M N 24 Apr 2024 CMB International Global Markets | Equity Research | Company Update InnoLight (300308 CH) 1Q24 results set stage for accelerated growth in 2024 Innolight has recently released results for FY23 and 1Q24, exceeding both our Target Price RMB183.00 and market’s expectations. For FY23, the company's revenue grew by 11.2% (Previous TP RMB136.00) YoY to RMB10.7bn, with net profit soaring by 77.6% YoY to RMB2.2bn. 1Q saw Up/Downside 15.6% even more impressive growth, with revenue up by 163.6% YoY to ...

Investment Rating - The report maintains a "BUY" rating for Netflix, with a target price of US$644.50, reflecting a potential upside of 16.1% from the current price of US$555.04 [2][3]. Core Insights - Netflix reported strong 1Q24 results, with revenue growth of 15% YoY, surpassing estimates by 1%, and an operating profit margin (OPM) of 28.1%, which is 2 percentage points above estimates [2][3]. - The management has guided an increase in FY24E OPM to 25% from the previous 24%, indicating confidence in continued profitability despite a moderate revenue guidance for FY24E [2][3]. - The report highlights Netflix's initiatives in AVOD and paid sharing as positive drivers for future growth, with an expected earnings upside from efficient content spending and reduced competition [2][3]. Financial Summary - **Earnings Summary**: - FY24E revenue is projected at US$38.428 billion, reflecting a 14% YoY growth, with net profit expected to reach US$7.978 billion [3][18]. - The report anticipates EPS growth of 52.8% in FY24E, with a reported EPS of US$18.71 [3][18]. - **Operating Performance**: - The operating profit for FY24E is estimated at US$9.597 billion, with an operating margin of 25% [3][15]. - The report indicates a significant increase in operating profit from US$6.954 billion in FY23A to US$9.597 billion in FY24E, representing a growth of 38% [3][18]. - **Cash Flow**: - Net cash from operations is projected to be US$7.389 billion in FY24E, with a notable increase in cash at the end of the year expected to reach US$8.934 billion [19][19]. Market Position and Guidance - Netflix's management has expressed confidence in achieving double-digit revenue growth in the medium term, supported by a strong content pipeline for 2Q24E and 2H24E [2][3]. - The company is expected to benefit from increased engagement and monetization strategies, despite the removal of quarterly subscriber and ARM disclosures starting 1Q25 [2][3].

M N 22 Apr 2024 CMB International Global Markets | Equity Research | Company Update Bosideng (3998 HK) From winter clothing to all seasons clothing We think the guidance raise is a key moment for the company, as the success Target Price HK$5.34 that Bosdieng has achieved in the sun-protective product series shows that it is (Previous TP HK$3.86) capable of generating sales in all seasons (other than just fall and winter). Also, Up/Downside 23.5% despite our raises in estimates and TP, we still think our num ...

Investment Rating - The report maintains a BUY rating for Xtep with a target price of HK$6.31, indicating a potential upside of 41.4% from the current price of HK$4.46 [4]. Core Insights - Xtep's retail sales in 1Q24 increased by high single digits year-over-year, aligning with market expectations, and showing signs of acceleration in growth due to new product launches and e-commerce support [2][3]. - The company expects improved retail sales growth, better discounts, and inventory levels from 2Q24E onward, supported by the popularity of new products like the 360X running shoes [2][3]. - The stock is currently trading at an undemanding valuation of 9x FY24E P/E, which is attractive compared to its 8-year average of 15x [2][4]. Earnings Summary - Xtep's revenue for FY24E is projected at RMB 15,913 million, with a year-over-year growth of 10.9% [12]. - The net profit for FY24E is estimated at RMB 1,230 million, reflecting a net profit margin of 7.7% [12]. - The company anticipates a compound annual growth rate (CAGR) of 10% for sales and 18% for net profit during FY23-26E [2][4]. Retail Performance - Retail sales growth for offline, online, and kids segments was reported at low single digits, over 25%, and 10% respectively in 1Q24 [2]. - Retail discounts narrowed to 25%-30% in 1Q24, showing improvement from 30% in 4Q23, with expectations for further reduction in 2Q24E [2][3]. Market Position - Xtep's new products, particularly the 360X running shoes, have been well-received, with over 500,000 pairs sold in just one month [2]. - The e-commerce segment is expected to rebound as the company increases the supply of entry-level and value-for-money products [2]. Financial Projections - The report conservatively estimates a revenue of RMB 17,587 million for FY25E and RMB 19,322 million for FY26E, maintaining the same growth expectations as previous estimates [8][9]. - Gross profit margin is projected to improve to 42.7% in FY25E and 43.1% in FY26E [12].

M N 18 Apr 2024 CMB International Global Markets | Equity Research | Company Update Anta Sports (2020 HK) An inline 1Q24 plus an improving outlook Retail sales growth in 1Q24 was slow, but it was widely expected. We see Target Price HK$101.73 FY24E growth supported by: 1) healthy momentum in late Mar, 2) an exciting (Previous TP HK$101.73) product launch pipeline, 3) further segmentation by Anta in terms of products Up/Downside 24.7% and store format, and 4) gradual improvement in retail discounts (rather C ...

Investment Rating - The report initiates coverage on the company with a "Buy" rating and sets a target price of 161.42 RMB [1][126]. Core Insights - The company, United Imaging Healthcare, has established itself as a leading player in China's medical equipment sector, with a comprehensive product line covering CT, MR, MI, RT, XR, and life science instruments. The company has achieved a compound annual growth rate (CAGR) of 39.9% in revenue from 2019 to 2023 [1][20]. - The company is expected to benefit from the expansion of the Chinese medical equipment market and the trend of domestic substitution, while also continuing to explore overseas markets [1][20]. - United Imaging has maintained high R&D investment, with a research expense ratio of 18.4% in the first nine months of 2023, and has made significant technological breakthroughs, positioning itself among the top international players in high-end medical equipment [1][20][28]. Summary by Sections Comprehensive Product Line - United Imaging has launched over 100 types of large medical equipment, including MR, CT, XR, MI, RT, and life science instruments, with 43 products certified by the FDA and CE [1][8]. - The company has broken the monopoly of international brands in the high-end medical equipment market, achieving significant market share growth in CT and MR products [1][10][11]. Market Expansion - The domestic market for large medical equipment is expected to grow significantly, with the per capita ownership of CT and MR equipment in China still low compared to developed countries [1][15]. - The relaxation of large medical equipment configuration management in China is anticipated to stimulate demand for mid-to-high-end equipment, benefiting leading domestic companies like United Imaging [1][15][17]. International Growth - The company has seen a CAGR of 121.8% in overseas revenue from 2019 to 2022, with overseas revenue accounting for 13.8% of total revenue in the first nine months of 2023 [1][13][14]. - United Imaging has established a presence in over 60 countries, including the US, Japan, and Australia, and is building a robust global service and operational system [1][14][110]. Financial Performance - The company achieved revenue of 114.1 billion RMB in 2023, a year-on-year increase of 23.5%, with a projected revenue CAGR of 25.7% from 2023 to 2026 [1][18][117]. - The net profit for 2023 is expected to reach 19.7 billion RMB, with a CAGR of 24.4% anticipated from 2023 to 2026 [1][18][117]. R&D and Innovation - United Imaging's R&D investment reached 14.3 billion RMB in the first nine months of 2023, representing 19.2% of revenue, with a focus on maintaining technological leadership in high-end medical equipment [1][28][29]. - The company has developed a range of innovative products, including the first domestic 3.0T MR and 320-slice CT, and continues to push the boundaries of medical imaging technology [1][20][28]. Valuation - The target price of 161.42 RMB corresponds to a P/E ratio of 55 times the expected earnings for 2024, based on a DCF model with a WACC of 9.3% and a perpetual growth rate of 4.0% [1][126][128].

Investment Rating - The report maintains a BUY rating for FIT Hon Teng with a target price (TP) of HK$ 2.42, indicating a potential upside of 12.6% from the current price of HK$ 2.15 [5][13]. Core Insights - Recent stock price corrections are viewed as overdone, primarily driven by investor concerns regarding Apple's TWS order allocation. Management has confirmed that the first production line of AirPods in Vietnam began shipments in February 2024, expected to contribute 5-7% of sales in FY24E. By 2025, additional production lines will be added in India, positioning FIT and Luxshare as the two largest AirPods suppliers with a projected market share of 30% and 70% respectively [2][3]. - The management has reiterated a solid outlook for 2024, projecting high-teens revenue growth, over 15% gross profit (GP) and operating profit (OP) growth year-on-year, driven by AirPods, AI server connectors, and the auto business [3][4]. Financial Summary - Revenue is projected to grow from US$ 4,196 million in FY23A to US$ 4,715 million in FY24E, reflecting a year-on-year growth of 12.4%. Net profit is expected to increase significantly from US$ 129.6 million in FY23A to US$ 201.2 million in FY24E, representing a growth of 55.3% [4][11]. - The earnings summary indicates a consistent improvement in profitability metrics, with gross profit margins expected to rise from 19% in FY23A to 20% in FY24E, and operating profit margins increasing from 6.3% to 7.5% over the same period [11][18]. Growth Drivers - Key growth drivers identified include the AirPods production ramp-up, AI server product launches, and consolidation in the auto business, with expected contributions of 5-7% from AirPods, 7-9% from AI server products, and 8% from the auto business in FY24E [3][4]. - The report highlights that the recent share price correction presents a buying opportunity, with the stock trading at attractive valuation multiples of 9.7x and 7.6x for FY24E and FY25E P/E respectively, compared to a historical average of 15x [3][13].

Investment Rating - The report maintains a "BUY" rating for Tencent with a target price of HK$445.0, reflecting a potential upside of 43.7% from the current price of HK$309.60 [10][11]. Core Insights - Tencent is expected to achieve solid earnings growth and enhance shareholder returns in FY24, with a forecasted total revenue increase of 6% YoY to RMB158.6 billion in 1Q24E and a non-IFRS net income growth of 31% YoY to RMB43.1 billion [10][11]. - The company is navigating short-term headwinds in its games business but anticipates recovery in revenue growth in 2Q24E due to new game launches [10][11]. - Advertising revenue is projected to grow by 16% YoY in 1Q24E, driven by strong demand for Video Account ads and improved ad technology [10][11]. Financial Summary - Revenue (RMB million) for FY22A was 554,552, FY23A was 609,015, and is expected to reach 655,548 in FY24E, reflecting a YoY growth of 7.6% [2]. - Adjusted net profit (RMB million) is forecasted to grow from 157,688 in FY23A to 185,358 in FY24E, representing a YoY growth of 17.5% [2]. - The gross margin is expected to improve from 48.1% in FY23A to 49.9% in FY24E [2]. Business Segment Valuation - The valuation for the online games business is set at HK$160.3 based on a 17x 2024E PE, aligning with the average PE of global gaming peers [5]. - The fintech business is valued at HK$85.4 based on a 4.0x 2024E PS, reflecting Tencent's strong position in China's digital payment market [6]. - The advertising business is valued at HK$79.4 based on a 19x 2024E PE, consistent with industry averages [14]. Strategic Investments - Tencent's strategic investments are valued at HK$62.0, applying a 30% holding company discount to the fair value of its equity investments [15]. - The report highlights Tencent's significant stakes in various companies, contributing to its overall valuation [19].

Investment Rating - Maintain BUY rating with a target price of US$131.9 per ADS [1][7] Core Views - Alibaba is expected to deliver in-line-with-consensus revenue growth for 4QFY24, with estimated revenue of RMB221.4bn, up 6% YoY [1] - The company is focusing on long-term growth through investments in international business, cloud, and Taobao and Tmall (T&T) Group, despite short-term margin pressure [1] - Alibaba is committed to improving shareholder return through loss reduction in non-core businesses, enhanced share buyback, and dividend payout [1] - The strategic move to drive an integrated group strategy is expected to enhance long-term value [1] Financial Performance - For 4QFY24, group-level adjusted EBITA is forecasted to decline 5% YoY to RMB24.0bn, with an adjusted EBITA margin of 10.8% [1] - T&T Group's adjusted EBITA is expected to decline 1.5% YoY to RMB38.5bn, implying a margin of 42.1% [1] - Customer management revenue growth is forecasted at 3% YoY in 4QFY24, driven by 7% YoY GMV growth from T&T GMV [1] Revenue and Profit Forecasts - Revenue for FY24E is estimated at RMB940.7bn, with FY25E and FY26E revenues projected at RMB1,027.6bn and RMB1,117.5bn, respectively [2][4] - Adjusted net profit for FY24E is forecasted at RMB155.5bn, with FY25E and FY26E projections at RMB158.2bn and RMB175.2bn, respectively [4] - Gross margin for FY24E is estimated at 37.8%, with FY25E and FY26E margins projected at 38.0% [4] Valuation and Shareholder Return - The SOTP-based target price is US$131.9 per ADS, translating into 15.7x FY24E P/E [7] - Alibaba is enhancing shareholder return through an integrated group strategy, including investments in international business and cloud infrastructure [1] - The next key event for shareholder return will likely be the announcement of annual fiscal year dividends in May [1] Segment Valuation - Taobao and Tmall Group is valued at US$59.1 per ADS, based on 7.0x FY24E EV/adjusted EBITA [8] - Cloud Intelligence Group is valued at US$24.4 per ADS, based on a 4.2x EV/S multiple on FY24E revenue [8] - Cainiao is valued at US$2.6 per ADS, based on the latest valuation given by Alibaba to repurchase Cainiao shares from minority shareholders [8] Financial Summary - Revenue for FY24E is projected at RMB940.7bn, with gross profit of RMB356.0bn [4] - Operating profit for FY24E is forecasted at RMB113.7bn, with net profit of RMB89.9bn [13] - Adjusted net profit for FY24E is estimated at RMB155.5bn, with an adjusted net profit margin of 16.5% [4]

11 Apr 2024 Renewed agreement with Blizzard; expect games revenue growth to reaccelerate in 2H24E NetEase on 10 Apr announced the renewal of publishing agreement with Blizzard Entertainment to bring Blizzard game titles back to China. Popular titles such as World of Warcraft, Hearthstone, and Diablo will return to the Chinese market sequentially starting in summer 2024. NetEase also reached an agreement with Microsoft to bring NetEase titles to Xbox and other platforms. We expect the return of Blizzard game ...