs)** [1][8]. Core Insights and Arguments - **Sino-US Relations**: Current relations between the US and China in the auto industry are at a low point, but there is potential for cooperation in EV technology despite ongoing national security concerns [1][2]. - **Market Transformation**: The transition from traditional vehicles to AI-enabled EVs is reshaping the global auto market, supply chains, and regulatory frameworks. Cooperation between US and Chinese automakers is deemed necessary for mutual benefit [2][3]. - **EV Adoption Forecast**: Short-term EV sales are influenced by policies and tariffs, but a significant increase in adoption is expected from 2027 to 2030. EVs are seen as essential for integrating AI technologies into vehicles [3][4]. - **China's Competitive Edge**: China is perceived to have a lead in producing affordable EVs, which may need to be manufactured in the US to meet local market demands. Tariffs may be used to incentivize localization of production [4][5]. - **Capital Efficiency**: Traditional US automakers like GM and Ford are expected to seek more capital-efficient strategies in the EV market, potentially collaborating with Chinese firms to optimize their investments [5][6]. - **IRA Restructuring**: The Inflation Reduction Act (IRA) may require significant changes, particularly regarding the definition of Foreign Entity of Concern (FEOC), to facilitate joint ventures that utilize US-based resources while relying on Chinese technology [6][9]. Additional Important Insights - **Strategic Partnerships**: Increased frequency of strategic announcements, joint ventures, and consolidations between legacy Western and Chinese EV companies is anticipated [11]. - **Stock Ratings**: Companies such as Tesla (TSLA), Rivian (RIVN), and Lucid (LCID) may see continued support, while traditional internal combustion engine (ICE) companies may face stagnation [11][62]. - **Investment Opportunities**: Analysts suggest reconsidering investments in Chinese EV-exposed companies and highlight potential benefits for EV-exposed suppliers [11][62]. This summary encapsulates the critical insights and implications for the auto industry, particularly regarding the evolving dynamics between US and Chinese automakers in the context of electric vehicle technology and market strategies.

Flash | 23 Feb 2025 16:27:43 ET │ 13 pages Citi Research is a division of Citigroup Global Markets Inc. (the "Firm"), which does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Certain products (not inconsistent with the author's published research) are ...