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The year after Abbott exited China’s infant formula market

At the end of 2022, Abbott Laboratories announced the gradual exit of mainland China’s infant formula market throughout 2023.

Abbott had ~3% market share.

How other international brands were doing in 2023?

Nestle’s Greater China business overall saw 4.2% organic growth in 2023, citing positive growth in Infant Nutrition.

Danone (Aptamil brand) saw market share gain in 2023, with 8.3% yoy like-for-like growth in specialized nutrition in China, North Asia & Oceania.

A2 grew 10.4% yoy in 23H2 (FY24H1) for its China label products, and 16% yoy in 23H1 (FY23H2).

 

 

 

Oh Tesla Q1 delivery number looks really bad

Read previous post on a $360 billion Tesla.

Although production number is flattish, Tesla q1 delivery number is worse than expected.

China reported wholesale number for Tesla is 89,064 for March (+0.2% yoy) and YTD is -3.7% yoy.

However, this wholesale number from China doesn’t mean cars have been delivered to customers.

Europe’s reported monthly number points to yoy growth of 40% for the first two month, but March was disrupted so won’t keep up the growth.

US customers are still facing super high interest rate on auto loan.

Tesla recently hiked the price, which indicates a change in strategy to protect profits, in-line with Tesla’s move to drop volume guidance for the year.

As price competition is fierce in China, lower some price for volume won’t help Tesla’s China profit much. Some target/core customers also won’t go away if Tesla raised some price (low price elasticity).

Stock prices are telling stories

There seems to be a more diverse purposes of stock prices theses days.

And trading prices are really interesting political/geopolitical storytellers.

Here are some recent examples:

1/ $DJT: This is obvious as the name of the company indicated. The financial obligation that Trump is facing also makes the market cap important.

 

2/ $META: This is partially an indicator of TikTok ban sentiment/probability I feel.

 

3/ $INTC: Bringing back high-end semi mfg to the US.

 

One could argue that the prices are moving based on narratives, rather than earnings; however, it’s true that different policies could change companies’ fundamentals in a big way.

Money Machine by Weijian Shan (2)

Such an interesting book.

Some takeaways:

  • You don’t get a deal until the very last
  • Sometimes you just need to wait, which can be the best strategy
  • Back channels are very much needed
  • Working with the top is very much needed
  • Don’t assume the other side will adhere to “law” all the time

 

Shortcuts is the preliminary format of Apple’s OS AI?

Apple Shortcuts has many drawbacks I think.

  • it functions depend on apps
  • you need to engineer or “low-code” the functions
  • debugging can be problematic
  • password/access is a big issue, which limit the functionality
  • daily impact looks limited. so far I haven’t used many in daily life, although I tried to..

However, it seems to me that on future hardware, users should be able to use verbal communication to replicate human interactions, in a way that even the hardware can’t distinguish if it’s AI or human. Or to imagine that you have an assistant to do all the work on iPhone for you, and that assistant is AI.

 

Ukraine, NATO, Rolls-Royce

I haven’t posted anything on this issue.

One logic that was less discussed:

Back in 2014, NATO leaders agreed to increase spending towards 2% of their GDP on defense within a decade.

But this hasn’t been achieved.

Here is 2023 number

And previously, for example

2021

2018

US may feel it’s less willing to over-spend for the long run.

And it’s mostly a question for European countries. How much they should spend on defense?

Europe’s overall economy and finance situation doesn’t seem very strong, compared to the US.

Maybe the GFC created too large a problem that took years to truly recover.

Ukraine may be the catalyst that really makes EU leaders to rethink about defense.

Rolls-Royce stock has been more than tripled in 2023! And continue to rise in 2024.

Of course, the end of covid helped a lot.

But Rolls-Royce is indeed a very important defense company for EU.

Defense segment op. profit is 35% of the total, up 30% in 2023, with 14% op. margin.

2024 guidance: underlying operating profit between £1.7bn and £2.0b!

That’s 25% growth if hit the upper end.

2023 NOPAT £1.4bn -> 2024 of £1.7bn? or $2.1bn?

Then it’s at above ~20x NOPAT, not cheap but can still go up.

Manufacturing in the US

The goal for supply chain security is probably not the whole picture.

This sounds like ESG to me.

I think a better question to ask is how to create a new class of mfg businesses that can do well in the US.

Or how the US society embrace this type of business and jobs and their families.

Do people love this kind of mfg work?

Can they earn decent wages?

Are companies profitable? Does ROE and IRR make sense?

There are some differences between a chip maker and a toy maker, but the questions would be similar.