Such an interesting book.
Some takeaways:
For the quarter ended Feb 2024, Nike brand sales in China grew 4.5% yoy (overall company sales grew 6% yoy) and Nike brand EBIT in China grew 2.8% yoy.
Not that impressive – as last year’s result should still be impacted by surging covid cases after reopen.
Meanwhile, Nike said it’s growing share, which I believe is true (holding some ground), but also indicates that the overall market is not strong (<6% growth).
Looking at channels, it’s wholesale that’s driving the growth. “Wholesale grew 12%” & “retail sales with our partners grew double digits in Q3 versus the prior year” & “seeing incredibly strong weekly sell-through on these franchises (wholesale partners)” from earnings call.
Another important observation – “physical retail channel in China is stronger than digital.”
Nike will be on Douyin. Not yet on Douyin. However, how should Nike balance gross margin? Live-streaming e-commerce is famous for heavy discounts.
I didn’t live that era so really appreciate the story.
Some key takeaway so far:
good segments
overall retail sales rose 5.5% yoy
in-line with on the ground sentiment that consumption is not that bad.
1/ shareholder return is real
annual dividend of 22bn rmb, out of net income of ~44bn net income -> ~50% payout ratio.
this is also due to scaling back of capex (down 30% yoy in FY23)
2/ growth has slowed to almost zero
q4 gross profit is up only +2% yoy
q4 net income is -1% yoy
however, with utilization up, 2024H2 and beyond should return to growth
3/ barrier in internationalization
both EU and US want to localize the whole value chain, which seems to be a big investment, and involves upstream & downstream companies.
CATL doesn’t see good return and hasn’t done massive capital-heavy investments.
Licensing model is what clients are happy about, which is capital-light for CATL, but growth in net income would be less.
AI will be so good at mimicking human.
Blockchain will be the tool to verify origin.
What news, photos, videos should I trust?
I am more likely to believe in those send from my friends whom I trust.
Fake account won’t work if I am already connected with the real account.
The reason I can recognize the “real” account from the “fake” one, even if they look exactly the same, is due to the history (conversations etc.) that happened before, which is what blockchain is about.
China export in Jan & Feb rose 7.1% yoy in USD term.
Notable growth driver?
The two combined is comprised of 13% total export.
Intel received the world’s first high NA EUV (TWINSCAN EXE:5200) from ASML recently.
The purchase order was made in Jan 2022 – so it took some 2 years.
The machine is said to be 2x as expensive, or $350mn (or more). ASML says it has taken between 10 and 20 orders to date.
If TSMC was to take 10 machines, it will cost $3.5-4bn, or some 13% of its $28-32bn capex target for 2024.
If Intel to budget 35% of its revenue as capex, (say $60bn), it would be ~$21bn, 10 high-NA machines would be 17-19% of that capex budget.
To justify the cost of machine, high-NA “enables building transistors that are about 1.7 times smaller than today, resulting in almost triple the transistor density“. So if density is almost 3x, and assume price per wafer is up by ~45%, then cost per transistor could be halved.
Meanwhile, ASML said 2024 revenue guidance is similar to 2023, which was EUR27.56 billion.
1/ China PPI
China’ PPI (12-month) started to decline from Nov 2021 (Dec 2020 – Nov 2021 when global demand running high and supply running low), and entered the negative territory in Oct 2022 (global demand shock after Fed hiked rates & war in Ukraine)
China’ PPI (12-month) has remained in negative territory for 16 month as of Jan 2024 data. Looks to remain negative for next 6 month at least.
2/ RMB depreciation
Average exchange rate for RMB has depreciated ~9% in 2 years against USD, which caused additional price deflation.
Average exchange rate in 2023: 0.1415 USD.
Average exchange rate in 2021: 0.155 USD.
3/ Domestic demand
Hard to quantify, but weak China domestic demand is partially causing weakness in global demand in commodities etc., especially from the real estate sector., thus reducing inflation pressure.
The sharp dropped happened in August 2021, when Evergrande’s debt problem was catching world’s attention.
Intel (2023q4 earnings call): “Customer inventory levels have normalized, and 2023 PC consumption was in line with our 270 million-unit forecast. We expect the PC TAM up low single digits year on year in 2024, in line with third-party estimates. We expect to ship approximately 40 million AIPCs in 2024 alone.”
IDC: The total PC market of 2024 should see growth of 3.4% compared to 2023.
Logitech (FY24q3 earnings call): implied low single digit rev growth – “Looking ahead to FY25, we do not anticipate an inflection point in the slope of this curve. While the rate of our net sales declines has improved, there are a number of headwinds and uncertainties that may impact our net sales throughout FY25.”