Deutsche Bank Research Asia Economics Asia Macro Insight 22 February 2025 Date Calm before the storm Despite US tariff threats, which prompted many of Asia's authorities to seek a deal with the US (with the exception of China), local markets remained relatively resilient, especially in the absence of aggressive follow-up actions against China. That said, we strike a note of caution, given that the US's comprehensive review and remedial action plan is not scheduled to be completed until April 1. While there ...

+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 ...

Summary of the Conference Call on Asian Industrial Technology - Humanoid Robots Industry Overview - The focus of the conference call is on the humanoid robotics sector, specifically the advancements made by Figure AI with their new product, Helix. Key Points and Arguments 1. Breakthrough in Humanoid Robots - Figure AI has made significant progress with the unveiling of Helix, which is rated 2+ based on a three-score framework: - Perfection in "pet movement" was disappointing - Genuine progress in single task training and performance met high expectations - Breakthrough in multi-task generalization was a big surprise [1][2][3] 2. Technical Aspects of Helix - **Full-upper-body control**: Helix can control movements in the torso, arms, wrists, head, and fingers with up to 35 degrees of freedom (DoF). This end-to-end training is crucial for performing sophisticated humanoid tasks in the future [2][3] - **Object generalization**: Helix can pick up various items, including those it has never encountered before, which is essential for household tasks in unstructured environments. This capability is attributed to the integration of visual and language understanding with precise motor commands [3][4] - **Multi-robot collaboration**: The demonstration of cross-robot interaction using the same Vision-Language-Action (VLA) model was noted as particularly elegant [4] 3. Limitations and Challenges - Helix is not yet capable of "multi-task generalization." The distinction between object generalization and task generalization was emphasized, indicating that while Helix can perform pick-and-place tasks, it has not yet mastered more complex tasks [5][6] - Clarification was sought regarding whether the robots' coordination was fully autonomous or if it relied on human prompts, which could mislead perceptions of their capabilities [7][8] 4. Future Challenges and Expectations - The company is challenged to achieve: - True autonomy in strategizing and planning without human prompts - Scene generalization, allowing Helix to operate in novel environments - Success in more complex single tasks beyond pick-and-place [9][10] 5. Competitive Landscape - Comparison with other players in the market: - Google DeepMind is focusing on robotic policy generalization, while Figure AI is tackling practical challenges with advanced hardware. - Tesla's Optimus has not yet demonstrated significant technological advancements compared to Figure AI, which is focusing on household and service applications [10] Investment Implications - The report recommends an "Outperform" rating for several companies in the robotics and automation sector, including FANUC, Keyence, Inovance, Cognex, Han's Laser, Hikvision, and Harmonic Drive, while suggesting a "Market Perform" rating for Estun [9][11] Additional Important Information - The report includes a detailed analysis of the financial performance and projections for various companies, highlighting the expected earnings per share (EPS) and price-to-earnings (P/E) ratios for 2023 to 2025 [11] This summary encapsulates the key insights and discussions from the conference call regarding advancements in humanoid robotics, particularly focusing on Figure AI's Helix, its capabilities, limitations, and the competitive landscape within the industry.

Summary of the Conference Call Transcript Industry Overview - The focus is on the **China Electric Vehicle (EV)** sector, particularly the advancements in **autonomous driving (AD)** technology and its implications for mass market adoption [1][2][3]. Key Points and Arguments 1. **Autonomous Driving Penetration**: The penetration of higher-level AD functions in EVs is currently at **17%**, with expectations to surpass the **10% inflection point** by July 2025. BYD is leading this charge by making advanced AD features standard in its mass-market models priced below **RMB200K** [2][3]. 2. **Catalyst for EV Consolidation**: The EV market is becoming commoditized post **50% penetration**, and AD is seen as a potential catalyst for further consolidation. The introduction of higher-level autonomy in budget models is expected to enhance competition among OEMs [3]. 3. **Sector Catalysts**: Anticipated developments around the **April Shanghai Autoshow** include more OEMs unveiling AD technologies, potential localization of Tesla's Full Self-Driving (FSD) in China, and increased consumer feedback on smart EV models [4]. 4. **Stock Recommendations**: Preference is given to OEMs transitioning to AD, such as **Geely**, which is expected to gain market share with its autonomous driving strategy launched in March. Battery manufacturers like **CATL** and **REPT** are also highlighted for their resilience amid market fluctuations [5][9]. 5. **Market Risks**: Key risks include slower consumer adoption of higher-level autonomy, pricing pressures in the EV market, unfavorable global trade policies, and weaker domestic consumption sentiment [5]. Additional Important Insights - **Retail and Wholesale Volumes**: In January 2025, the overall auto retail sales decreased by **12% year-on-year** and **32% month-on-month**. The EV penetration rate fell to **41.4%** [13][15]. - **Discount Levels**: The discount level for EVs increased to **9.4% month-on-month** in January 2025, while the discount for internal combustion engine (ICE) vehicles remained stable at **21.9%** [42][45]. - **Battery Market Dynamics**: Lithium carbonate prices have remained largely flat, and LFP batteries hold a **78%** market share in China's EV battery sector as of January 2025 [28][30]. - **Valuation Metrics**: Current valuations for key players include Geely with a target price of **HKD19.30**, CATL at **RMB319.00**, and REPT at **HKD18.50**, indicating potential upsides of **8%**, **17%**, and **58%** respectively [54]. Conclusion The conference call highlights the significant role of autonomous driving in shaping the future of the EV market in China, with key players like BYD and Geely leading the charge. The sector faces both opportunities and risks, particularly in consumer adoption and pricing strategies. The insights provided are crucial for understanding the evolving landscape of the automotive industry in China.

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]