In today’s briefing:
- Fuyao Glass (3606 HK): Global Champion Benefiting From Structural Uptrend
- Monthly Chinese Tourism Tracker | Outbound Recovery Continues, but Some Regional Destinations Lag
- BSE – A Regulatory Accident?
- Tech Supply Chain Tracker (29-Apr-2024): Apple expands supply chain in Southeast Asia, led by Vietnam.
- China Consumption Weekly (29 Apr 2024): Weird Phone Mkt, Encouraging Car and Travel Mkts
- BYD (1211 HK): Low Growth in 1Q24, But March Sales and Homemade Batteries to Support a Strong Year
- BFI Finance Indonesia (BFIN IJ) – Slower Recovery in Process
- Taiwan Semiconductor Manufacturing: Significant Artificial Intelligence (AI) Opportunities & The Returns That Lie Ahead! – Major Drivers
- Waaree Renewable Technologies Ltd- Forensic Analysis
- China Comm Const (1800 HK): Continue to Deliver
Fuyao Glass (3606 HK): Global Champion Benefiting From Structural Uptrend
- Fuyao Glass Industry Group (3606 HK) is the largest auto glass producer in the world, with an estimated 40% market share globally, and a dominant 65% market share in China.
- The investment case for Fuyao include: ASP increase from product mix upgrade; increasing sales volume due to more auto glasses needed per car; and improving margins.
- The company has production bases in China with annual production volume of around 32.5 million units, and in US with annual production volume of around 5.5 million units.
Monthly Chinese Tourism Tracker | Outbound Recovery Continues, but Some Regional Destinations Lag
- Outbound continues to improve, March load factor matched pre-Covid level
- Appears Chinese tourists are “spreading their wings”, travelling farther afield
- Trip.com has been best YTD performer in the space; can airlines catch up?
BSE – A Regulatory Accident?
- SEBI has asked BSE to pay regulatory fees on options trading based on notional turnover instead of premium turnover
- The impact of this would 10-20% on earnings in short term
- The bigger question lies ahead what BSE will do to offset the impact and grow its market share in derivative trading
Tech Supply Chain Tracker (29-Apr-2024): Apple expands supply chain in Southeast Asia, led by Vietnam.
- Apple diversifies supply chain, focusing on Southeast Asia, led by Vietnam, while also shifting suppliers in India.
- MediaTek plans to boost market presence and R&D in India, targeting 30% market share in China by 2H24 with Dimensity 9400 SoC.
- US probe into China’s RISC-V role could impact Samsung’s AI chip ambitions, while STMicroelectronics aims for 100% renewable electricity by 2027.
China Consumption Weekly (29 Apr 2024): Weird Phone Mkt, Encouraging Car and Travel Mkts
- The top five smartphone producers’ market shares got closer in the first quarter.
- The China Immigration Office announced that entry and exit of people increased by 305% YoY in 1Q24.
- China Passenger Car Association expected that new energy vehicle sales volume will grow by 37% YoY in April.
BYD (1211 HK): Low Growth in 1Q24, But March Sales and Homemade Batteries to Support a Strong Year
- BYD’s revenue growth is lower than the estimate in our preview note.
- However, the recovery of sales volume in March suggests a strong year.
- We believe BYD will win the price war due to its homemade batteries.
BFI Finance Indonesia (BFIN IJ) – Slower Recovery in Process
- BFI Finance Indonesia (BFIN IJ) booked a solid set of 1Q2024 numbers with improved QoQ bookings, although with some concerns over challenging market conditions slowing the recovery.
- The NPF ratio saw an ongoing improvement, although the cost of capital increased due to higher write-offs from last year’s bookings. Revenue declined due to a shift to lower-risk products.
- The outlook for BFIN in 2H2024 looks more positive, with the company shifting back to higher-return products and with lower expected credit costs. Valuations are appealing on 1.5x PBV.
Taiwan Semiconductor Manufacturing: Significant Artificial Intelligence (AI) Opportunities & The Returns That Lie Ahead! – Major Drivers
- Taiwan Semiconductor Manufacturing Company’s (TSMC) Q1 2024 earnings presented several key details about the firm’s current market standing and future performance.
- For Q1 2024, they reported a 5.3% sequential decrease in revenue due to the impact of smartphone seasonality despite strong demand in high-performance computing (HPC).
- Gross margin was also up to 53.1%, reflecting product mix changes, and the firm’s operating margin increased to 42%.
Waaree Renewable Technologies Ltd- Forensic Analysis
- Waaree Renewable Technologies (WAREERTL IN) or (WRTL) is into Solar EPC and is a subsidiary of Waaree Energies Ltd.
- Revenues and order book have increased exponentially in the last few years.
- While the business has certainly picked up, there are few forensic checks that need attention; most important being the auditor’s comment on the need to increase strength of internal controls.
China Comm Const (1800 HK): Continue to Deliver
- China Communications Construction (1800 HK) maintained healthy earnings growth at 10% in 1Q24, ahead of the consensus expectation of 7.3% for full-year FY24.
- A 0.2pp gross margin expansion and positive swing in credit and asset impairments are the drivers, though higher finance costs have offset some of their benefits.
- 1Q24 new contracts were up 10.8%, and we estimate backlog equals 4.5x FY24F revenue. Despite YTD outperformance, it is still cheap at 2.4x PER and 0.2x P/B.
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