Investment Rating - The report maintains a BUY rating for Weichai Power, indicating that the valuation remains attractive even with revised earnings forecasts [2][4]. Core Views - The earnings forecast for Weichai Power has been adjusted downwards, with HDT engine sales volume forecasts trimmed by 7% for 2024E and 2025E, reflecting a challenging market environment [2]. - Profit growth is expected to decelerate significantly from 51% in 1H24 to 7% in 2H24E and further to 2% in 2025E, primarily due to unfavorable LNG/diesel price spreads impacting the gas engine segment [2]. - The target price has been revised down to RMB17.9/HK$17.7 from RMB18.0/HK$19.5, reflecting a 25.1% upside from the current price of RMB14.31 [4]. Financial Summary - Revenue is projected to grow from RMB213,958 million in FY23A to RMB223,162 million in FY24E, representing a 4.3% year-on-year growth [3]. - Adjusted net profit is expected to increase from RMB9,013.9 million in FY23A to RMB11,390.7 million in FY24E, reflecting a 26.4% growth [3]. - The P/E ratio is forecasted to decrease from 13.9x in FY23A to 11.0x in FY24E, indicating a more favorable valuation [3][14]. Sales Volume and Revenue Breakdown - The total engine sales volume forecast for 2024E has been revised down to 803,223 units, a decrease of 5.6% from previous estimates [7]. - Revenue from diesel engines is expected to decline from RMB69,788 million to RMB66,427 million in 2024E, a drop of 4.8% [7]. - The segment profit for diesel engines is projected to increase slightly from RMB8,863 million to RMB8,968 million in 2024E, indicating a 1.2% growth [7]. Valuation Metrics - The report indicates a target price of RMB17.90, with a current price of RMB14.31, suggesting a significant upside potential [4]. - The net gearing ratio is expected to worsen from (62.0%) in FY23A to (70.2%) in FY24E, indicating increasing leverage [3][14]. - The dividend yield is projected to increase from 3.6% in FY23A to 4.6% in FY24E, reflecting a commitment to returning value to shareholders [3][14].

Inflation Trends - In September, the CPI increased by 0.18% month-on-month, exceeding the market expectation of 0.10%[1] - Year-on-year CPI growth slightly decreased from 2.5% to 2.4%, marking six consecutive months of decline[1] - Energy prices saw a year-on-year decline of 6.9%, while food prices rebounded from 2.1% to 2.3%[1] Core CPI Insights - The core CPI month-on-month growth rose from 0.28% to 0.31%, surpassing the market expectation of 0.22%[1] - Year-on-year core CPI growth increased from 3.2% to 3.3%[1] - Rent inflation showed a significant drop, with the month-on-month growth of rent decreasing from 0.5% to 0.2%[1] Federal Reserve Policy Outlook - The Federal Reserve is expected to implement gradual rate cuts, with a forecast of 25 basis points reductions in November and December[1] - A total of 100 basis points of further cuts may occur next year due to ongoing economic and inflation slowdowns[1] - The neutral interest rate level has risen, with the policy rate likely not falling below 3% in a soft landing scenario[1]

Macro Overview - The Chinese economy continues to weaken, with real estate declines expanding, weak consumption, and ongoing deflationary pressures. The macro policy has shifted significantly towards strong easing to restore confidence in the housing and stock markets [1][7] - The U.S. economy is gradually slowing down from an overheated state to a cooler one, but is expected to avoid recession. The Federal Reserve's significant interest rate cuts in September may lead to further gradual cuts in the coming months [1][9] Technology Sector - The technology sector is optimistic, with improved market liquidity and risk appetite due to the Federal Reserve's rate cuts and domestic macro policy stimulus. The Hang Seng Technology Index is expected to see valuation recovery, with a projected P/E of 16x for 2025, compared to 30x for U.S. SOX and A-share electronics [1] - Key investment opportunities include companies in the AI supply chain, such as Xiaomi (1810 HK), BYD Electronics (285 HK), and AAC Technologies (2018 HK) [1] Semiconductor Sector - The semiconductor and communication sectors have seen significant stock price increases, with A-share semiconductor companies averaging a 37% rise from September 23 to September 30. Despite this, the average P/E ratio remains below the historical average [1] - Recommended stocks include Hua Hong Semiconductor (1347 HK) and ZTE Corporation (763 HK), which are expected to benefit from improved market sentiment and capital inflows [1] Internet Sector - The internet sector has experienced a notable recovery in investment sentiment due to a series of supportive policies. The average trading P/E for internet stocks is currently at 19x, similar to the valuation during the previous revaluation phase [1] - Key recommendations include Alibaba (BABA US) and Pinduoduo (PDD US), which are expected to benefit from ongoing cost reduction and efficiency improvements [1] Software and IT Services - The Chinese software sector has outperformed the market due to its high beta characteristics. Although the U.S. software sector benefits from rate cuts, its fundamental performance is expected to be less than stellar [2] - Recommended stocks include Kingdee International (268 HK), which is expected to benefit from scale effects and profit margin improvements [2] Healthcare Sector - The healthcare sector is anticipated to face weak domestic demand due to macroeconomic pressures, but the overall situation may improve with economic stimulus policies. The innovative drug and CXO sectors are expected to see valuation rebounds [2] - Recommended stocks include WuXi AppTec (2359 HK) and BeiGene (BGNE US), which are considered attractive due to their solid fundamentals [2] Consumer Sector - The consumer sector is expected to stabilize as policies shift, with essential consumption stocks likely to benefit from positive consumption stimulus policies. The beer industry is projected to see improved sales and profit growth due to new product launches [2] - Recommended stocks include China Resources Beer (291 HK) and Proya Cosmetics (603605 CH), which are expected to perform well in the current environment [2] Automotive Sector - The automotive industry is expected to see stronger seasonal effects this year due to government policies promoting trade-in programs and financial incentives. Sales forecasts for the industry have been revised upward [3] - Recommended stocks include Geely Automobile (175 HK) and Li Auto (LI US/2015 HK), which are expected to benefit from improved market conditions [3] Real Estate and Property Management - The real estate market shows signs of recovery, with increased transaction volumes in the secondary housing market. New policies are expected to stimulate demand, leading to a potential stabilization in housing prices [3] - Recommended stocks include China Resources Land (1109 HK) and Greentown Service (2869 HK), which are positioned to benefit from the improving market sentiment [3] Insurance Sector - The insurance sector is expected to see significant profit growth due to improved investment returns and favorable policy changes. The sector is likely to benefit from a strong beta performance in the current market environment [4] - Recommended stocks include China Life (2628 HK) and China Pacific Insurance (2601 HK), which are considered attractive due to their low valuations and strong fundamentals [4] Capital Goods Sector - The capital goods sector is viewed selectively, with expectations of volatility in stock prices until tangible improvements in demand are observed. The engineering machinery sector is expected to see continued growth, while heavy truck exports may weaken [4] - Recommended stocks include Zoomlion Heavy Industry (1157 HK) and Zhejiang Dingli (603338 CH), which are expected to perform well in the current environment [4]

Economic Overview - The September PMI indicates resilience and divergence in the U.S. economy, with the services PMI rising significantly to 54.9 from 51.5 in August, suggesting robust domestic demand[1] - The manufacturing PMI remains in contraction at 47.2, marking the sixth consecutive month of decline, with a corresponding GDP growth rate of approximately 1.3%[2] Services Sector Insights - The services sector's new orders index surged to 59.4, the highest since March of the previous year, indicating strong demand[1] - Employment index in the services sector fell to 48.1, signaling a reduction in service employment despite overall sector expansion[1] Manufacturing Sector Insights - Manufacturing new orders and production indices improved slightly to 46.1 and 49.8, respectively, but the sector continues to face challenges with inventory dropping to 43.9[2] - The prices index for manufacturing dropped to 48.3, entering contraction territory for the first time this year, reflecting a decrease in price pressures[2] Economic Outlook - The U.S. economy is expected to transition from overheating to a cooler state, with a forecasted gradual increase in unemployment rates and a decline in non-farm payroll growth[2] - The Federal Reserve is anticipated to implement further rate cuts, with a potential 25 basis points reduction in November and December, followed by an additional 100 basis points in the following year[2]

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].