Daily Brief Equity Bottom-Up: What Is Kioxia? And Should You Bother? Part 1: Why NAND Is so Hard (And Not Attractive) and more

• Tier-2 commodity Memory is a lousy business, which requires high Capex and R&D, generates very low Free Cash Flows. DRAM is more sustainable than NAND as peak margins are higher. 
• Kioxia only makes NAND, has a high market share (16%) but is a Tier-2 supplier with a roadmap lagging SK Hynix by ~2 years, and a high exposure to Consumer. 
• The Memory cycle has recovered, probably close to peak earnings. That’s why stocks have been declining (Micron, Hynix).  Part 2 will cover financials (there’s a bad surprise) and valuations. 

• Xiaomi’s stock price has risen 62% since our buy rating after 2Q24 results.
• We believe vehicle production will bring Xiaomi a revenue of RMB90 billion maximum.
• The sum-of-the-parts valuation suggests significant downside for the next twelve months.

• PG Electroplast (PGEL IN) is India’s 2nd largest ODM player for washing machines. It also serve as ODM and OEM for leading brands in Room ACs, electronics, air coolers etc.
• Company is guiding for 76% of topline growth as well as 250Cr of PAT for FY25, out of which 103Cr is already delivered. Also company revised guidance upwards in Q2. 
• With 1500Cr of QIP in plan, company is looking for inorganic growth opportunities to make stronger growth going forward. 

• Hong Kong continued a correction in its Bull market which has lifted the HSCEI to be the best performing Asian index this year.  Southboune buying is strong.
• AAC Technologies Holdings (2018 HK) share price had a breakout relative to the MSCI AC Asia Index.  The company reported solid results benifitting from the smartphone and auto sectors.
• CGN Power (1816 HK) share price relative to MSCI China broke down.  The company reported a disappointing 3Q24 results even as power generation increased by 15% YoY for the period.

• TSMC: +19.2% Premium; Middle of Most Recent ADR Spread Trading Range
• UMC: -1.7% Discount; Local Shares’ Short Interest Continues to Rise
• ASE: +4.0% Premium; Local Shares’ Short Interest Has Finally Stopped Rising

• Exxon Mobil’s Q3 revenue fell by 0.8% YoY and net profit decreased by 5.1%. Revenue missed estimates by 4.2% but EPS exceeded expectations by 2.3%.
• Exxon Mobil’s Q3 upstream production rose by 24% YoY to 4.6 mboepd, driven by strong output in Guyana and the Permian basin and the acquisition of Pioneer.
• Exxon attributed its better-than-expected earnings in bottom-of-cycle conditions to structural cost savings, reduced expenses, high-return investments, and selective divestments.

• Lotte Chilsung Beverage’s land in Seochogu, Seoul is estimated to be worth more than 3x its market cap. 
• In the past several weeks, there have been increasing concerns about the overall debt pressures at the Lotte Group.
• Lotte Group may be considering on selling some of its assets including Lotte Rental, Lotte Capital, and Lotte Chilsung Beverage’s Seochogu land. 

• Although the reported FY24 net profit plunged 69.7% due to intangible impairments, China Education Group (839 HK)‘s adjusted net profit grew by 3.3% and adjusted EBITDA by 12.3%.
• Based on adjusted net profit, its payout ratio is flat at 40%, implying an 8% dividend yield. This suggests underlying operations are decent and demonstrate confidence in the outlook.
• Both tuition and enrollment are expected to sustain growth in FY25, meaning that a consensus forecast of 9% net profit is achievable. Its 4.5x PER does not appear stretched.

• Project quickly shut down by company, but still moving forward
• Concerns about Chinese buying in Australia
• Waiting on cost release for project, anticipating higher costs due to increase in uranium price

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