Daily Brief TMT/Internet: Taiwan Semiconductor (TSMC) – ADR, Coforge, Alibaba (ADR), Shibaura Mechatronics, ARM Holdings, Kuaishou Technology, Doosan Robotics, Sunny Optical Technology Group, Baidu and more

• Nvidia will report its earnings today U.S.-time, we outline the key Taiwan AI supply chain names to watch around the earnings.
• TSMC has maintained its full-year revenue guidance despite media reports questioning whether a further downgrade was coming.
• Hon Hai produces over 50% of Nvidia’s AI hardware according to media reports.

• Baring aims to raise around US$900m by selling its remaining 26.6% stake in Coforge (COFORGE IN) .
• Baring has been paring down its stake since 2020 and hence, the selldown is somewhat well flagged.
• In this note, we run the deal through our ECM framework and talk about the deal dynamics.

• Alibaba (ADR) (BABA US)‘s New Retail strategy stumbled, prompting the company to revert to its e-commerce origins with a renewed emphasis on social commerce.
• Creating a social media platform could be relatively simple, yet turning it into a prosperous venture amid established social media giants could be challenging.
• Branching out from social media to e-commerce might be straightforward, but Alibaba Group Holding (9988 HK)‘s unprecedented reverse path could present unique challenges.

• Five plus years ago, Toshiba Corp (6502 JP) sold down a 26% stake in small cap Shibaura Mechatronics (6590 JP) to get to a consolidated 13%-ish stake. 
• This was discussed in Toshiba Selldown of Shibaura Mechatronics (6590) back then. Yesterday, we got news Toshiba would sell out its remaining stake. And there’s a buyback. Maybe.
• The stock has reacted badly on Day 1, despite a lack of dilution. Shareholder structure matters. 

• While Softbank is trying to complete the IPO of Arm in the next several weeks, many investors are likely to have concerns about valuations. 
• Arm Holdings generated sales of US$2.7 billion (down 0.9% YoY) and net profit of US$524 million (down 22.5% YoY) in FY 2023.
• In order for the valuation of Arm to reach US$60 billion, this would imply a significant premium multiple to the comps. 

• Kuaishou Technology (1024 HK) reported 2Q2023 results yesterday which beat consensus estimates. The company reported an OPM of 4.7% with net profits for the first time.
• The company’s domestic business continues to see improvement in operating profits while losses of the overseas business have reduced significantly over the last few quarters.
• Though livestreaming growth has decelerated, the company’s online marketing and e-commerce businesses continue to expand driving Kuaishou’s earnings.

• Softbank Group (9984 JP) aims to raise around US$8-10bn via selling some of its stake in ARM Holdings ’ US IPO.
• ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
• In this note, we talk about the not-so-positive aspects of the deal.

• Doosan Robotics is getting ready to complete its IPO in Korea in September. The expected IPO price range is 21,000 won to 26,000 won.
• The company estimates its sales to surge from 67 billion won in 2023 to 766.3 billion won in 2027, representing 83.9% CAGR from 2023 to 2027.
• One of the major reasons why local investors will have a positive view of Doosan Robotics is due to Samsung’s investment in Rainbow Robotics whose share price increased 232% YTD. 

Sunny Optical has released H1/23 numbers that were worse than expected in our view, with revenues and earnings below street estimates. Revenues declined 15.9% y-o-y to CNY 14.3 bn. Meanwhile, gross profit dropped 39.5% to CNY 2.1 bn, with a margin of 14.9%. Net profit plunged 68% to CNY 437 mn. A detailed cash-flow statement was not provided. Positively, the financial risk profile and liquidity remain healthy, supported by a large net cash position. Gross Debt/EBITDA rose to 3.9x, which is too high for a Baa1 credit in our view. We note that this has crossed Moody’s 2.0x negative rating trigger, which should cause downgrade pressure to build up.

• Baidu reported 2Q23 revenue/non-GAAP net income 2.3%/38.1% vs cons., Baidu core’s online marketing revenues and other revenues grew 7.1%/13.0% YoY, respectively. 
• We expect that Baidu’s ads growth will continue into 2H23, supported by recovery of key advertisers. 
• We slightly increase FY23 EPS estimates and maintain our TP of US$162, which implies 17.8X PE.