Daily Brief Equity Bottom-Up: NVIDIA Q3FY25 Growth Story Still On Track But Heed The Flaws In Jensen’s GenAI Vision and more

• NVIDIA this week reported Q3FY25 revenues of $35.082 billion, up 17% QoQ, up 94% YoY and a full $2.5 billion above the guided midpoint.
• Looking ahead, NVIDIA is forecasting revenues of $37.5 billion, up ~7% sequentially. Gross margins to decline slightly to 73%.
• Contrary to Jensen Huang’s vision, the existing $1 trillion worth of data centers do not need to be “modernized” into AI factories. This is pure fantasy. 

• PDD reported C3Q24 top line, non-GAAP EBIT and non-GAAP net income (2.6%), (12.4%) and (6.3%) vs. cons., and (3.4%)
• PDD is easing its appeasement of China-platform merchants, positive for profitability,but its transition to the semi-consignment model will likely continue as it tries to improve merchandise selection and logistics quality
• We reiterate BUY as PDD is undervalued at 8.1x CY2025 P/E, but we cut its TP to US$ 146 to reflect slower growth amid increasing overseas investment.

Sayona Mining is a lithium producer and explorer with projects in Canada, Western Australia and soon in the US and Ghana. A proposed merger of equals with Piedmont Lithium will create a c A$1bn mid-tier lithium player with streamlined asset ownership and significant growth optionality. Sayona and Piedmont’s Canadian and US projects comprise one of the largest advanced hard rock lithium resources in North America and are strategically positioned to supply the region’s growing lithium demand. Following the proposed equity raises, the company will be well capitalised to execute on its growth plans. As a producer, Sayona should also benefit strongly from inevitable recovery in lithium prices, with additional upside coming from the potential downstream expansion.

• Temasek-Backed 65 Equity Partners bought 13% stake in Tuya, implying a total investment of US$100 million (or S$134M). 
• The fund’s mandate is to support high-growth, mid-cap companies seeking a listing on the Singapore Exchange (SGX).
• The listing will benefit Tuya by providing easy access to capital. Tuya will be able to use stock as a currency to fund its expansion plans in Southeast Asia.

Avon Technologies’ FY24 results show the continued momentum seen throughout the year, with revenue growth of 12.2% y-o-y ($275m), adjusted operating profit growth of 53.4% y-o-y ($31.6m) and a record closing order book value of $225m, up 64.3% y-o-y. Return on invested capital (ROIC) grew 500bp y-o-y to 13.7%. Given Avon’s record order pipeline, disciplined capital allocation and strong cash generation, management expects the company to achieve both its medium-term operating margin (14–16%) and ROIC (>17%) targets a year ahead of schedule in FY26.

• Beike (BEKE) reported C3Q24 revenue in-line with our estimate and consensus but non-GAAP operating profit 26%/25% below, mainly due to higher commission rebate and agent salaries;
• Strong rebound in home transaction volumes in October and November, led to our C4Q24 revenue 16% above consensus. But the rebound needs more stimulus to sustain;
• We maintain the stock as BUY and raise TP to US$25 to reflect the near term rebound and steady market share gains.

Games Workshop Group’s (GAW’s) H125 trading update suggests the company enjoyed a strong Q225 in both its core business (due to the launch of the fourth edition of Age of Sigmar midway through Q125) and licensing (due to the success of the Space Marine 2 video game). These are impressive in the context of the tough comparative from the prior year’s launch of the new edition of Warhammer 40K (40K) and the currency headwinds in the early part of H125. We upgrade our profit estimates for FY25 (by 7%) and FY26 (by 3%) to reflect the outperformance versus our prior expectations.

• Price momentum softened dramatically in October, mirroring steep declines in H221, FY22
• We believe price momentum, rather than earnings, drives medium-term share performance
• Reaction to ZIM’s stellar Q324 results & guidance raise suggests more downside ahead