Multinationals in China: Europe vs. US
Much of what 86Research has heard this earnings season confirms insights they have previously flagged re. the China market, including the strength of Sam's Club, the robust expansion of travel demand and the competitive challenges facing Starbucks and iPhone. More remarkable, however, are the latest moves by several European multinationals, such as Volvo and LVMH, which appear committed to cross-border cooperation in areas relatively insulated from geopolitical pressures. Beneath the broader, probably over-generalised narrative of a multinational exodus, a more nuanced observation points to a potential structural shift in the origins of China-bound investments, with European firms advancing at the expense of their US counterparts.
Edition: 200
- 29 November, 2024
Volvo Car (VOLCARB SS) Sweden
Industrials
Inventory of finished goods has grown by 33% y/y (vs. 21% growth in revenues). Based on Q4 COGS, the DSI of finished goods has risen from 33 days at the end of FY22 to 41 days at the end of FY23. This may not seem like a large increase, but in an industry focused on “Just-in-Time” manufacturing, this is a significant move up. Whether this additional product can easily be absorbed into the market will depend on your view of demand in 2024. In any case, Forensic Alpha recommends investors to continue tracking inventory in coming quarters.
Edition: 182
- 22 March, 2024
China: Domestic excavator sales well below expectations
Industrials
Mar sales growth deteriorated to -48% Y/Y from -41% in Jan+Feb, bringing 1Q23 sales to -44% Y/Y off a weak comp (1Q22 -54%). Weakness was broad-based (excl. the mining sector which continues to enjoy strong demand). With Mar historically the most important month of the year (~20% of annual sales), the latest data does not bode well for FY sales. SRR’s conversations with industry contacts suggest that Apr (the second most important month) has not started well either. If the recent trend persists, industry sales could be tracking closer to 70-90K units (-40-50% Y/Y), well below OEM industry forecasts in the -5% to -35% range (with Volvo at the high end and Cummins at the low end).
Edition: 158
- 14 April, 2023