M N 22 Mar 2024 CMB International Global Markets | Equity Research | Company Update Sunny Optical (2382 HK) Expectations reset on conservative guidance; Maintain HOLD Target Price HK$47.31 Sunny Optical (Sunny)’s FY23 net profit was largely in-line with profit warning, but (Previous TP HK$50.71) 2H23 GPM of 14.1% (vs 19% in 2H22) was below expectations due to more intense Up/Downside 1.0% competition despite spec upgrade and more high-end models in 2H23. For 2024 Current Price HK$46.85 guidance, while mgmt. ...

Investment Rating - The report maintains a BUY rating for FriendTimes, with a target price of HK$1.8, indicating an upside potential of 80% from the current price of HK$1.00 [13][29]. Core Insights - FriendTimes reported a significant revenue decline of 31% YoY for FY23, with an adjusted net loss of RMB 133 million, which was largely in line with expectations. The decline was attributed to existing games' grossing decline and increased sales and marketing expenses [29]. - The new game "Twist of the Fate 2" (ToF2) has shown promising performance, ranking in the top 50-70 for iOS grossing in Q1 2024. The company expects ToF2 to maintain stable grossing and is focusing on expanding to Android and overseas markets [29]. - Management is prioritizing cost discipline in FY24, with adjustments in personnel and careful development of high-R&D projects. The report anticipates that mini-games will unlock additional grossing potential [29]. Financial Summary - For FY22, revenue was RMB 1,524 million, which decreased to RMB 1,056 million in FY23, with a projected recovery to RMB 1,474 million in FY24, and further growth to RMB 1,933 million in FY25 and RMB 2,048 million in FY26 [1][23]. - Adjusted net profit is expected to recover from a loss of RMB 131.8 million in FY23 to a profit of RMB 180.3 million in FY24, increasing to RMB 256.9 million in FY25 and RMB 299.4 million in FY26 [1][23]. - The report indicates a significant drop in diluted EPS from 1.90 cents in FY22 to a loss of 6.10 cents in FY23, with a forecasted recovery to 8.27 cents in FY24 and further increases in subsequent years [1][23]. Valuation Metrics - The P/E ratio is projected to decrease from 50.7 in FY22 to 11.1 in FY24, indicating a more favorable valuation as earnings recover [1][25]. - The gross margin is expected to stabilize around 68% from FY24 onwards, while the operating margin is projected to improve gradually [30][25]. - The report highlights a current ratio of 4.1 in FY23, indicating strong liquidity, which is expected to improve to 5.4 in FY24 [25].

Investment Rating - The report maintains a "BUY" rating for CSPC Pharmaceutical, with a target price revised to HK$7.76 from HK$8.16, indicating a potential upside of 21.1% from the current price of HK$6.41 [2][4]. Core Insights - CSPC reported FY23 revenue of RMB31.45 billion, reflecting a 1.7% year-over-year growth, and an attributable net profit of RMB5.87 billion, down 3.6% year-over-year. The adjusted net profit increased by 2.8% year-over-year to RMB6.28 billion [2]. - The company expects new products to significantly contribute to revenue in 2024, forecasting an additional RMB3.5-3.6 billion from these products [2]. - CSPC's R&D expenses rose by 21.2% year-over-year to RMB4.83 billion, indicating a strong commitment to innovation [2]. Financial Performance Summary - **Revenue**: FY23 revenue was RMB31.45 billion, with projections of RMB34.80 billion for FY24E, representing a 10.6% growth [3][9]. - **Net Profit**: FY23 attributable net profit was RMB5.87 billion, with expectations of RMB6.68 billion in FY24E, a 13.7% increase [3][9]. - **Gross Profit Margin**: The gross profit margin decreased to 70.5% in FY23 from 71.9% in FY22, with expectations of 70.3% in FY24E [3][10]. Sales Performance - **Finished Drugs**: Sales of finished drugs increased by 4.6% year-over-year to RMB25.64 billion, although there was a slight decline in the second half of FY23 due to anticorruption measures in China [2]. - **CNS Products**: CNS products saw a 12.1% year-over-year growth, primarily driven by strong sales of NBP [2]. - **Oncology Products**: Sales of oncology products fell by 16.4% year-over-year, largely due to a significant price cut for Keaili [2]. New Product Pipeline - CSPC has several new products expected to drive sales growth, including Mingfule, Yiluoda, and Anfulike, with management forecasting substantial revenue contributions from these products in 2024 [2][3]. - The company has had four drugs added to the National Reimbursement Drug List (NRDL) since early 2024, enhancing market access [2]. Valuation Metrics - The report provides a DCF valuation of RMB7.76 per share, with a WACC of 11.78% and a terminal growth rate of 2.0% [4][10]. - The P/E ratio is projected to decrease from 13.0x in FY23 to 10.5x in FY24E, indicating potential undervaluation [3][10].

Investment Rating - The report maintains a "BUY" rating for PDD Holdings with a target price increase to USD 155.4, representing a 21.7% upside from the current price of USD 127.68 [11]. Core Insights - PDD Holdings reported a revenue increase of 123% YoY in 4Q23, reaching RMB 88.9 billion, which was 11% above Bloomberg consensus estimates. This growth is attributed to stronger international expansion and improved domestic monetization [11]. - Non-GAAP net profit for 4Q23 rose by 110% YoY to RMB 25.5 billion, exceeding consensus by 52%, driven by better domestic profit generation and a narrower loss from the Temu business [11]. - The company is expected to continue improving its monetization rate through increased commission rates in its "Ten Billion Subsidy" program and new advertising products [11]. - PDD's international expansion is on track to support long-term revenue and earnings growth, with adjustments made to account for rapid development in international business and domestic monetization improvements [11]. Financial Summary - Revenue projections for FY24E, FY25E, and FY26E are RMB 389.6 billion, RMB 492.4 billion, and RMB 540.1 billion respectively, reflecting significant growth rates of 57.3%, 26.4%, and 9.7% [3][14]. - Adjusted net profit estimates for FY24E, FY25E, and FY26E are RMB 91.7 billion, RMB 127.3 billion, and RMB 136.8 billion, indicating growth rates of 35.1%, 38.8%, and 7.5% [3][14]. - The company's gross profit margin is projected to be 62.5% in FY24E, slightly declining to 62.2% by FY26E [14]. Growth Metrics - PDD's revenue growth rates for FY22A, FY23A, FY24E, FY25E, and FY26E are 39.0%, 89.7%, 57.3%, 26.4%, and 9.7% respectively, showcasing a strong upward trend [8]. - The adjusted net profit growth rates for the same periods are 185.8%, 71.8%, 35.1%, 38.8%, and 7.5% [8]. Profitability Ratios - The gross profit margin for FY22A was 75.9%, expected to decrease to 62.5% in FY24E and further to 62.2% in FY26E [8]. - The operating margin is projected to be 23.4% in FY24E, increasing to 27.1% in FY25E before slightly declining to 26.8% in FY26E [8]. Valuation Metrics - The P/E ratio for FY24E is estimated at 14.8, decreasing to 10.5 by FY25E and further to 9.7 by FY26E, indicating a potentially attractive valuation [3][8].

Investment Rating - The report maintains a "BUY" rating for Kuaishou, with a target price of HK$97, implying an upside of 85.6% from the current price of HK$52.25 [2][3]. Core Insights - Kuaishou is expected to see margin improvement driven by gains in advertising and e-commerce. The company reported solid 4Q23 results, with revenue growth of 15% YoY and a net profit of RMB4.4 billion, which was 34% above consensus estimates [2][3]. - For FY24E, total revenue is projected to grow by 10.6% YoY, with specific segments showing varied performance: livestreaming revenue is expected to decline by 8%, while advertising and other services are forecasted to grow by 20% and 24% YoY, respectively [2][3]. - The adjusted net profit margin (NPM) improved to 13.4% in 4Q23, exceeding estimates, primarily due to a higher-than-expected gross profit margin (GPM) and reduced losses from overseas operations [2][3]. Financial Summary - Revenue for FY23A was RMB113.47 billion, with a YoY growth of 20.5%. For FY24E, revenue is expected to reach RMB125.54 billion, reflecting a growth of 10.6% [3][16]. - The adjusted net profit for FY23A was RMB10.27 billion, with projections for FY24E at RMB16.03 billion, indicating a significant growth of 56.1% YoY [3][16]. - The report highlights a projected GPM of 53.1% for FY24E, with an expected operating profit of RMB13.17 billion, marking a substantial recovery from previous losses [3][16]. Segment Performance - In 4Q23, the revenue breakdown showed online marketing services growing by 24% YoY, while live streaming remained flat at 0% growth. Other services and e-commerce saw significant growth of 36% and 31% YoY, respectively [2][7]. - For 1Q24E, advertising revenue is expected to increase by 26% YoY, while e-commerce GMV is projected to grow by 29% YoY, indicating strong momentum in these segments [2][3]. Valuation Metrics - The report provides a SOTP-based valuation, with the target price set at HK$97, based on a P/E ratio of 24x for FY24E and 17x for FY25E [2][3]. - The current market capitalization is reported at HK$2.27 billion, with a P/S ratio of 1.7 for FY24E, indicating a favorable valuation compared to historical performance [4][16].

Investment Rating - The report maintains a BUY rating for Kingdee with a target price of HK$15.50, reflecting a potential upside of 66.3% from the current price of HK$9.32 [4]. Core Insights - Kingdee reported a revenue of RMB5.7 billion for 2023, representing a 17% year-over-year growth, and a net loss of RMB210 million, which is a significant reduction from a loss of RMB389 million in 2022 [2][12]. - The company is well-positioned to benefit from the domestic substitution trend, supported by strong product capabilities and an enhanced partner ecosystem [2]. - The cloud segment contributed 79% of total revenue, with cloud revenue growing 21% year-over-year to RMB4.5 billion [2]. Financial Performance - Revenue growth is projected to continue with a compound annual growth rate (CAGR) of 15-20% from 2023 to 2026 [2]. - The annual recurring revenue (ARR) grew by 34% year-over-year, indicating a solid SaaS growth outlook for 2024 [2]. - Kingdee's core SaaS product, Galaxy, achieved revenue of RMB2.0 billion, up 16.3% year-over-year, with a stable dollar retention rate of 97.2% [2]. Business Segments - The Galaxy product line recorded over 39,000 customers by the end of 2023, with a net addition of over 8,000 customers year-over-year [2]. - The Cosmic & Constellation (C&C) segment saw a revenue increase of 40.9% year-over-year, and management expects revenue growth to reaccelerate in 2024 due to strong project pipelines [2]. Financial Guidance - Management has guided for a subscription ARR CAGR of 30% from 2023 to 2026 and aims for at least RMB900 million in operating cash flow in 2024, indicating a growth of at least 38% year-over-year [2].

Investment Rating - Maintain BUY rating for WuXi AppTec with a target price of RMB67.53, down from the previous target price of RMB116.01, indicating a potential upside of 32.9% from the current price of RMB50.81 [2][3]. Core Insights - WuXi AppTec reported a revenue of RMB40.3 billion in 2023, reflecting a year-on-year growth of 2.5%. The attributable recurring net income was RMB9.7 billion, up 16.8% YoY, and the attributable adjusted non-IFRS net income reached RMB10.9 billion, up 15.5% YoY. Excluding COVID-19 related revenue, the company achieved a remarkable revenue growth of 25.6% YoY [2][3]. - For 2024, management expects reported revenue to range between RMB38.3 billion and RMB40.5 billion, representing a decline of 5.1% YoY to growth of 0.4% YoY. Excluding COVID-19 related revenue, growth is anticipated to be between 2.7% and 8.6% YoY [2][3]. - The company has shown solid business development in 2023, particularly in TIDES revenue, which grew by 64.4% YoY, and drug safety assessment and SMO business, which grew by 27.3% and 26.1% YoY, respectively [2][3]. - WuXi AppTec is actively working on commercial projects and has started receiving royalty income in 2023, with several customers discussing long-term contracts for advanced-stage projects [2][3]. Financial Summary - Revenue for FY23 was RMB40,341 million, with a YoY growth of 2.5%. For FY24E, revenue is projected at RMB39,126 million, reflecting a decline of 3.0% YoY, followed by growth of 10.2% in FY25E and 11.1% in FY26E [3][8]. - Adjusted net profit for FY23 was RMB10,854 million, up 15.5% YoY, with projections of RMB10,260 million for FY24E (down 5.5% YoY), RMB11,364 million for FY25E (up 10.8% YoY), and RMB12,828 million for FY26E (up 12.9% YoY) [3][8]. - The company’s P/E ratio for FY23 was 13.7, with projections of 14.5 for FY24E, 13.1 for FY25E, and 11.6 for FY26E [3][8]. Shareholder Actions - WuXi AppTec has demonstrated confidence in its business by canceling RMB1.2 billion H-shares under its 2023 H-share Award Scheme and is in the process of repurchasing another RMB1 billion A-shares [2][3].

M N 20 Mar 2024 CMB International Global Markets | Equity Research | Company Update Akeso (9926 HK) Expect another fruitful year in 2024 In FY23, Akeso recorded RMB4.53bn in revenue, including RMB1.63bn from Target Price HK$59.61 product sales and RMB2.92bn from license income relevant to AK112 (PD- (Previous TP HK$51.23) 1/VEGF). Cadonilimab/AK104 (PD-1/CTLA-4) achieved RMB1.36bn in sales in Up/Downside 19.3% FY23, surpassing the Company’s initial guidance of RMB1.2-1.3bn. In 2H23, Current Price HK$49.95 A ...

Investment Rating - The report maintains a "BUY" rating for China Lilang with a target price raised to HK$5.75, reflecting a 29.2% upside from the current price of HK$4.45 [2][4]. Core Insights - China Lilang is expected to outperform in FY24E due to operational efficiency improvements and product quality upgrades, with a robust retail sales growth target of 15%, including 20% growth for e-commerce [2][6]. - The company reported FY23 results that slightly beat expectations, with sales and net profit increasing by 15% and 18% year-over-year, respectively [2][9]. - The report highlights a significant improvement in working capital, with inventory and receivable days reduced to 170 and 42 days, respectively [2][9]. Financial Performance - FY23 revenue was RMB 3,544 million, with a gross profit margin of 48.2% and a net profit of RMB 530 million, reflecting a year-over-year growth of 15% and 18% [3][9]. - For FY24E, revenue is projected to reach RMB 4,047 million, with a net profit of RMB 626 million, indicating a year-over-year growth of 14% [6][9]. - The company declared a dividend per share (DPS) of HK$0.36 for FY23, resulting in a payout ratio of 74% and an 8% yield based on the current market capitalization [2][4]. Segment Performance - Sales growth rates for key segments in FY23 were 10% for the core brand, 35% for smart casual, and 18% for e-commerce [2][9]. - The smart casual segment is expected to continue its rapid growth, with sales per store already exceeding that of the core brand [2][6]. Valuation Metrics - The report indicates a P/E ratio of 8x for FY24E, which is considered attractive compared to the target P/E of 10x [2][4]. - The projected sales and net profit CAGR for FY23-26E is 11% and 14%, respectively, supporting the valuation [2][6].

M N 21 Mar 2024 CMB International Global Markets | Equity Research | Company Update Huya (HUYA US) Margin improvement to continue Target Price US$6.80 Huya delivered upbeat 4Q23 results, with revenue 2% above consensus and adj. (Previous TP US$6.80) NPM at -12.4% (vs. consensus of -13.9%). Looking into FY24E, we suggest to focus Up/Downside +54.5% on its margin improvement and game monetization from more titles cooperation. We Current Price US$4.40 forecast stable topline YoY in FY24E, with advertising & ot ...