Asia’s earnings season has reached the halfway line, with focus shifting to Chinese companies as investors reassess holdings in emerging markets after recent comments on US rate hike.
(Bloomberg) — Asia’s earnings season has reached the halfway line, with focus shifting to Chinese companies as investors reassess holdings in emerging markets after recent comments on US rate hike.
If chatter about an even higher rate comes true, it will reprice emerging market valuations, Bloomberg Intelligence analysts Marvin Chen and Sufianti said. More broadly, it will put the onus on earnings to deliver a bigger rebound. Australia’s biggest oil and gas producer Woodside Energy Group reported its highest-ever profit and eyes will turn to guidance for China’s earnings season next month.
China abruptly abandoned its signature Covid Zero policy at the end of 2022, leading to a sharp increase in infections in the initial stage of the reopening. It may take time for business activities to return to pre-pandemic levels. Companies including brewer Budweiser Brewing Co APAC and China’s Twitter-like platform Weibo may not see a full recovery until later this year.
In addition to the rocky start to the reopening, post-Covid jockeying for position within the domestic market is also intense. Tesla slashed prices on its models in China, fueling similar moves by local rivals. China EV makers appear vulnerable to deteriorating margins and cash flows as the business is being hit by a Tesla-led price war, Bloomberg Intelligence analyst Dan Wang said. Firms including Li Auto and Nio could see negative free cash flow in 2023.
- To subscribe to earnings coverage across your portfolio or other earnings analysis, run NSUB EARNINGS function on the Bloomberg terminal.
- For more on what’s going on in other regions, see the US Earnings Week Ahead or the EMEA Earnings Week Ahead, and see the ESG Stock Watch for a selection of the environmental, social and governance themes that may come up on earnings calls.
Highlights to look for this week:
Monday: Beijing-based Li Auto (LI US) will announce results on Monday. Fourth-quarter revenue is expected to jump more than 88% sequentially, according to Bloomberg consensus estimates. Still, higher battery costs and soaring R&D expenses might have caused the EV maker to continue posting operating losses in 4Q as lithium-carbonate costs hit a record high in November, Bloomberg Intelligence analysts Joanna Chen and Steve Man wrote in a note. The firm introduced an extended-range electrified sport utility vehicle L7 this month amid Tesla’s recent price cuts on its Chinese-made vehicles. Li Auto, founded in 2015, may have to wait until 2024 to record its first annual operating profit, BI added.
- Malaysia’s biggest lender Malayan Banking (MAY MK) is set to release its earnings on Monday. Bloomberg consensus estimates show an about 6% sequential drop in fourth-quarter adjusted net income after a surge boosted by normalization of business activities last quarter. Maybank’s profit growth for 2022 might be higher than consensus supported by factors including steady lending and non-interest-income recovery, according to Bloomberg Intelligence analysts Sarah Jane Mahmud and Diksha Gera. Malaysian banks’ earnings tailwinds are expected to dissipate with the tail-end of the interest rate up-cycle coupled with moderating loans growth.
Tuesday: SM Investments (SM PM), one of the Philippines’ largest conglomerates, is due to report full-year earnings on Tuesday. Fourth-quarter adjusted net income is expected to extend growth to jump more than 32% sequentially, according to Bloomberg consensus estimates. SM Investments’ gross profit could rise in this quarter from a year earlier driven by its retail and property units, Bloomberg Intelligence analyst Ken Foong wrote in a note. The residential segment could see earnings rise due to more deliveries amid a higher order backlog, Foong added. SM Prime’s Philippine malls may benefit from the easing of Covid-19 curbs and year-end festive season. Recently, Philippine President Ferdinand Marcos Jr. approved a proposal to refund taxes to foreign tourists to boost visitor arrivals in the country.
Wednesday: Weibo (WB US) will announce its results after the market close in Hong Kong. Fourth-quarter revenue losses are likely to narrow from the last quarter as its advertisement business could benefit from the holiday sales period and soccer World Cup activities, Bloomberg Intelligence analyst Tiffany Tam wrote in a note. Fourth-quarter adjusted diluted EPS is expected to increase about 3% from last quarter, according to estimates compiled by Bloomberg. Overall businesses are likely to see gradual improvement as consumer confidence still takes times to improve, according to Citi analysts including Alicia Yap. They expect that potential resumption of positive year-on-year growth will only start from 2Q with more optimistic rebound in 2H.
- Chinese electric vehicle maker Nio (NIO US) is set to report results after the market close in Hong Kong. The firm reported a 4Q revenue forecast of 17.4 billion yuan to 19.2 billion yuan, which missed the average analyst estimate. It later further revised 4Q vehicles delivery outlook down from previous estimation. Covid-related challenges forced Nio to lower 4Q’s delivery guidance, according to Bloomberg Intelligence analysts Steve Man and Joanna Chen, adding that pent-up demand can be shifted to 1Q. However, CEO William Li said the the firm may face a challenging first half as a cut in government subsidies and the broader economic slowdown erode local demand in China. Nio reportedly plans to build a new factory to produce budget EVs under a new brand.
Thursday: Budweiser Brewing Co APAC (1876 HK) is scheduled to announce results before market open. The FIFA World Cup could have boosted its fourth-quarter revenue, which is typically the weakest season in the year, according to Bloomberg Intelligence analysts Ada Li and Catherine Lim. Bloomberg consensus estimates show fourth-quarter net income will drop more than 75% sequentially. The brewer remained under pressure on a surge in Covid infections in China last December and increase in raw material prices. South Korea will raise the tax on beer by 3.6% per liter in April. Budweiser APAC’s local brands Oriental Brewery and Hite Jinro may raise their selling prices in 1H by more than double of the proposed liquor tax hike, BI added.
- Reporting a day after Weibo, video platform Bilibili (BILI US) may see a mid-single digit sale in 4Q with analysts expecting room for upside in 2023 due to cost cutting.
Friday: No major earnings expected.
–With assistance from Zoe Ma.
(Updates throughout with Woodside Energy’s earnings.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.