Investment Rating - The report maintains a "BUY" rating for China Hongqiao [1] Core Views - The aluminum industry is expected to be significantly influenced by China's strong market policies, which, combined with a weaker US dollar and limited new supply, may drive aluminum prices up in the short term, serving as a key catalyst for Hongqiao [1] - The earnings forecasts for 2024 to 2026 have been raised by 9-12% due to the upward adjustment of aluminum price assumptions, with a 1% increase in aluminum prices estimated to boost Hongqiao's earnings per share by 4% [1] - The new target price for Hongqiao is set at HK$19.6, up from HK$17.9, based on a consistent 9.8x P/E ratio for 2024, reflecting a potential industry recovery cycle [1][28] Summary by Relevant Sections Earnings Summary - Revenue (in million RMB) is projected to grow from 131,699 in 2022 to 151,734 in 2026, with a year-on-year growth rate of 15.0% in 2021, 1.5% in 2022, and 10.5% in 2023 [2] - Adjusted net profit (in million RMB) is expected to increase from 8,702 in 2022 to 19,160 in 2026, with a significant jump in 2023 [2] - Adjusted earnings per share (in RMB) are forecasted to rise from 0.94 in 2022 to 2.02 in 2026 [2] Price Trends - The latest aluminum price in Shanghai has rebounded to RMB 20,395 per ton, reflecting a 3% increase since early September [1] - The average aluminum price for Q3 2024 is expected to be RMB 19,600 per ton, a 4% year-on-year increase [1] Supply Dynamics - China's aluminum production growth slowed to 1.3% year-on-year in August, with a capacity utilization rate of approximately 96.7% [1] - The report indicates limited meaningful supply growth due to the Chinese government's cap on production capacity [1] Valuation Metrics - Hongqiao's historical average P/E ratio over the past decade is 6x, with peaks at 10x during market cycles and lows around 3x [1][28] - The new target price reflects a valuation above the historical average, indicating potential upside based on recovery expectations [1][28]

Investment Rating - The report maintains a "BUY" rating for China Hongqiao with a target price of HK$19.60, up from the previous target of HK$17.90, indicating a potential upside of 52.9% from the current price of HK$12.82 [5][34]. Core Views - The aluminum sector is expected to benefit from China's pro-market policies, which are anticipated to increase aluminum prices in the near term. The report revises earnings forecasts for 2024E-2026E upward by 9-12% due to higher price assumptions for aluminum and alumina [3][34]. - The report highlights that a 1% increase in aluminum prices could boost Hongqiao's earnings by 4% [3]. - The company is currently trading at a mid-cycle valuation of 7x 2024E P/E, with an attractive yield of 7% [3]. Revenue and Profit Forecasts - Revenue is projected to grow from RMB 133,624 million in 2022 to RMB 151,734 million in 2026, reflecting a compound annual growth rate (CAGR) of approximately 4% [4][36]. - Adjusted net profit is expected to increase from RMB 11,461 million in 2023 to RMB 19,160 million in 2026, indicating a strong growth trajectory [4][36]. Price Trends and Market Dynamics - The Shanghai aluminum price has rebounded to RMB 20,395 per ton, a 3% increase since early September, with an average price of RMB 19,600 per ton in Q3 2024, up 4% year-on-year [3][34]. - The report notes that alumina prices have seen a significant increase of 35% year-on-year, with forecasts indicating a 34% increase in Hongqiao's alumina ASP in 2H24 [3][34]. Supply and Demand Factors - China's aluminum production growth slowed to 1.3% year-on-year in August, with a capacity utilization rate of approximately 96.7%. Limited new supply is expected due to government-imposed capacity limits [3][34]. - The report estimates that construction and automobile sectors in China account for 16% and 14% of global aluminum demand, respectively, with government policies expected to stabilize demand expectations [3][34]. Valuation Insights - The report indicates that Hongqiao has historically traded at an average forward P/E of 6x, with peaks at 10x and troughs around 3x. The new target price reflects a valuation of 9.8x 2024E P/E, which is 1.5 standard deviations above the historical average, suggesting a potential industry upcycle [3][34].

Investment Rating - Maintain **Buy** rating with a revised target price of HK$107.84, up from HK$97.05, reflecting a 24.2% upside potential [2][3] - The new target price is based on a 20x FY25E P/E multiple, up from 18x, due to improved investor sentiment following central government stimulus measures [2] Core Views - The company's new retail formats, such as the "ANTA Super Store," "ANTA Champion Store," "ANTA SNEAKERVERSE," "ANTA Arena," and "ANTA Palace," are successfully driving growth and expanding the customer base [1] - The ANTA Super Store in Shenzhen, with a monthly sales estimate of RMB 1.5 million, outperforms regular ANTA stores, with annual sales per square meter reaching RMB 21,000, compared to RMB 16,000 for regular stores [6] - The company aims to open 10 ANTA Super Stores in FY24 and expand to 40 stores within three years, potentially contributing 2% to ANTA brand sales by FY26 [6] - The company's market segmentation strategy, including targeting mass-market, premium, and niche markets, is well-executed and supports future growth [1] Financial Performance - Revenue is expected to grow at a CAGR of 12% from FY23 to FY26E, with net profit growing at a CAGR of 16% [2] - FY24E revenue is projected at RMB 70.3 billion, with net profit of RMB 13.7 billion, representing a 12.8% YoY growth in revenue and 21.4% YoY growth in net profit [3][19] - FY25E revenue is forecasted at RMB 78.3 billion, with net profit of RMB 15.0 billion, reflecting an 11.4% YoY revenue growth and 9.7% YoY net profit growth [3][19] - FY26E revenue is expected to reach RMB 87.1 billion, with net profit of RMB 17.6 billion, indicating an 11.2% YoY revenue growth and 17.5% YoY net profit growth [3][19] Store Performance and Strategy - The ANTA Super Store in Shenzhen, with a floor area of 670 sqm (860 sqm including warehouse), achieves monthly sales exceeding RMB 1 million, with an average ticket size of RMB 330 [6] - The store offers a wide range of products, including training gear, professional sports, outdoor products, and sports culture, with approximately 1,000 SKUs [1] - The store's product mix differs from regular ANTA stores, with only 10% overlap in SKUs, and a higher proportion of evergreen products [1] - The company's strategy to attract new customers, particularly families and students, is successful, with over 90% of customers being first-time visitors to ANTA Group [6] Valuation and Peer Comparison - The company's FY25E P/E of 16x is below its 5-year historical average of 25x, indicating undervaluation [2] - The company's ROE is expected to remain strong, at 24.7% in FY26E, compared to 26.0% in FY21A [3][19] - Peer comparison shows ANTA Sports trading at a lower P/E multiple compared to some international brands like Nike and Adidas, which trade at higher multiples [17] Growth Drivers - The company's new retail formats and market segmentation strategy are key growth drivers, supported by strong execution and financial performance [1][6] - The ANTA Super Store model, with its high sales per square meter and attractive pricing, is expected to drive significant growth in the coming years [6] - The company's focus on expanding its customer base, particularly through family and student segments, is expected to contribute to long-term growth [6]

27 Sep 2024 Earnings Summary CMB International Global Markets | Equity Research | Company Update Anta Sports (2020 HK) Takeaways from the Anta Superstore visit The Anta Superstore we visited is fairly competitive and should be a decent growth driver onwards, supported by its superior price to quality and great variety of choices. Moreover, it can also acquire more family-type customers, and it has reasonable room for store expansion and decent financials (both sales per store and sales per sq.m are better t ...

Investment Rating - The report assigns a "Buy" rating to Baidu (BIDU US) with a target price of $180.50 per ADS [1]. Core Insights - The 2024 Cloud Intelligence Conference highlighted Baidu's advancements in AI infrastructure, including the upgrades to the Baidu AI Heterogeneous Computing Platform 4.0 and the Qianfan Large Model Platform 3.0, which aim to enhance the industrialization of large models and improve enterprise productivity [1]. - Baidu's cloud business is expected to benefit from the growth in GPU cloud services, with revenue growth anticipated to steadily recover due to a leading infrastructure and technology position, as well as the cross-selling of CPU cloud services [1]. - The valuation of Baidu is based on a Sum of the Parts (SOTP) approach, with the cloud business valued at $32.2 per ADS, contributing 17.8% to the overall target valuation [1]. Summary by Sections - **Company Overview**: Baidu is focusing on enhancing its AI capabilities through significant upgrades to its computing platforms and applications, which are expected to drive growth in its cloud business [1]. - **Market Position**: The company is well-positioned to capitalize on the increasing demand for GPU cloud services, which is projected to lead to improved revenue and profit margins [1]. - **Valuation Metrics**: The target price of $180.50 per ADS reflects a strong outlook for Baidu's cloud business, with specific emphasis on the contribution from GPU services [1].

Investment Rating - The report maintains a "Buy" rating for the company, with a target price of $180.50, indicating a potential upside of 90.4% from the current price of $94.81 [1]. Core Insights - The report highlights the advancements made by the company during the 2024 Cloud Intelligence Conference, focusing on the upgrade of its AI platforms, which are expected to enhance productivity and cloud service usage [1]. - The company's cloud business is projected to recover steadily, benefiting from scale effects and a higher profit margin due to the increasing revenue share from GPU cloud services [1]. - The valuation based on the Sum of the Parts (SOTP) method assigns a value of $32.2 per ADS for the cloud business, contributing to 17.8% of the total target valuation [1]. Financial Performance Summary - The company reported sales revenue of 134,598 million RMB for FY23A, with a year-on-year growth of 8.8% [2]. - Adjusted net profit for FY23A was 28,747 million RMB, reflecting a significant increase of 39.0% compared to the previous year [2]. - The forecast for FY24E anticipates a slight decline in adjusted net profit to 27,964 million RMB, representing a decrease of 2.7% [2]. Revenue and Profitability Trends - Sales revenue is expected to grow from 135,827 million RMB in FY24E to 157,928 million RMB by FY26E, with annual growth rates of 0.9%, 8.2%, and 7.5% respectively [2]. - The adjusted net profit margin is projected to stabilize around 20.6% in FY24E, with a gradual increase to 20.2% by FY26E [6]. Valuation Metrics - The company’s price-to-earnings (P/E) ratio is forecasted to decrease from 11.5 in FY23A to 9.4 by FY26E, indicating a potentially undervalued stock [7]. - The price-to-book (P/B) ratio is expected to decline from 0.9 in FY23A to 0.7 by FY26E, further suggesting attractive valuation levels [7]. Cash Flow Analysis - The operating cash flow for FY23A was reported at 36,615 million RMB, with projections of 37,930 million RMB for FY24E [6]. - The net cash flow from financing activities is expected to improve significantly, with a forecast of 1,997 million RMB by FY26E [6].

Group 1: Federal Reserve Actions - The Federal Reserve unexpectedly cut interest rates by 50 basis points, lowering the target range to 4.75%-5%[1] - The Fed's dot plot predicts a slight reduction in GDP growth from 2.1% to 2% for this year, while maintaining a 2% growth forecast for next year[1] - The Fed anticipates two more rate cuts totaling 50 basis points this year and four cuts totaling 100 basis points next year[4] Group 2: Economic Outlook - The PCE inflation forecast for this year has been adjusted down from 2.6% to 2.3%, and for next year from 2.3% to 2.1%[1] - Unemployment rate predictions have been raised to 4.4% for this year and 4.3% for next year, indicating a slight increase in joblessness[1] - The current economic environment resembles that of 1995, where the Fed initiated a rate cut cycle amid moderate economic slowdown[2] Group 3: Market Reactions - Following the rate cut, U.S. stock markets initially rose but then retreated, while Treasury yields and the dollar index experienced fluctuations[1] - The rate cut is expected to enhance economic expectations and asset prices, but may prolong the time needed for inflation to reach the 2% target[1] - The dollar's rate cut is likely to increase international liquidity and lower funding costs, benefiting emerging market currencies and equities[4]

Investment Rating - The report maintains a positive investment rating for the Chinese internet industry, emphasizing a preference for companies with strong fundamentals and sustainable profitability [1]. Core Insights - The report identifies three main investment themes for the next six months: companies with robust fundamentals and high revenue and profit growth certainty, those with sustainable profitability and a willingness to enhance shareholder returns, and firms with significant potential in new business ventures [1]. - The report suggests that market preference is currently leaning towards certainty rather than growth, recommending a focus on companies like Alibaba, Meituan, and Tencent, which exhibit strong fundamentals and shareholder return intentions [1][5]. Summary by Sections Performance Review - The second quarter performance of the internet sector showed resilience, with transaction platforms like e-commerce and online travel demonstrating strong profit performance due to refined operations and user engagement strategies [1]. - The report notes that the advertising revenue growth for online platforms remains robust, driven by improved commercialization efficiency and higher ad loading rates [1]. Stock Selection Strategy - The report ranks stock recommendations for the second half of 2024 as follows: 1. Alibaba: Expected to benefit from improved monetization and new business efficiencies 2. Meituan: Competitive landscape improving with stable profitability in new business areas 3. Trip.com: Strong core user base and recovery in outbound travel 4. Tencent: Stable core business with high-margin segments driving growth 5. Bilibili: Accelerated revenue growth from new game releases 6. Pinduoduo: Valuation may have overshot, but potential for a second growth curve exists [5]. Industry Trends - The report highlights that the local lifestyle sector is seeing a phase of improved competition, while the online gaming sector is expected to recover in the second half of 2024 due to new product launches [4][5]. - The online advertising sector is experiencing a shift in ad budgets towards platforms that offer higher ROI, indicating a concentration of advertising spending among leading platforms [1][4]. Market Dynamics - The inclusion of companies like Alibaba and Cloud Music in the Hong Kong Stock Connect is anticipated to bring incremental capital inflows, enhancing liquidity and supporting valuations [7]. - Historical performance data shows that stocks entering the Stock Connect have experienced significant average excess returns, indicating a positive market reaction to such inclusions [9].

Investment Rating - The report maintains a "BUY" rating for Adobe, with a target price of US$645.00, indicating a potential upside of 20.1% from the current price of US$536.87 [4][8]. Core Insights - Adobe reported solid 3QFY24 results, with total revenue increasing by 11% YoY to US$5.41 billion, and non-GAAP net income also growing by 11% YoY to US$2.08 billion, both in line with consensus estimates [2][3]. - The guidance for 4QFY24 was softer than expected, with Digital Media net new ARR guidance of approximately US$550 million, reflecting a 3% YoY decline, which raised concerns about revenue growth outlook for FY25E [2][3]. - The management attributed the softness in guidance to seasonal effects, including the absence of Cyber Monday in 4Q and certain deals being closed earlier in 3QFY24 [2][3]. Financial Performance - Creative Cloud revenue grew by 10% YoY to US$3.2 billion in 3QFY24, with net new ARR of US$341 million, driven by product innovations and user expansion [2][3]. - Document Cloud revenue increased by 18% YoY to US$807 million, with net new ARR of US$163 million, supported by strong usage growth and AI Assistant monetization [2][3]. - Digital Experience revenue was US$1.35 billion in 3QFY24, up 10% YoY, driven by strong subscription revenue growth [2][3]. Revenue Forecasts - The revenue forecasts for FY24-26E remain largely unchanged, with FY24E revenue expected at US$21.46 billion, FY25E at US$23.44 billion, and FY26E at US$25.52 billion [3][7]. - Non-GAAP net profit is projected to grow from US$8.27 billion in FY24E to US$9.80 billion in FY26E, reflecting a steady growth trajectory [3][7]. Valuation - Adobe is valued at US$287 billion, translating to a target price of US$645.00 per share based on a P/E ratio of 32x for FY25E, which is at a discount to the sector average of 36x [8][9].

Investment Rating - The report maintains a "BUY" rating for Haier Smart Home with a target price (TP) of HK$ 31.58, reflecting an upside potential of 31.3% from the current price of HK$ 24.05 [2][3]. Core Insights - The sales growth slowdown in 2Q24 was unexpected, but margin improvements were notable. The outlook for 2H24 is positive, driven by government subsidies, potential interest rate cuts, new product launches, and margin recovery in the EU [2][6]. - The "old for new" trade subsidies initiated in August 2024 are expected to favor high-end products, with significant sales growth observed in home appliances, particularly in Hubei province, where sales increased by 30% YoY [2][6]. - Haier's FY24E guidance remains unchanged, targeting mid-single-digit sales growth in China and over 10% growth overseas, with specific categories like air-conditioners and kitchen appliances expected to perform well [2][6]. Financial Summary - Revenue projections for FY24E are set at RMB 273.7 billion, with a YoY growth of 4.7%. Net profit is expected to reach RMB 19.6 billion, reflecting a 15.2% growth [3][12]. - The report indicates a fine-tuning of net profit forecasts for FY24E, FY25E, and FY26E by +1%/-1%/-1% respectively, accounting for slower sales growth but improved operating leverage and efficiency gains [2][7]. - The earnings summary shows a consistent increase in revenue and net profit over the forecast period, with net profit margins improving from 7.1% in FY24E to 7.7% in FY26E [3][12]. Market Position and Competitive Advantage - Haier is positioned to benefit from the ongoing subsidy programs, with a significant portion of local sales companies and distributors engaged in discussions with the government [2][6]. - The company is expected to leverage its market leadership to capture more high-end demand, with Casarte brand products showing exceptional sales growth [2][6]. - The report highlights Haier's strategic focus on high-end product sales and operational efficiencies, which are anticipated to enhance gross and operating margins in the upcoming periods [6][7].