Key Points **Industry/Company Involved**: - The report focuses on the Multi-Industry & Electrical Equipment (MI/EE) industry, specifically analyzing the impact of China's stimulus measures on various companies within the sector. **Core Views and Arguments**: 1. **China Stimulus Measures**: The People's Bank of China (PBoC) announced a series of monetary policy measures to stimulate the Chinese economy, including rate cuts, reserve requirement ratio (RRR) cuts, and mortgage loan rate cuts. Additionally, fiscal policy measures were announced, including increased bond issuance and capital injections to state-owned banks. 2. **Impact on MI/EE Companies**: Most MI/EE companies indicated that business in China has stabilized sequentially, with Y/Y organic sales trends in China seeing a material sequential uptick from 4% growth in 1Q24 to 8.5% in 2Q24. However, this uptick is attributed to easing prior year comparisons rather than a measurable improvement in demand. 3. **China Revenue Exposure**: VRT, IR, and EMR have the highest China revenue exposure and would likely disproportionately benefit from a recovery in demand. BMI, HUBB, LII, SWK, SYM, and ZWS have no China revenue exposure. 4. **Share Price Performance**: Since the China stimulus announcement, share price performance within the MI/EE coverage universe has been mixed, with VRT (+11%), ZWS (+5%), and EMR (+4%) being the strongest performers, while DOV (-2%), LII (-2%), and SWK (-1%) being the weakest performers. 5. **Skepticism about China Recovery**: While the China recovery could be a theme for 2025, the report remains somewhat skeptical about a material recovery in China over the next 12 months, describing it as a 'free call option' for applicable companies within the group. **Other Important Points**: 1. **MI/EE Global Trading Comps**: The report provides a detailed analysis of MI/EE global trading comparisons, including key performance indicators (KPIs) and price performance charts. 2. **Commodities & Currencies**: The report includes an analysis of energy commodity performance, mined commodity performance, agriculture commodity performance, and currency performance. 3. **Macro/Industry Stats**: The report provides an overview of macroeconomic and industry statistics, including ISM readings, industrial production, capacity utilization, durable goods shipments, construction expenditure, and more. 4. **Company News**: The report includes updates on various MI/EE companies, including Airbus, A.O. Smith, Boeing, Carrier, Daimler Truck, Dover, Fastenal, Honeywell, Lincoln Electric, Middleby, Siemens AG, Supermicro, Symbotic, Trane Technologies, TRATON, Veralto, and more. 5. **Latest DB MI/EE Research**: The report includes insights from recent research reports on topics such as WEFTEC Water Quality Exhibition, Honeywell's Advanced Materials spin-off, Veralto's acquisition of TraceGains, and more. 6. **Valuation**: The report discusses the valuation of the MI/EE group, noting that it now trades at a median NTM P/E multiple of 25x, which represents an all-time high when looking back at valuation over the past decade. 7. **3Q24 Earnings Preview**: The report provides a preview of the 3Q24 earnings season for the MI/EE group, noting that the group is 'priced for perfection' going into the earnings season. 8. **Catalyst Calls**: The report includes catalyst calls for various MI/EE companies, including Rockwell Automation and Carrier. 9. **Water Tech. 3Q24 Earnings Preview**: The report provides a preview of the 3Q24 earnings season for water technology companies, noting that all five of the DB Water Tech. names are expected to post 3Q24 beats. 10. **Dover Catalyst Call**: The report includes a catalyst call for Dover, noting that the company's 3Q adj. EPS forecast sits in line with the Street, and there is downside risk to management's assessment that book-to-bill can surpass 1x in 3Q (and 2H24). 11. **Non-Resi Update**: The report discusses the non-residential construction market, noting that while data points remain mixed to cautious, the recent Fed cut has put a more optimistic spin on the outlook. 12. **DB vs. Consensus Ests**: The report compares Deutsche Bank's estimates with consensus estimates for various MI/EE companies, including EPS, sales, and other financial metrics. 13. **Equity Rating Dispersion and Banking Relationships**: The report provides information on equity rating dispersion and banking relationships for various MI/EE companies. 14. **Additional Information**: The report includes additional information on various topics, including conflicts of interest, investment strategies, and more.

Industry and Company Overview * **Industry**: Solar Outlook, Clean Technology * **Region**: North America, United States * **Date**: 7 October 2024 Key Topics 1. **US Presidential Elections and Solar Sector**: The upcoming US presidential elections are a pivotal moment for the solar sector. A Democratic victory is seen as positive, with minimal risks to residential demand and incentives. A Republican win could lead to the fading/removal of incentives and dampen sentiment. 2. **Residential Demand Trends**: Demand in the US is stable, with California recovering post NEM 3.0. Southern states are performing well. Europe's demand is lagging, down ~10%+ YoY. 3. **Inverters Update**: Under shipments are expected to be fully done for ENPH in 3Q24. SolarEdge faces challenges in Europe, but US under shipments should clear after 3Q. 4. **Macro Environment**: Interest rates are coming down, benefiting residential solar companies and the market. 5. **Equity Ratings**: Buy-rated First Solar (PT $280), Hold rated on ENPH, SEDG, RUN, and NOVA. Company-Specific Updates * **First Solar (FSLR)**: Expected to report 3Q24 results on October 29. Revenue forecasted at $1.09bn, with ASP of 28c/w and shipments of 3.90GW. Costs forecasted at $113m, leading to operating income of $385m and net income of $356m. * **Enphase Energy (ENPH)**: Expected to report 3Q24 results on October 22. Revenue forecasted at $387m, with GAAP net income of $52m and GAAP EPS of 38c. * **SolarEdge (SEDG)**: Expected to report 3Q24 results on October 30. Revenue forecasted at $274m, with GAAP gross margin of negative 2%. * **Sunrun (RUN)**: Expected to report 3Q24 results on October 30. Revenue forecasted at $559mm, with cash generation of negative $4m. * **Sunnova (NOVA)**: Expected to report 3Q24 results on October 30. Revenue forecasted at $241m, with adj. EBITDA of $209m. Additional Information * The report includes graphs and charts on solar power generation, energy costs, and company financials. * The report also includes important disclosures and analyst certifications.

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - China's fiscal sector is experiencing both near-term and long-term challenges, with slower public sector activity negatively impacting economic growth [2] - The government has maintained an expansionary fiscal stance, with a deficit around 7% of GDP, but local fiscal spending has contracted due to declining tax and land sales revenue [2][7] - A budget revision is deemed necessary, as fiscal spending may drop by an additional -2.5% YoY without policy changes, while an increase in the deficit could allow for a 3% YoY increase in spending [2][25] Summary by Sections Fiscal Challenges - The revenue-to-GDP ratio in China has declined by almost 10% over the past decade, now at approximately 22% of GDP, significantly lower than G7 (36%) and OECD (39%) averages [15] - The public sector's growth was only 3.4% in H1 2024, the second lowest among all sectors, indicating a slowdown in public sector activity [5] - Fiscal revenue dropped by -5% YoY in the first seven months of 2024, attributed mainly to an -18% YoY decline in land sales and a -5% YoY decline in major taxes like VAT and corporate income tax [10][13] Long-term Strategies - Broadening the tax base on high-end consumption is suggested as a practical approach to reverse the downward trend in fiscal revenue [3] - Local government financing has become increasingly reliant on borrowing or central government transfers, highlighting the need for reforms to boost local revenues [20] - The government's plan to increase revenue through consumption tax is seen as prudent, with current consumption tax revenue at 1.3% of GDP, below the OECD average of 2.9% [27]

Deutsche Bank Research 7T2se3r0Ot6kwoPa Asia Economics Asia Week Ahead Date 2 September 2024 What you need to know: 2 - 6 Sept | --- | --- | |------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------| | | Juliana Lee | | Week ahead | Chief Economist | | We expect BNM to remain on the sidelines as growth surprised to the upside, and | +65-6423-5203 | | inflation is likel ...