Category: personal_noteS

1/ Post pandemic, the growth rate of various food consumption products did not meet the expected rapid increase. Additionally, government consumption is strictly limited, reducing the scenarios that support alcohol consumption, leading to insufficient effective market demand.

2/ Under the guidance of leading brands like Moutai directly increasing sales volumes and strictly controlling retail price hikes, the price increase room for high-end to sub-high-end products has been compressed, and the main business revenue and profitability of well-known products have declined.

3/ Key enterprises and traditional key production areas continue to expand brewing facility construction, and the production capacity of solid-state raw liquor is gradually being released. Inventories of raw liquor and finished liquor continue to increase.

4/ Well-known brands are accelerating their expansion to broader sales regions and nationwide layouts, penetrating into third- and fourth-tier markets and through omni-channel, both online and offline. The regional brands’ baijiu market has visibly shrunk.

5/ After the revised standards for beverage alcohol classification and baijiu industrial terminology were issued, they affected the raw materials of liquid baijiu. The labeling of food tags has increased the cost of some low-end baijiu.

6/ The adjustment of the national industrial structure catalog lifted restrictions on baijiu production lines. Various regions, especially traditional baijiu-producing areas, have successively approved the establishment of a number of new baijiu enterprises, leading to a slight increase in the total number of baijiu enterprises. However, due to the current macroeconomic environment, the number of large-scale baijiu enterprises has not increased but decreased. We have now entered an era where there is neither a shortage of alcohol nor a shortage of good alcohol.

see the other post for Chinese Baijiu consumption – already quite high volume, hard to grow, likely decline IMO.

While investors mostly focus on below whispered q3 guidance, or that revenue beat is smaller than recent quarters, a less discussed problem seems to be declining contribution from the US.

Singapore revenue contribution to Nvidia is rising qoq to 19%, while the US declined to 43% from 52%.

In absolute number, US revenue declined from $13.5bn to $13bn and Singapore rose from $4bn to $5.6bn.

Sure Nvidia says it’s not an indication for the end location. But Malaysia/Indonesia is likely, where end users include ByteDance or US CSP services (whose end user is ByteDance).

See the other post for ByteDance capex – it’s probably $10bn+ per year on data centers, or 1GW of IT load assuming $1mn per MW.

ByteDance has deep wallet: in 2023, it generated $40bn+ EBITDA.

To compare, Meta had over $60bn in EBITDA during the same period.

Meta will grow to $80bn ebitda in 2024, while capex guidance is as much as $40bn – half of its EBITDA.

Assuming half of Meta’s capex goes to data centers -> $20bn. And half of that goes to GPUs > $10bn; building out those data centers etc. will be $5-10bn for Meta.

ByteDance is also growing, say at a similar rate as Meta, so $50bn+ EBITDA in 2024. And assume ByteDance invests at a similar ratio as Meta, then it needs to spend ~$25bn in capex, or ~$12bn (or 60% of $20bn) for data centers – $6bn  for GPUs, and $3-6bn to build out data centers etc.

Just look at BYD, the largest new energy carmaker (in terms of sales volume).

BEV used to be almost 30% higher than Hybrid in late 2023;

Now Hybrid is over 50% higher than BEV in Jul 2024.

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Related: why not full BEV in the near future