Daily Brief Equity Bottom-Up: Microsoft Chairman & CEO: AI and more

• The speaker reflects on the excitement and nervousness of facing a new platform shift in technology and the need for continual innovation
• They consider the broader economic impact of technological advancements, like AI, and the potential for breakthroughs in various industries
• The decision to partner with OpenAI was driven by Microsoft’s history of seeking out ambitious technology innovators to collaborate with, even when the outcome is uncertain.

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• 2023 results came in broadly in line with expectations but included a concerning step up in ex-fuel unit cost inflation.
• We cut our 2024 EBITDAR by 10% to HK$22.2bn, which drives net income down 21% to HK$6.6bn, leaving us well below consensus.
• We revisit Cathay’s margin generation problems from the last cycle, illustrating structural problems which require structural solutions.

• We cut Luckin Coffee’s 1Q24 revenue estimate by 3% to RMB7.9bn with 79% yoy and cut non-GAAP net income estimate by 42% to RMB318mn due to (1) weak sales；
• We expect 2Q24 to be the turning point for earnings due to (1) sales improving with weather warm-up (2) ASP rebound from easing competition 
• We maintain the stock as BUY rating but lower TP by US$4 to US$37 to factor in the temporary near-term weak sale.

• FY23 net profit of HKD9.1b, easily beating the consensus forecast of HKD8.5b, and announced a surprise dividend, the first since 2019, signally pandemic effects are over 
• Perfect execution from the team, leveraging on a strong market 
• Cathay Pacific is a value BUY, our target price of HK$9.90 (+10% UPSIDE) implies 10x FY2024 PE. We will update more after tuning in the 2 pm analyst briefing 

• Broadcom reported consolidated net revenue of $12 billion, a 34% increase year-on-year, with semiconductor solutions contributing $7.4 billion, up 4% from the previous year.
• Infrastructure software revenue saw a significant increase of 153% year-on-year, totaling $4.6 billion.
• These improvements are due in part to the contribution from VMware, which has resulted in a sequential jump in revenue by 132%.

• JD.com’s latest earnings showed a strong commitment to growth, navigating a mix of macro recoveries, seasonality factors and strategic refocus.
• They delivered a growth in net revenues by 4% and recorded a non-GAAP net income attributable to ordinary shareholders of RMB 8.4 billion.
• Cash and cash equivalents, restricted cash, and short term investments totaled RMB 198 billion.

• CrowdStrike Holdings, Inc., a leader in the cybersecurity sector, reported an impressive fourth quarter and fiscal year for 2024 during its latest earnings conference call.
• The call highlighted several positive aspects of the company’s performance such as a record net new Annual Recurring Revenue (ARR) of $282 million, reflecting a year-over-year increase of 27%.
• Furthermore, the company achieved a record operating margin of 25%, an improvement of 10 percentage points when compared to the previous year.

• The short-term recovery momentum observed in China and consumer markets.
• The Gen 3 in 4Q23 accounts for about 50% of the production, expected to increase to around 60-70% in 4Q24F.
• Expecting to improve quarter by quarter after reaching the bottom in 1Q24F, and the growth is expected to recover to around 20%+ YoY in 2024F.

• We screen our coverage universe for earnings surprises, EPS upgrades, and management narratives to identify fundamental longs.
• Stocks discussed include TVS Motor (TVSL IN), Nestle India (NEST IN), and Honasa Consumer (HONASA IN) 
• TVSL EVs could surprise, NEST offers the right safety in the current environment, and for HONASA there is a possibility of turning around. 

• Fairfax India’s stock price may increase due to potential higher valuations
• Company’s fee structure may be high but offers opportunity for strong returns
• Investment in Fairfax India provides discounted opportunity with growth potential, specifically through ownership in Bangalore airport

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.