In today’s briefing:
- Xiaomi (1810 HK): 4Q24 Preview, All Businesses Healthy, But Vehicle Overvalued
- Alibaba Group’s AI Power Move—Can It Outpace DeepSeek and OpenAI?
- Sea Ltd (SE US) – Shifting into Overdrive
- Southern Company: Is The Growth in Southern Power’s Asset Portfolio Sustainable?
- Seeking Value and Safety in HK/China: SHKP 16 HK
- Coal India (COAL IN) Value Trap
- SITC International (1308 HK): Another Strong Year, with Excellent Yield
- Tech Supply Chain Tracker (11-Mar-2025): Global smartphones in 4Q 2024
- Cisarua Mountain Dairy (CMRY IJ) – New Variants and Channels
- China Bans Illumina’s Gene Sequencers Amid Escalating Trade Sanctions
Xiaomi (1810 HK): 4Q24 Preview, All Businesses Healthy, But Vehicle Overvalued
- We believe all business, including smartphone and vehicle, will grow strongly in 4Q24 and 2025.
- We expect EPS will increase by 15% YoY in 4Q24 and 41% in 2025.
- However, we believe the market overvalues the newly launched vehicle business.
Alibaba Group’s AI Power Move—Can It Outpace DeepSeek and OpenAI?
- Alibaba Group Holding has made a significant move in the AI space with the release of its latest artificial intelligence model, QwQ-32B, as it seeks to establish itself as China’s leading AI developer, challenging DeepSeek.
- The model, which excels in mathematical reasoning, coding, and problem-solving, demonstrates capabilities comparable to both DeepSeek’s R1 and OpenAI’s latest technology.
- However, a key differentiator is its size, as QwQ-32B operates with only 32 billion parameters compared to DeepSeek R1’s 671 billion.
Sea Ltd (SE US) – Shifting into Overdrive
- Sea Ltd booked a blowout set of results, with strong growth and profitability across all three divisions, surpassing previous guidance and bringing about the second profitable year for the company.
- E-Commerce was the key feature, with GMV surpassing US$100bn with increasing take rates, with core marketplace GAAP Revenues booking nearly +50% YoY growth in 4Q2024, confirming Shopee’s lead position.
- Digital Financial Services and Digital Entertainment also booked strong growth, with management highlighting a positive outlook for all three segments in 2025. Sea Ltd remains a core holding.
Southern Company: Is The Growth in Southern Power’s Asset Portfolio Sustainable?
- Southern Company reported strong performance for the fourth quarter of 2024, with adjusted earnings per share (EPS) reaching $4.05, marking an 11% growth from the previous year and positioning itself at the top of the 2024 guidance range.
- This success is attributed to steady investments in state-regulated utilities and the successful management of weather-related impacts.
- Positives from the earnings report include the addition of 57,000 new residential electric customers and 26,000 new customers in natural gas distribution businesses, reflecting robust growth, particularly in the Southeast.
Seeking Value and Safety in HK/China: SHKP 16 HK
- MSCI China has rallied 19% YTD, outperforming DM and EM by 18% and 14% respectively. We think it makes sense to look at China and Hong Kong again
- Part of the rally is driven by AI optimism. In terms of fund flow, we are seeing increasing south-bound fund flow to HK equity market at a fast pace
- We think Sun Hung Kai Properties, which is a proxy for Hong Kong, may benefit and play the catch up game on the back of very attractive valuation
Coal India (COAL IN) Value Trap
- COAL’s production growth during Apr-Feb 25 has slowed to 1.5% yoy due to a high base effect and is unlikely to grow significantly in the near future
- Regulated pricing mechanism means low correlation to international price movements. E-auction (10-12% of volumes) prices crash -25% yoy in line with international trends, impacting profitability
- Single digit PE is in line with historic multiples. Wage renegotiations due in June 2026, rising coal production from captive producers, surge in renewable capacities are headwinds
SITC International (1308 HK): Another Strong Year, with Excellent Yield
- SITC International (1308 HK)‘s 93.5% profit growth in FY24 is at the top-end of the positive profit alert. A final DPS of HK$1.4 put it on a 7.3% dividend yield.
- The FY25 long-term contract rate is expected to rise 10%, with volume growing at least 5% and lower costs. The consensus forecast of a 23.1% earnings decline is too conservative.
- Having an ROE of 32% for FY25F, its 12-month forward P/B of 2.46x (vs. average of 2.59x) with net cash equals 5.4% of market capitalisation are inexpensive.
Tech Supply Chain Tracker (11-Mar-2025): Global smartphones in 4Q 2024
- Global smartphone market expected to see substantial growth in 4th quarter of 2024, indicating a positive trend for the industry.
- TSMC experiences a drop in revenue in Q1, as AI sector continues to expand and company addresses discrimination allegations.
- AMD CEO recognizes value of open-source technology in DeepSeek, while HP announces plans to reduce workforce by cutting 2,000 jobs, reflecting industry challenges.
Cisarua Mountain Dairy (CMRY IJ) – New Variants and Channels
- Cisarua Mountain Dairy booked a strong finish to the year in terms of sales growth despite a high base driven by premium consumer foods, but with dairy showing recovery.
- The company saw an improvement in gross margins in 4Q2024 driven by the stabilization of raw materials and product mix, but operating margins were impacted by higher promotional spending..
- Cimory will drive future growth by expanding across channels, especially general trade and with the launch of new products in both dairy and consumer food segments. Valuations remain attractive.
China Bans Illumina’s Gene Sequencers Amid Escalating Trade Sanctions
- China has banned Illumina, the U.S. genomics giant, from exporting gene sequencing machines to the country, escalating sanctions imposed last month when the company was added to Beijing’s Unreliable Entity List.
- The move is expected to accelerate domestic alternatives in the gene sequencing industry.
- Illumina, a dominant player in the global gene sequencing industry, has been a major supplier in China since entering the market in 2005. It once held a near-monopoly in the country’s gene sequencing sector before Chinese rival MGI Tech Co. Ltd. emerged in 2015 as a competitor. Since then, the two companies have battled for market share in China while engaging in global patent disputes.
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