Daily Brief TMT/Internet: NVIDIA Corp, Xiaomi Corp, Hollysys Automation Technologies, Intel Corp, KCE Electronics PCL, Erajaya Swasembada, SenSen Networks and more

• Q3FY24 revenues of 18.1 billion, up 34% QoQ and up a staggering 206% from the year ago period. It was also ~$2 billion higher than the guided number
• NVIDIA’s current quarter forecast was for a further revenue raise of almost $2 billion with gross margins staying roughly flat at 74.5%
• Share price reaction was negative, closing down 2.5% the following day. But why?

• Xiaomi reported C3Q23 top-line, non-GAAP EBIT, and GAAP net profit (2%), 7% and in-line vs. our est., and in-line, 4%, and 13%, vs. consensus respectively.
• Xiaomi’s recent run could be short lived, as (1) Huawei will soon launch mid-range 5G handsets, (2) the Mi 14 will soon face new high-end Android competition;
• And (3) its underinvested EV project could disappoint. We maintain our SELL rating and HK$ 12.6 TP, implying 28x CY24 P/E.

• The Hollysys Automation Technologies (HOLI US) Board has finally succumbed to shareholder pressure by targeting a special meeting of shareholders in the week commencing 22 January 2024.
• The special meeting is a side event as the Board targets a binding proposal by mid-December, with some bidders proceeding to the confirmatory due diligence stage.
• The BVI takeover structure and Hollysys’ undemanding valuation facilitate a competitive bidding process. A 10% uplift to the current highest offer (Recco’s US$26.50 offer) is possible.

• By offering 15k and 30k/m 3nm capacity by 4Q24/4Q25 to Intel, TSMC will see Intel becoming one of its top 3 customers by accounting for 12% of TSMC 2025 sales
• By leveraging 3nm outsourcing, Intel will have incremental sales/capacity growth of 19-20% per year by accounting for 28%/44% of sales in 2024/2025, beating consensus’ 14%/9% y/y sales growth for 2024/2025.
• We estimate 30-35% 5 years EPS CAGR for Intel, driven by TSMC’s 2/3nm foundry support, lower cost and process R&D, lower capex and depreciation cost, and AI PC CPU launch.

• The SET50 index tracks the performance of the top 50 largest and most liquid names listed in the Stock Exchange of Thailand (SET).
• In this insight, we take a look at the potential ADDs/DELs for Thailand’s SET50 index rebalance in December 2023.
• I currently see only one ADD and one DEL for the SET 50 index and with more than 90% of the reference period complete, these are my final expectations.

• Erajaya Swasembada (ERAA IJ) had a tempestuous 3Q2023, with one-off write-downs of inventory in both Indonesia and Malaysia, despite booking strong sales and gross profit growth overall. 
• The company has also expanded its store network more aggressively in 9M2023, which meant higher opex and financing to build the new inventory, whilst stores take time to ramp up. 
• Erajaya should see a recovery in 4Q2023, given plans to limit store expansion plus a lack of write-offs. Trading on 5x FY2024E PER with forecast +25% EPS growth is attractive.

SenSen has won a major contract with Australia’s National Heavy Vehicle Regulator (NHVR), generating A$1.5m in upfront revenue and c A$500,000 in annual recurring revenue. This is a major scale-up with an existing customer, providing important validation of both SenSen’s technology and its ‘land and expand’ strategy, while retaining significant upsell potential through expanding deployments across other NHVR jurisdictions. The deal provides good support for our FY24 forecasts and strengthens the company’s prospects for delivering sustained, scalable growth.