China’s biggest high-tech companies, which have weathered their own volatility in the last few years, may be positioned to be the ones offering some relief to investors as market confidence has been shaken by the financial sector’s health from UBS Group AG’s take over of Credit Suisse Group AG to the collapse of Silicon Valley Bank.
(Bloomberg) — China’s biggest high-tech companies, which have weathered their own volatility in the last few years, may be positioned to be the ones offering some relief to investors as market confidence has been shaken by the financial sector’s health from UBS Group AG’s take over of Credit Suisse Group AG to the collapse of Silicon Valley Bank.
Tencent Holdings Ltd. is likely to regain some of its swagger, with rising revenue and Ebitda over the intermediate term, as regulatory risk and pandemic concerns in China begin to fade, according to Bloomberg Intelligence. After a two-year industry crackdown, Tencent has secured a green-light for clutch of major game titles and is planning to launch an esports league.
Still, rising geopolitical tensions, coupled with regulatory focus on data protection and content suitability, may hurt Tencent and NetEase’s ability to import foreign gaming intellectual property, BI added. China’s new Premier Li Qiang called for better cooperation with the US and signaled continuous support to the private sector. The country also created a bureau to oversee increasingly valuable data to strengthen oversight of its vast technology arena.
Intensifying price competitions may weigh on some China earnings. Food delivery giant Meituan is competing with other tech firms including ByteDance Ltd. after they expanded businesses to delivery space. Citi analysts expected Xiaomi Corp. to report a weak fourth-quarter results with pricing weighing on margins this year. Carmaker Geely Automobile Holdings Ltd. has joined the expanding automotive price war by offering discounts on some of its models.
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Highlights to look for this week:
Monday: Indonesia’s biggest tech company, GoTo Gojek Tokopedia (GOTO IJ), plans to announce its full year and fourth quarter results after market close, with a conference call scheduled at 7pm Jakarta time. Full-year net loss is expected to widen to 26.5 trillion rupiah ($1.72 billion), according to Bloomberg consensus estimates. Investors will be looking for signs of profitability after GoTo pledged to turn its Ebitda positive in 4Q this year. The company recently said it would reduce 600 more jobs as part of a shake-up that includes merging certain units and winding down parts of its Mitra Tokopedia business. The job cuts will be a positive move for the company as its personnel expenses are the highest among Indonesian tech companies and contribute a fifth of cash costs, said Ciptadana Sekuritas analyst Gani in a report.
- Sunny Optical Technology Group (2382 HK) is set to report earnings after market close. The smartphone lens maker sees a 50% to 55% drop in annual profit compared to a year ago. The company attributes the decrease to chip shortage, inflation and Russia’s war in Ukraine among other factors. FY net income is expected to decline 46% year-on-year to the lowest level since 2018, Bloomberg consensus estimates show. Outlook could remain grim for smartphone lenses due to a muted recovery in handset demand against the backdrop of an inventory glut and economic headwinds, Bloomberg Intelligence wrote earlier this month.
Tuesday: Geely Automobile (175 HK) is expected to release results after morning trading session. The Chinese carmaker may see over 30% jump in full-year revenue and a 9.5% increase in sales volume sequentially, according to Bloomberg consensus estimates. The company earlier announced Zeekr delivered 71,941 vehicles in 2022, surpassing its target of 70,000 units. The premium line could double deliveries to 150,000 units in 2023, as strong policy support and new EV launches keep stoking demand, Bloomberg Intelligence wrote in November. The automaker unveiled a new high-end line last month to make up lost ground to Tesla and BYD.
Wednesday: Tencent (700 HK) will report earnings after market close. Fourth-quarter revenue is expected to rise 0.2% from a year earlier, according to Bloomberg Consensus estimates. The management is expected to deliver a cautiously upbeat outlook statement with improving fintech and advertising businesses and the resumption of gaming approvals, Bloomberg Intelligence analysts Robert Lea and Tiffany Tam wrote in a note. While analysts expect that Tencent’s video accounts are a key earnings growth driver for the this two to three years, Chinese media regulators are studying measures to curb addiction among youths to short videos. Still, investors are looking for Tencent’s potential divestment of its equity portfolio after the Chinese behemoth distributed the majority of its shares in meal delivery giant Meituan to investors last year.
Thursday: China Mobile Ltd. (941 HK) is due to report full-year earnings after market close. FY revenue may increase about 11% to 938 billion yuan ($136 billion) from a year earlier, according to Bloomberg consensus estimates. Net income is expected to rise 9.2% to about 127 billion yuan. Having expected a stronger outlook, the carrier said its dividend payout ratio for 2022 will be raised and its cash payment for this year will also be boosted to account for more than 70% of profits. China Mobile would maintain its leading position in the nation’s 5G push as state-owned firms may speed up adoption of the technology, Bloomberg Intelligence said in a research note.
Friday: Meituan (3690 HK) is scheduled to announce results after market close. Fourth-quarter revenue is expected to jump nearly 17% from a year earlier but drop more than 7% sequentially, according to Bloomberg consensus estimates. The Chinese food delivery titan may see a faster revenue growth this year as business activities resumed at a faster-than-expected speed in China, Citi analysts including Alicia Yap wrote in a note. Meituan plans to hire as many as 10,000 people to catch increasing consumer consumption. It coincides with ByteDance’s Douyin — Tiktok’s cousin in China — which is testing a grocery and food delivery service in cities including Beijing and Shanghai. While concern on rising competition is likely to remain, Citi expected Meituan to have a steeper-than-expected recovery because of solid demand. Strong execution could overshadow competitive tension near term that could revive investor sentiment, it added. The firm is also ratcheting up its overseas business.
- Xiaomi (1810 HK) is due to report results after market close. Fourth-quarter revenue may drop 24% to 65 billion yuan from a year earlier, Bloomberg consensus estimates showed. Sales could be boosted for home-appliance market leaders such as Gree Electric and Xiaomi as consumer demand gradually recovered, Bloomberg Intelligence analysts wrote in a report. China’s home-appliance companies are likely to extend discounts on e-commerce channels to capture bargain-driven consumers in the months ahead, they said. “We are more conservative on the margin trajectory given the competitive landscape,” Citi analysts including Andre Lin wrote in a note this month, expecting a strong pressure for the firm to lower component prices to consumers as demand is modest. Investors would also be keen to know more about Xiaomi’s plans to invest in electric vehicles and chips.
(Updates throughout.)
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