Asia’s earnings season kicks off this week, with tech companies in the limelight after a few early disappointments and an escalating chip war between the US and China.
Chip bellwether Taiwan Semiconductor Manufacturing Co. and Indian software services firm Infosys Ltd. are set to announce results. The global tech industry downturn has deepened as online activity waned after the pandemic and recession fears hammered consumer sentiment. Samsung Electronics Co. reported its worst decline in quarterly revenue since at least 2009.
China’s decision to control exports of two key metals used in chips has exacerbated uncertainty in the industry. The curbs may prompt the US and European countries to tighten tech exports to China and affect the profitability of major tech firms, according to Bloomberg Intelligence analysts Marvin Lo and Chris Muckensturm.
“The escalating chip war could be a swing factor of the current tech-market recovery,” they said.
China stepped up support for the ailing real estate sector and extended policies to support cash-strapped developers. Debt-laden developer China Evergrande Group is expected to report long-awaited 2021 and 2022 annual results Monday.
India’s largest producer JSW Steel Ltd. will announce first-quarter results on Friday. The firm is considering a bid for as much as a 20% stake in Teck Resources Ltd.’s steelmaking coal business, according to people with knowledge of the matter. Potential financing for the acquisition may total about $2 billion.
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Highlights to look out for:
Monday: Evergrande (3333 HK) will approve 2021 and 2022 annual results, as well as interim results for the six months ended June 30, 2022. The crisis-hit group is working with offshore bondholders to finalize its offshore debt restructuring proposal and expects to apply in late July to courts in the relevant jurisdictions to move ahead with the plan. Its onshore unit’s overdue commercial bills of about 245 billion yuan ($34.2 billion) also threaten to delay completion of its pre-sold projects, putting China’s housing sentiment recovery at risk, BI analysts Kristy Hung and Lisa Zhou said. It may be delisted from the Hong Kong stock exchange if it fails to file audited results by September, they added.
Tuesday: No major earnings expected.
Wednesday: No major earnings expected.
Thursday: TSMC (2330 TT) is expected to exceed second-quarter earnings estimates. While a surge of AI chip orders from Nvidia and other foundry customers should give an upbeat forecast, the earnings trajectory in the second half may still be dragged down by a sluggish smartphone sector, BI analyst Charles Shum said. Its capacity expansion plan, a response to increasing demand from Nvidia and other major chip designers, will be in focus, he added. The firm earlier reported June sales of NT$156.4 billion ($5 billion), a year-on-year drop of 11%. Second-quarter revenue totaled NT$480.8 billion, according to Bloomberg calculations, a 10% decline on the prior year but better than analysts expected.
- India’s second-largest IT services exporter Infosys (INFO IN) is scheduled to report first-quarter earnings after market hours. The firm’s sequential revenue growth was probably little changed amid discretionary spending cuts in the US banking and financial services sectors. Infosys shares tumbled the most in three years on April 17 after its forecast of revenue growth of 4%-7% in the year through March was well below market expectations. Still, some analysts expect the company to cut the top end of the FY24 revenue guidance. Employee attrition, another pain point for the firm, may have accelerated in the June quarter, according to estimates compiled by Bloomberg.
- Nidec Corp. (6594 JP) is projected to report a sales recovery in car electronics parts and systems, supported by a strong rebound in Japanese auto production, BI said. The auto sales boost seen in Japan and the US, two of its biggest markets, may be a tailwind for earnings growth moving forward. Nidec aims for ¥10 trillion ($72 billion) in sales by March 2031, Chief Executive Officer Shigenobu Nagamori said last month. Earlier, Nidec announced plan to launch a tender offer at 2,600 yen/share around mid-September to take Japanese precision machine tool maker Takisawa private.
- India’s largest consumer goods company Hindustan Unilever Ltd. (HUVR IN), reporting first-quarter results on Thursday, may post “a weaker quarter as it prioritizes market shares amid rising competition,” Citi analyst Vismaya Agarwal wrote in a note. Watch for comments on business plans from CEO Rohit Jawa, who started a five-year term at the end of June.
Friday: JSW Steel (JSTL IN) may say first-quarter adjusted profit rose, led by higher domestic sales volume as the Indian economy gathered pace. Crude steel output at India’s biggest steel producer rose 11% in the quarter and analysts predict similar growth in sales volume. The scrapping of steel export duties in November may also boost exports. The company has also forecast sequentially higher coking coal costs, which may affect profit margins.
(Updates throughout with JSW and Nidec’s news.)
Author: Justina T. Lee, Rachel Yeo, Harshita Swaminathan and Reina Sasaki
