M N 24 May 2024 CMB International Global Markets | Equity Research | Company Update Topsports (6110 HK) This is likely a rocky-road turnaround High bases are tough for both industry and Topsorts and we are cautious about Target Price HK$6.78 1Q25E. However, the turnaround in next few quarters is still an important (Previous TP HK$9.23) catalyst. Also, thanks to the 7% FY2/25E yield, we think the downside is limited. Up/Downside 23.5%  4Q24 retail sales growth was slow and there are still some pressure in C ...

Investment Rating - The report maintains a "BUY" rating for Xiaomi with a new target price (TP) of HK$25.39, reflecting a 34% upside from the current price of HK$18.94 [2][18]. Core Insights - Xiaomi's 1Q24 results exceeded expectations, with revenue and net profit growing 27% and 101% year-over-year (YoY), respectively, driven by improved gross profit margins (GPM) and a favorable revenue mix [2][14]. - The company has set an ambitious target of 120,000 annual electric vehicle (EV) deliveries, up from the previous guidance of 100,000, indicating strong growth potential in the EV segment [2][18]. - The report anticipates continued earnings growth for Xiaomi, supported by smartphone market share gains, robust AIoT sales, and increasing overseas internet revenue [2][14]. Financial Summary - Revenue for FY24E is projected at RMB 337,161 million, representing a 24.4% YoY growth, with adjusted net profit expected to reach RMB 22,974 million, a 19.2% increase YoY [3][24]. - The adjusted EPS for FY24E is forecasted at RMB 0.92, significantly above consensus estimates [3][16]. - Gross margin is expected to be 21.1% for FY24E, reflecting a slight improvement from previous years [3][15]. Segment Performance - Smartphone revenue is projected to grow by 18% YoY in FY24E, driven by a 33.7% increase in global smartphone shipments in 1Q24 [2][13]. - AIoT and lifestyle products are expected to see a revenue increase of 21% YoY in FY24E, supported by strong sales in various product categories [2][13]. - Internet services revenue is anticipated to grow by 15% YoY in FY24E, indicating a solid performance in this segment [2][13]. Valuation - The report employs a sum-of-the-parts (SOTP) valuation method, assigning a P/E multiple of 15x to Xiaomi's smartphone, AIoT, and internet businesses, while the EV business is valued at 0.75x FY25E price-to-sales (P/S) [18][19]. - The total valuation for Xiaomi is estimated at RMB 581,175 million, translating to a target price of HK$25.39 per share [19][18].

Group 1: Policy Changes and Market Impact - Demand policies are being relaxed, with first-tier cities lowering provident fund loan rates and second-tier cities reducing down payment ratios[1] - As of May 16, 297 cities have established a "white list" mechanism, approving loans totaling CNY 935 billion, which is expected to alleviate liquidity pressure on developers[1] Group 2: Real Estate Sales Trends - New home sales in 30 cities have seen a year-on-year decline of 41% and a month-on-month decrease of 1% as of May 21[10] - The cancellation of purchase restrictions is showing positive effects, with Chengdu's new home sales down 31% year-on-year, an improvement from April's 41%[21] - In the first 20 weeks of 2024, Shenzhen's new home sales exceeded the average weekly level by 19%, indicating strong market performance[16] Group 3: Company Performance and Recommendations - Kuaishou's Q1 2024 revenue grew by 17% year-on-year, exceeding consensus expectations, with adjusted net profit reaching CNY 4.4 billion[24] - Pinduoduo reported a 131% year-on-year revenue increase in Q1 2024, reaching CNY 86.8 billion, driven by domestic monetization and international expansion[17] - Investment recommendations include property management companies and developers with long-term value, such as China Resources Land and Poly Property[15]

Investment Rating - The report maintains a "BUY" rating for PDD Holdings with a target price of US$192.70, which represents a 31.0% upside from the current price of US$147.09 [1]. Core Insights - PDD Holdings reported a strong performance in 1Q24, with revenue increasing by 131% year-over-year to RMB86.8 billion, surpassing Bloomberg consensus estimates by 13% [1]. - The significant revenue growth is attributed to enhanced monetization of the domestic business and accelerated international expansion [1]. - Non-GAAP net profit rose by 202% year-over-year to RMB30.6 billion, exceeding consensus expectations of RMB15.5 billion [1]. - The company is transitioning its valuation method from DCF to SOTP to better reflect the value split between its core domestic and international businesses [1]. Financial Performance Summary - In 1Q24, online marketing services and other revenues increased by 56% year-over-year to RMB42.5 billion, accounting for 48.9% of total revenue [3]. - Transaction services revenue grew by 327% year-over-year to RMB44.4 billion, driven by the Temu business and optimized consumer subsidy spending [1][3]. - Gross profit margin (GPM) decreased to 62.3% in 1Q24 from 70.4% in 1Q23, while operating profit margin (OPM) improved to 29.9% from 18.4% in 1Q23 [3]. - The company aims to build a compliance program to support long-term business development and mitigate geopolitical risks [1]. Revenue and Profit Forecast - Revenue is projected to grow from RMB247.6 billion in FY23A to RMB438.7 billion in FY24E, reflecting a year-over-year growth of 78.8% [2]. - Adjusted net profit is expected to increase from RMB67.9 billion in FY23A to RMB121.4 billion in FY24E, indicating a growth rate of 78.8% [2]. - The report anticipates a continued strong performance with a projected P/E ratio of 12.8x for FY24E [2]. Valuation Breakdown - The SOTP-based target price of US$192.7 includes valuations of US$154.6 for the main app, US$1.9 for Duoduo Grocery, and US$15.6 for Temu, along with US$20.6 for net cash [10].

Investment Rating - The report maintains a "BUY" rating for Kuaishou with a target price of HK$97, indicating a potential upside of 66.8% from the current price of HK$58.15 [2][3][4] Core Insights - Kuaishou reported a strong quarterly performance with revenue and net profit growth of 17% and 10,348% year-over-year, respectively, surpassing consensus estimates [2][3] - The company is expected to benefit from a new HK$16 billion share repurchase program, which is anticipated to enhance its market valuation [2] - The forecast for Q2 2024 includes a revenue increase of 9.5% year-over-year, driven by resilient advertising and other services revenue growth of 22.5% and 24%, respectively [2][3] Financial Performance Summary - For FY24E, revenue is projected at RMB 125,544 million, reflecting a year-over-year growth of 10.6% [3][17] - Adjusted net profit is expected to reach RMB 17,247 million in FY24E, with a significant increase in diluted EPS to RMB 3.74 [3][15] - The gross margin is forecasted to improve to 54.2% in FY24E, while the operating margin is expected to be 11.6% [15][18] Segment Performance - The revenue breakdown for Q1 2024 shows a decline in livestreaming revenue by 8%, while advertising and other services grew by 27% and 48%, respectively [2][5] - The company anticipates continued strong momentum in its advertising and e-commerce segments for Q2 2024, with total revenue expected to grow by 9.5% year-over-year [2][3] Market Position and Valuation - Kuaishou's market capitalization is approximately HK$254 billion, with significant shareholding from Tencent Holdings (18.8%) and Morningside Venture Capital (15.6%) [4][18] - The report highlights a favorable valuation with a P/S ratio of 1.9 and a P/E ratio of 13.8 for FY24E, indicating potential for further rerating [3][4]

Investment Rating - The report assigns a "BUY" rating for Trip.com Group (TCOM) with a target price of US$65.8, up from the previous target of US$49.0, indicating a potential upside of 17.9% from the current price of US$55.83 [3][12]. Core Insights - Trip.com Group reported a net revenue of RMB11.9 billion for Q1 2024, representing a year-over-year increase of 29.4%, which exceeded both the forecast and consensus estimates [2]. - The company is positioned to capitalize on globalization opportunities beyond the current pent-up demand in the travel industry, leveraging its one-stop shop business model and strong customer service capabilities [2][7]. - Management anticipates that international business will contribute over 20% of total revenue within the next 3-5 years, supported by a significant total addressable market in Asia that is 1.5 times that of China [7][8]. Summary by Sections Financial Performance - In Q1 2024, Trip.com achieved a non-GAAP operating income of RMB3.8 billion, surpassing forecasts due to better gross profit margins and controlled marketing expenses [2][10]. - The company expects revenue for Q2 2024 to reach RMB12.9 billion, reflecting a 15% year-over-year growth [2]. Market Position and Growth Strategy - Trip.com’s domestic travel bookings grew at a double-digit rate year-over-year in Q2 2024, outpacing the overall market [9]. - The international flight capacity rebounded to 70% of pre-pandemic levels, with Trip.com outperforming the industry by 20-30% in outbound travel bookings [8][9]. - The inbound travel revenue, which accounted for approximately 20% of Trip.com’s revenue in Q1 2024, is expected to further support revenue growth [7]. Operational Efficiency - The non-GAAP operating profit margin for Q1 2024 was 31.6%, significantly better than forecasted, driven by disciplined sales and marketing spending [2][10]. - The company aims to maintain efficient marketing expenditures focused on return on investment, which is expected to stabilize the operating profit margin despite a high base [2][10]. Future Projections - Revenue projections for 2024, 2025, and 2026 are RMB52.8 billion, RMB59.5 billion, and RMB65.8 billion respectively, with corresponding growth rates of 18.5%, 12.6%, and 10.6% [10][11]. - The gross profit margin is expected to remain strong at around 81.3% for 2024, with operating margins projected to improve to 26.2% [10][11].

Investment Rating - Maintain HOLD rating with a target price of US$10.00, down from US$10.50, indicating a potential upside of 14.0% from the current price of US$8.77 [2][4]. Core Views - Management's positive outlook on the new Mona model and B-class sedan has likely boosted investor confidence in Xpeng's sales growth for 4Q24 and FY25, although this growth has already been incorporated into previous forecasts [2]. - Xpeng's 1Q24 revenue exceeded prior forecasts by 4%, primarily due to a higher-than-expected average selling price (ASP), despite increased incentives [2]. - The gross profit margin (GPM) for 1Q24 was 12.9%, outperforming projections by 1.8 percentage points, largely due to increased R&D service income from Volkswagen [2]. - The company is projected to remain unprofitable in FY25E, with a net loss forecast of RMB5.6 billion [2][4]. Financial Summary - Revenue is expected to grow from RMB30.7 billion in FY23A to RMB44.7 billion in FY24E, representing a year-on-year growth of 45.7% [4][9]. - The gross margin is projected to be 10.3% in FY24E, improving to 11.4% in FY25E, but still below the levels needed to cover selling, general, and administrative (SG&A) expenses [4][9]. - The net loss is expected to decrease from RMB10.4 billion in FY23A to RMB6.0 billion in FY24E, and further to RMB5.6 billion in FY25E [4][9]. Sales Volume and ASP - The sales volume forecast for FY24E has been reduced by 20,000 units to 200,000 units, with expectations of nearly 150,000 units sold in the second half of 2024 [2]. - The average selling price (ASP) for 1Q24 was RMB300,082, reflecting a 35.6% year-on-year increase [8]. Earnings and Valuation - The net loss for 1Q24 was RMB1.4 billion, which was better than previous projections by approximately RMB0.2 billion [2]. - The projected FY25E revenue has been cut by 6% due to lowered ASPs for the new models [2]. - Xpeng's price-to-sales (P/S) ratio is projected at 1.1x for FY25E, compared to competitors Li Auto and BYD, which are trading at 0.8x and 0.7x respectively [2].

Investment Rating - The report maintains a "BUY" rating for Tongcheng Travel with a target price of HK$26.1, implying a 23.1% upside from the current price of HK$21.20 [4][2]. Core Insights - Tongcheng Travel ("TC") reported a strong performance in 1Q24, with revenue increasing by 50% year-over-year (YoY) and adjusted net profit rising by 11% YoY, both exceeding consensus estimates [2][3]. - The company is expected to continue gaining market share in 2Q24, driven by robust travel demand during holidays and recovery in international business [2][3]. - For 2Q24, total revenue is forecasted to grow by 49% YoY, with core OTA revenue projected to increase by 23.5% YoY [2][3]. Financial Performance - In 1Q24, TC's revenue reached RMB 3,866 million, reflecting a 50% YoY growth and a 23% quarter-over-quarter increase [12][2]. - Adjusted net profit for 1Q24 was RMB 559 million, up 11% YoY, with a net profit margin of 14.4% [12][2]. - The company expects adjusted net profit to rise to RMB 621 million in 2Q24, indicating a slight improvement in net profit margin to 14.6% [2][3]. Revenue Breakdown - In 1Q24, revenue from transportation increased by 26% YoY, hotel revenue grew by 16% YoY, and other revenue surged by 36% YoY, driven by advertising and hotel management [2][3]. - International business is anticipated to contribute 3%-4% of total revenue in 2Q24, with international air ticketing volume and hotel room nights increasing significantly [2][3]. Future Outlook - The report projects continued strong momentum for TC, with expectations of robust growth in both domestic and international segments [2][3]. - The full-year financial forecasts for FY24-26 remain unchanged, with a DCF-based target price of HK$26.1, reflecting a P/E ratio of 21x for FY24E [2][3].

Group 1: Ctrip (TCOM US) - Ctrip's 1Q24 net revenue reached RMB 11.9 billion, a year-on-year increase of 29.4%, exceeding expectations by 3%[8] - Non-GAAP operating profit was RMB 3.8 billion, better than the forecast of RMB 3.2 billion, driven by scale effects and lower market expenses[8] - Target price raised to $65.8 based on DCF, reflecting strong international expansion potential and a 24/25 non-GAAP PE of 24/20 times[8] Group 2: Xpeng Motors (XPEV US) - Xpeng's 1Q24 total revenue was 4% higher than previous forecasts, primarily due to better-than-expected average selling prices[2] - Comprehensive gross margin was 12.9%, exceeding expectations by 1.8 percentage points, while vehicle gross margin was only 5.5%, below expectations due to impairment provisions related to the P5 model[2] - Net loss for 1Q24 was RMB 1.4 billion, narrowing by approximately RMB 200 million compared to previous forecasts[2]

Investment Rating - The report maintains a positive outlook on the insurance industry, particularly recommending China Life and China Pacific Insurance for their strong premium growth and effective transformation strategies [1][2]. Core Insights - The insurance sector in China is showing signs of recovery, with a notable increase in premium income for leading life insurance companies, indicating resilience despite previous declines [1]. - The property insurance sector is experiencing slower growth, primarily due to a decline in non-auto insurance premiums, which has affected the overall performance of major players [2]. - The report highlights the successful transformation efforts of leading insurers, particularly in enhancing their distribution channels and product offerings, which have contributed to improved premium growth [1][2]. Summary by Sections Life Insurance - In the first four months of the year, the total premium income for six listed life insurance companies increased by 0.4% year-on-year to 854.1 billion yuan, marking a recovery from three consecutive months of negative growth [1]. - China Life and China Pacific Insurance reported double-digit growth rates of 11.6% and 12.3% respectively, significantly improving from March's growth rates [1]. - New business value (NBV) is expected to rise due to ongoing transformation efforts, with a focus on diversified product strategies [1]. Property Insurance - The property insurance sector's premium income growth slowed, with a year-on-year increase of only 2.0% in April, down from March's figures [2]. - Major players like China Pacific Insurance and Ping An Insurance reported modest growth rates, while China Property & Casualty Insurance experienced a decline in non-auto premiums [2]. - The report emphasizes the long-term investment potential of China Property & Casualty Insurance due to its market leadership and robust dividend yield [2].