Daily Brief Equity Bottom-Up: Tencent/Netease: Game Approval Trending up but Only One Approval for Netease and more

• China announced game approval for the December batch. The number of games approved remained at a higher level than 2023.
• The pace of China game approval appears to have accelerated to the same level as pre-tightening. There have been 47% more games approved in 2024 compared to 2023.
• Of the companies that we are monitoring, Netease got one approval.

• Profits and share price stabilizing after steep declines, although margins still under pressure from rising R&D and depreciation, and costs associated with recent acquisitions.
• Sales of medical equipment to recover from post-COVID decline. Semiconductor equipment driven by advanced logic and high-bandwidth memory. Lasers to become fourth major product division.
• Buy for the long-term. Risks include Trump tariffs, weak European economies, emergence of Chinese competition.

• This insight explores the semiconductor industry’s fundamental building blocks, focusing on India’s role and target segments within the value chain.
• The Indian government has committed INR 76,000 crore to establish a self-reliant semiconductor manufacturing ecosystem.
• Key investments are being made in semiconductor manufacturing, focusing on design, assembly, testing, and packaging capabilities.

• MKS Instruments, Inc. reported a robust third quarter for 2024, with performance largely surpassing expectations.
• The company achieved revenue of $896 million, marking a 1% sequential increase, driven predominantly by gains in semiconductor and electronics and packaging markets.
• This growth was reflected in a gross margin of 48.2%, which was higher than anticipated due to favorable product mix and operational leverage.

• Credo Technology Group Holding Ltd. reported strong financial and operational performance for the second quarter of fiscal year 2025.
• The company recorded a revenue of $72 million, indicating a sequential increase of 21% and an impressive 64% year-over-year growth.
• The robust revenue figures were largely driven by vibrant demand across its three core product lines: Active Electrical Cables (AECs), optical Digital Signal Processors (DSPs), and line card retimers.

• Ono Pharmaceutical (4528 JP) is reporting decelerating revenue from its flagship drug, Opdivo. During H1FY25, domestic revenue from Opdivo decreased 17% YoY to ¥62.6B.
• Opdivo will start to lose patent protection starting from 2028. Prolific commercialization of these new drugs will remain crucial for Ono riding the patent cliff successfully.
• Ono shares plunged 36% over the last one year to trade at attractive valuation. In absence of any near-term growth catalyst, the shares are not expected to see much upside.

• BWX Technologies (BWXT) reported robust results in its third-quarter 2024 earnings, showing strong organic revenue growth of 14%.
• This growth, combined with solid operational performance, led to a 19% increase in adjusted EBITDA and a 24% rise in adjusted earnings per share (EPS).
• These results exceeded expectations, prompting the company to raise its 2024 adjusted EPS guidance to around $3.20, the upper limit of its previous range, while maintaining its free cash flow guidance of $225 million to $250 million.

• Paysafe is undergoing a turnaround after a significant decrease in value since its post-IPO high
• The company generates cash and benefits from growth opportunities in the igaming sector
• Despite high leverage and a substantial PE shareholder overhang, the stock has potential for significant upside if the turnaround is successful

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• In FY08/24, revenue was JPY82.1bn (-3.0% YoY), operating profit was JPY1.5bn (+172.2% YoY), recurring profit was JPY1.0bn (+355.9% YoY), and net income attributable to owners of the parent was JPY533mn (+212.8% YoY). The initial company forecast at the beginning of the fiscal year was revenue of JPY72.9bn, operating profit of JPY634mn, recurring profit of JPY454mn, and net income attributable to owners of the parent of JPY320mn. The initial assumptions were an exchange rate of JPY135/USD and an LME copper price of USD8,500/ton.
• The USD remained above JPY150 until end-Q3 and LME copper prices exceeded USD9,000/ton since April 2024. The company thus revised its performance forecast upward at its Q3 results briefing to revenue of JPY82.1bn, operating profit of JPY2.3bn, recurring profit of JPY1.9bn, and net income attributable to owners of the parent of JPY1.1bn.
• However, due to a decline in LME copper prices in Q4, the actual results for FY08/24 fell below the revised forecast.

• American Eagle Outfitters reported a strong third quarter for 2024, supported by their strategic initiatives, particularly their “Powering Profitable Growth” strategy.
• The company experienced a 3% increase in comparable sales, building on a 5% growth the previous year, and delivered an adjusted operating income at the high end of their guidance.
• Key highlights of the quarter include progress on brand amplification, with American Eagle maintaining its position as the #1 brand in denim for the 15-to-25 age group and experiencing its sixth consecutive quarter of comparable sales growth.