Daily Brief Equity Bottom-Up: Xiaomi (1810 HK): 2Q24 and more

• Excluding the new business electrical vehicle, total revenue increased by 23% YoY in 2Q24.
• Smartphone shipments grew faster than Samsung and Apple in 2Q24.
• We believe electrical vehicle will bring significant gross profit in following two years.

• TSMC Foundry 2.0 more than doubles its addressable market and resets its market share to 28%, down from the ~60% share it has long enjoyed in the “traditional” foundry market
• The lion’s share of this new market will come from IDM, a combination of increased outsourcing (e.g. Intel) and new JV deals (e.g. Germany and Japan)
• Foundry 2.0 reflects the reality of how the semi industry is evolving and it’s the polar opposite of Intel’s IDM 2.0 

• Company had strong half year results with 990 million in operating EBITDA and 420 million NPAT
• They have 1.55 billion in cash and are debt-free, with majority of revenue from thermal coal production
• Despite recent 20% drop in share price, company is on track and has good long-term prospects

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• Taiwan Tech Stocks Rally, But Lag Nvidia’s Massive Rally; Prepare for Nvidia, Dell, HP Results Next Week
• Hon Hai & Zhen Ding Show No Major AI Slowdown; Taiwan AI Supply Chain Names Lag Nvidia’s Rebound 
• TSMC Foundry 2.0: Strategic Shift Or Brand Tinkering? Why It Is Significant

• On 21 August, SM Entertainment announced that it will sell its non-core assets including its controlling stakes in SK C&C and KeyEast.
• The combined sales amount could be about 110 billion won or more, representing 7% or more of SM Entertainment’s market cap. 
• Sale of SM C&C and KeyEast is likely to have a positive impact on SM Entertainment by selling its non-core assets and improving its balance sheet for higher shareholder returns.

• Headline numbers for ZTO in Q224 were +10% Revenue, +12% EBITDA
• But gross margin in core express segment fell, as did Operating Cash Flow
• ZTO left guidance unchanged for FY24; we recommend investors AVOID it

• SE Asia & India deploying semi supply chains for efficiency & cost reduction, with focus shifting to automotive & mobile ventures.
• Taiwan leveraging strong semiconductor industry to attract foreign students & enhance industry leadership.
• Wiwynn suing Musk’s X over unpaid server bills, UK reassessing semiconductor strategy amid US & China influence. Apple’s Foxconn to manufacture iPhone Pro in India, AMD entering AI market with $4.9 billion investment. TSMC building EUR10B fab in Dresden to boost semiconductor industry.

• Hon Hai’s Latest Key Take Aways — No Slowdown for AI Server or Mobile Demand Indicated
• Zhen Ding — Delivers Higher Than Expected 2Q24 Growth; No Indication of AI Server or Mobile Slowdown
• Taiwan AI Supply Chain Names Have Lagged Nvidia’s Massive Rebound Since August 9th

• China East Education (667 HK)‘s 1H24 result is impressive with a 58% YoY increase in adjusted net profit. Good cost control is a key contributing factor. 
• Profitability has improved in all business segments. Its strategy to focus on higher-value courses has led to further improvement in annualised tuition per student. 
• The 1H24 result equals 68% of the full-year consensus, implying an upside in market expectations. Its net cash, at 35% of market capitalisation, is unmatched by peers.

• Expedia Group, in its second-quarter 2024 earnings, exhibited a dual-faced performance characterized by significant achievements and emerging challenges that mirror the broader complexities of the travel industry.
• The management has focused on revitalizing core brands, particular emphasis on enhancing execution within the company’s consumer segment, and fine-tuning their long-term strategic direction.
• Under her leadership, Expedia Group has seen a robust growth in room nights and gross bookings indicating a strong recovery trajectory from previous downturns.