Carmaker earnings to show intensity of EV competition in Asia
Major car manufacturers in Asia should shed more light on the competitive landscape for electric vehicles as the industry ramps up efforts in transformation and decarbonisation.
China’s biggest electric carmaker BYD posted record preliminary third-quarter earnings as sales in new energy vehicles continue to grow despite intense competition. Shares of Tata Motors Ltd. reached a new high earlier this month, with analysts expecting the firm to reverse the quarterly net loss a year ago.
Toyota, which had long championed hybrids and cars running on hydrogen fuel cells, is making a belated push into electric vehicles as it chases rivals including Tesla. New CEO Koji Sato, who took leadership in April this year, considered electric vehicles as a “missing piece” in its vast portfolio of products. The firm plans to triple EV output by 2025 from about 190,000 expected to be produced next year, according to Nikkei.
HSBC and Macquarie Group are under scrutiny as Standard Chartered Plc posted lower-than-estimated profit on charges related to investments in China. GoTo Group will kick off technology earnings in the region.
Highlights to look out for:
Monday: BYD sets high expectations after the company reported strong preliminary net income for the third quarter of 9.55 billion yuan ($1.3-billion) to 11.5 billion yuan and outperformed BI’s scenario by as much as 53%. Its latest results also suggest sequential margin growth, with lithium cost cuts and scale economies outweighing the impact of price competition. Rising exports and luxury sales could give earnings added buoyancy next year, BI added.
HSBC’s net interest income will probably see growth with elevated Hibor and rising prime rates, according to BI. The lender’s Hong Kong net interest margin will also be a particular focus after it was flat in 2Q. Tight cost discipline was most likely sustained in the previous quarter, with asset quality remaining a focus amid Chinese property-market troubles. HSBC is likely to further extend its share buyback program, with CET1 to remain above 14%, BI added. Net interest margin will likely rise to 1.69%, according to Bloomberg estimates.
Concerns over GoTo’s recent comment that some major holders may continue to sell shares in the company will likely be in focus when the Indonesian tech giant reports its third-quarter results. Heightened uncertainty over management and founder divestments may overshadow other factors for now and weigh on multiples, JP Morgan analysts Henry Wibowo and Ranjan Sharma said in a note. Weaker topline growth and intensifying e-commerce competition in Indonesia meant that GoTo’s pace of narrowing losses has been slower than expected year-to-date, according to CGS-CIMB analysts Ong Khang Chuen and Kenneth Tan.
Tuesday: Larsen & Toubro will see robust profit growth as government infrastructure spending ramps up ahead of national elections in 2024. While margins may be pressured by material and labour costs, solid construction activity during the quarter, helped further by weak monsoon rains in August, should support earnings.
Bharti Airtel will see profit grow by about half as it continues to gain subscribers from Vodafone Idea in India. While BI analyst John Davies says the devaluation of the Nigerian naira likely impacted Africa revenue, estimates compiled by Bloomberg still forecast nearly 9% revenue growth from the region. With the ongoing shift from 4G to 5G, analysts will also watch for progress on its 5G rollout and any capital expenditure outlays.
Wednesday: Toyota Motor’s second-quarter profit could expand thanks to robust production, better pricing and a weak yen, BI said. Retail unit sales by region are expected to be mixed, likely jumping 32% in Japan thanks to expedited delivery to reduce order backlog, while climbing 12% in the US and falling 7% in China, according to BI. Output in the next quarter could take a hit from some domestic plants halting operations earlier this month following an explosion at a parts supplier. The firm recently announced Toyota and Lexus owners will be able to use Tesla Superchargers in North America from 2025, and that it’s partnering with Idemitsu Kosan to make all-solid-state batteries.
Thursday: Tata Motors will have better earnings as Jaguar Land Rover sales improved, boosting the top-line while it gains market share in some segments. Lower commodity costs compared with last year should also help auto manufacturers’ earnings, according to analysts Kapil Singh and Siddhartha Bera at Nomura.
Friday: Macquarie Group may see cash earnings miss by more than 10% versus consensus, Citi analyst Brendan Sproules wrote in a note. Deal-related activity will remain subdued for longer than expected, which may lead to another current year guidance downgrade. The Australian financial giant is expected to post a 27% decline in first-half net income, consensus estimates show.