Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Quantitative Analysis

<ul>
<li>The 200 largest weighted companies in the GEM index reported average EPS growth of +14.2%y/y for 4Q22-to-date, slightly down from the +15.7% reported for 3Q22.</li>
<li>Only 54% of companies delivered positive sales surprises, and only 49% delivered positive EPS surprises, significantly down from the trend seen over the past 2 years.</li>
<li>Historically, there has been a significant difference in relative share price performance between the largest positive versus negative surprise generators, for 3 months after the reporting date.</li>
</ul>


The 200 largest weighted companies in the GEM index reported average EPS growth of +14.2%y/y for 4Q22-to-date, slightly down from the +15.7% reported for 3Q22.
Only 54% of companies delivered positive sales surprises, and only 49% delivered positive EPS surprises, significantly down from the trend seen over the past 2 years.
Historically, there has been a significant difference in relative share price performance between the largest positive versus negative surprise generators, for 3 months after the reporting date.


Global Emerging Markets: Reporting Season Summary, 4Q2022

China/Asia TMT

Shawn Yang

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

<ul>
<li>Xiaomi reported C4Q22 top-line, non-IFRS EBIT and non-IFRS net income in-line, 14%, and 25% vs. our est., and in-line, 78%, and 26% vs. consensus; </li>
<li>Beginning in 2023,  we expect it will be forced to sacrifice for or the other given its lack of moat in any category; </li>
<li>Xiaomi will likely improve phone gross margins due to declining IC prices, RMB appreciation, underlying our TP raise to HK$8.2, but we maintain SELL.  </li>
</ul>


Xiaomi reported C4Q22 top-line, non-IFRS EBIT and non-IFRS net income in-line, 14%, and 25% vs. our est., and in-line, 78%, and 26% vs. consensus; 
Beginning in 2023,  we expect it will be forced to sacrifice for or the other given its lack of moat in any category; 
Xiaomi will likely improve phone gross margins due to declining IC prices, RMB appreciation, underlying our TP raise to HK$8.2, but we maintain SELL.  


[Xiaomi Inc. (1810 HK) Target Price Change]: Picking Both Earnings and Scale, but Obtaining Neither

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>Xiaomi’s 4Q22 weakness is largely anticipated, and adj. net profit decline of 67% YoY is 9%/13% above our/consensus estimates, driven by stronger margins and improved product mix.</li><li>Looking ahead, we believe smartphone weakness in 1H23E has been largely priced in, and earnings growth will rebound sequentially given improving channel inventory, overseas AIoT recovery and better internet revenue.</li><li>We are also positive on Xiaomi’s focus on operating efficiency and profitability improvement amid macro headwinds in the near term.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Xiaomi’s 4Q22 weakness is largely anticipated, and adj. net profit decline of 67% YoY is 9%/13% above our/consensus estimates, driven by stronger margins and improved product mix.Looking ahead, we believe smartphone weakness in 1H23E has been largely priced in, and earnings growth will rebound sequentially given improving channel inventory, overseas AIoT recovery and better internet revenue.We are also positive on Xiaomi’s focus on operating efficiency and profitability improvement amid macro headwinds in the near term.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Xiaomi (1810 HK) – 4Q22 better than feared; All eyes on profitability recovery in 2023

Senior Credit Analyst, Lucror Analytics

Trung Nguyen

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

Xiaomi Corp's FY 2022 results were in line with expectations and the weakness in the smartphone market. However, we see some positive signs, such as the reasonable Q4 results, improved selling prices on the back of the premiumisation strategy, as well as the stable Internet of Things (IoT) segment. The balance sheet remains in a large net cash position, with cash more than 2x total debt. We believe the worst may be over for Xiaomi. The re-opening of offline stores in China following the easing of COVID-19 related measures in 2023 would drive up demand for the company's premium phones, as well as the average selling prices and gross margins. We expect the smartphone market to stabilise in H2, though overall shipments in the year should remain weak.

  Xiaomi Corp's FY 2022 results were in line with expectations and the weakness in the smartphone market. However, we see some positive signs, such as the reasonable Q4 results, improved selling prices on the back of the premiumisation strategy, as well as the stable Internet of Things (IoT) segment. The balance sheet remains in a large net cash position, with cash more than 2x total debt.   We believe the worst may be over for Xiaomi. The re-opening of offline stores in China following the easing of COVID-19 related measures in 2023 would drive up demand for the company's premium phones, as well as the average selling prices and gross margins. We expect the smartphone market to stabilise in H2, though overall shipments in the year should remain weak. 

Xiaomi Corp - Earnings Flash - FY 2022 Results - Lucror Analytics

Leonard Law, CFA

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.<ul><li><a href='#lucror-entity-26970'>Meituan</a></li><li><a href='#lucror-entity-24409'>Xiaomi Corp</a></li></ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.MeituanXiaomi Corp

China

Xiaomi Corporation manufactures communication equipment and parts. The Company produces and sells mobile phones, smart phone software,  set-top boxes, and related accessories. Xiaomi markets its products worldwide.

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Xiaomi (1810 HK)

Global Emerging Markets: Reporting Season Summary, 4Q2022

In this quarterly insight, we analyse recent GEM reporting trends with reference to Sales and EPS growth, size and percentage of positive...

Wium Malan, CFA

[Xiaomi Inc. (1810 HK) Target Price Change]: Picking Both Earnings and Scale, but Obtaining Neither

Beginning in 2023, we expect it will be forced to sacrifice for or the other given its lack of moat in any category and sustained R&D underspending...

Blue Lotus Research Institute

Xiaomi (1810 HK) – 4Q22 better than feared; All eyes on profitability recovery in 2023

Xiaomi’s 4Q22 weakness is largely anticipated, and adj. net profit decline of 67% YoY is 9%/13% above our/consensus estimates, driven by stronger...

CMB International

Xiaomi Corp - Earnings Flash - FY 2022 Results - Lucror Analytics

Xiaomi Corp's FY 2022 results were in line with expectations and the weakness in the smartphone market. However, we see some positive signs, such...

Lucror Analytics

Morning Views Asia: Meituan, Xiaomi Corp

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

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