In today’s briefing:
- US Restriction on Semi Export to China Negative for All Equipment Makers, Naura, AMEC, ASML, TEL
- ASML. Class Action Lawsuit Looms As Share Price Declines 37% From Peak
- The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (December 2)
- Baidu Inc.: Generative AI & Search Transformation Driving Our Bullishness! – Major Drivers
- Chailease – A Window on China Lending, +62% Impairment Costs, Decelerating Loan Growth in China
- [Meituan (3690 HK, BUY, TP HK$165) TP Change]: C3Q24 Review: Buy or Leave?
- Abercrombie & Fitch Co.: Expansion of Global Brand Awareness & Localization Efforts Driving Our Bullishness! – Major Drivers
- Urban Outfitters Inc.: These Are The 7 Biggest Factors Impacting Its Performance In 2025 & Beyond! – Major Drivers
- Dell Technologies: An Insight Into Expansion Beyond Endpoint Security & Storage Opportunities! – Major Drivers
- NetApp Inc.: Keystone Subscription Model Expansion As A Critical Growth Lever! – Major Drivers
US Restriction on Semi Export to China Negative for All Equipment Makers, Naura, AMEC, ASML, TEL
- An additional 24 Equipment are added to the restriction list (negative to AMAT, KLA, LAM). No explicit restrictions on ASML or Tokyo Electron, but that’s done indirectly.
- HBM Memory sales to China restricted (directly negative to Samsung), but restriction of DRAM Manufacturing Equipment sales is long-term positive to Micron, Samsung, SK Hynix.
- 140 Chinese firms added to the Entity List, including all China’s Semi Production Equipment makers (Naura, AMEC, Piotech, SiCarrier).
ASML. Class Action Lawsuit Looms As Share Price Declines 37% From Peak
- A case against ASML being brought by the Hollywood Firefighters Pension Fund (HFPF) is now opening up into a class action lawsuit
- Claims that ASML withheld crucial information from investors in the Jan-Oct 2024 time period, e.g. impact of US sanctions, strength of the semi recovery, order backlog etc.
- In reality, ASML warned in October 2023 that 2024 would be a zero growth year. Did the HFPF think they were kidding?
The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (December 2)
- Hong Kong market breadth stays strong despite market pullback in November. Mainland investors continue to increase exposure to HK market through Southbound Connect platform.
- Baidu (9888 HK) , Baidu (BIDU US) , the global leader in Robotaxis, was granted a license to start operating its autonomous cars in Hong Kong.
- Vitasoy Intl Holdings (345 HK) shares surged on takeover rumours after Yeo Hiap Seng (YHS SP) increased its stake to more than 12% allowing them to call a Board meeting.
Baidu Inc.: Generative AI & Search Transformation Driving Our Bullishness! – Major Drivers
- Baidu’s third-quarter 2024 financial performance presents a complex picture, showcasing both opportunities and challenges that shape the company’s investment thesis.
- The company reported total revenues of RMB 33.6 billion, reflecting a 3% decline year-over-year.
- However, Baidu Core’s revenue remained stable at RMB 26.5 billion.
Chailease – A Window on China Lending, +62% Impairment Costs, Decelerating Loan Growth in China
- Chailease offers an alternative view on China lending than the large mainstream banks there
- Data through 9M24 shows very high growth of its China impairment costs at +62% YoY
- Its lending in China is slowing sharply, often a reaction to worsening credit metrics
[Meituan (3690 HK, BUY, TP HK$165) TP Change]: C3Q24 Review: Buy or Leave?
- Meituan reported C3Q24 revenue/non-IFRS operating profit 2%/12% above consensus, thanks to rising monetization and cost reduction. C4Q24 guidance, however, missed expectation due to low ASP mix and expansion;
- We see the following as positive catalysts: (1) consumption stimulus in 2025 that will likely include service coupons, (2) market share gains, (3) overseas expansion in Mid-East bearing quick fruits.
- We therefore opt to keep Meituan on our TOP BUY list and maintain TP at HK$165.
Abercrombie & Fitch Co.: Expansion of Global Brand Awareness & Localization Efforts Driving Our Bullishness! – Major Drivers
- Abercrombie & Fitch’s latest quarterly performance showed strong results, effectively capitalizing on consumer demand and strategic execution across multiple facets of their business.
- The company reported a record net sales figure of $1.2 billion for the third quarter, marking a 14% increase from the previous year, alongside a comparable sales rise of 16%.
- The operating income also witnessed a 30% growth year-over-year, driven by a 170 basis point improvement in operating margin to 14.8%.
Urban Outfitters Inc.: These Are The 7 Biggest Factors Impacting Its Performance In 2025 & Beyond! – Major Drivers
- Urban Outfitters, Inc. reported a promising performance for Q3 of fiscal 2025, with total sales reaching a record $1.4 billion, a 6% rise compared to the previous year.
- This growth was primarily driven by strong performances from its Anthropologie and Free People brands, both of which posted mid-single-digit positive retail segment comps, which counterbalanced a high single-digit decline at Urban Outfitters.
- Nuuly, the company’s fashion rental business, also saw robust double-digit revenue growth, credited to a 51% rise in average active subscribers.
Dell Technologies: An Insight Into Expansion Beyond Endpoint Security & Storage Opportunities! – Major Drivers
- Dell Technologies Inc. reported solid results for the fiscal year 2025 third quarter, demonstrating both strengths and challenges across its various segments.
- The company achieved a revenue of $24.4 billion, marking a 10% increase year-over-year, driven by strong growth in its Infrastructure Solutions Group (ISG) thanks to robust demand for AI servers and traditional servers.
- Diluted earnings per share (EPS) reached $2.15, reflecting a 14% rise, while cash flow from operations was $1.6 billion.
NetApp Inc.: Keystone Subscription Model Expansion As A Critical Growth Lever! – Major Drivers
- NetApp’s recent earnings for the second quarter of fiscal year 2025 reflects a strong performance with both opportunities and challenges evident in the company’s results.
- Key aspects of the company’s current position and future outlook can be synthesized as follows: NetApp demonstrated significant growth in its all-flash storage segment, showing a 19% year-over-year increase, and enjoyed solid momentum in cloud storage services, which helped drive revenue beyond expectations.
- The reported revenues reached $1.66 billion, showing a 6% increase compared to the previous year.
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