Investment Rating - The report maintains a "Buy" rating for Innolight, with a new target price of RMB 150.76, up from the previous target price of RMB 130.71, reflecting a potential upside of 31.7% from the current price of RMB 114.48 [2][3]. Core Insights - The report highlights strong fundamentals for Innolight, driven by robust capital expenditures from major cloud service providers like Google, Microsoft, Amazon, and Meta, which totaled USD 52.9 billion in Q2 2024, marking a significant increase of 57.1% compared to the previous quarter [2]. - Despite recent market volatility and concerns over the U.S. economy, the long-term outlook for AI investments remains positive, with expectations of continued high capital expenditures from major players in the cloud sector [2][3]. - Innolight is positioned as a primary beneficiary of the increasing demand for AI computing, with an attractive valuation of 22.8x and 15.3x for 2024 and 2025 earnings, respectively [2][3]. Financial Summary - Revenue for FY24E is projected at RMB 23,877 million, representing a year-on-year growth of 122.8%, with further growth expected in FY25E and FY26E [3][9]. - Net profit for FY24E is estimated at RMB 5,462 million, reflecting a substantial increase of 151.3% compared to FY23A [3][9]. - The report indicates an upward revision of revenue forecasts by 6% and 11% for FY24E and FY25E, respectively, due to stronger capital expenditure outlooks from cloud companies [2][3]. Valuation Metrics - The new target price of RMB 150.76 is based on a forward P/E ratio of 30x for FY24E, which is 9% higher than the five-year historical average [2]. - The PEG ratio is close to 1, indicating a balanced valuation relative to the expected earnings growth rate of 32% for FY24-26E [2][3]. Market Context - The report notes that major cloud service providers are expected to continue significant investments in AI infrastructure, which will support Innolight's growth trajectory [2][3]. - The overall sentiment in the technology sector remains cautious due to geopolitical tensions and uncertainties surrounding the upcoming U.S. presidential election, but the report emphasizes the resilience of the AI investment theme [2].

7 Aug 2024 CMB International Global Markets | Equity Research | Company Update Yum China (YUMC US) The best-in-class costs management in 2Q24 Sales growth was indeed a miss in 2Q24, but the net profit was a significant beat. For 2H24E, we are still very cautious about the demand and so as the level of competition. However, thanks to various efforts like Project Fresh Eye, Project Red Eye, rationalizing number of SKUs, more direct sourcing, and rampup of more profitable store formats (e.g. K-coffee and Pizza ...

Investment Rating - The report reiterates a BUY rating for Innolight with a new target price of RMB150.76, up from the previous target price of RMB130.71, indicating an upside potential of 31.7% from the current price of RMB114.48 [2]. Core Insights - Despite recent market volatility, the fundamentals of Innolight remain strong, benefiting from the ongoing heavy investments by major cloud service providers (CSPs) to meet rising AI compute demand [1]. - The report highlights a significant increase in capital expenditures (capex) by the Big Four CSPs, which totaled US$52.9 billion in Q2 2024, representing a 57.1% increase year-over-year [1]. - Innolight's valuation is considered attractive at 22.8x/15.3x P/E for 2024/25E, especially following a market pullback of over 35% since July [1]. - Revenue forecasts for Innolight have been revised upwards by 6% and 11% for 2024 and 2025, respectively, due to a stronger capex outlook from cloud companies [1]. Financial Summary - Innolight's revenue is projected to grow from RMB10,718 million in FY23 to RMB23,877 million in FY24, reflecting a year-over-year growth of 122.8% [4]. - Net profit is expected to increase significantly from RMB2,173.5 million in FY23 to RMB5,462.1 million in FY24, representing a growth of 151.3% [4]. - The gross margin is forecasted to remain stable around 33.2% in FY24, slightly improving from 33.0% in FY23 [4]. - The earnings per share (EPS) is projected to rise from RMB2.00 in FY23 to RMB5.03 in FY24, indicating strong profitability growth [4]. Market Context - The report notes that concerns regarding market turmoil in the tech sector are primarily driven by mixed earnings results, fears of a US recession, and uncertainties surrounding the upcoming US presidential election [1]. - Despite these concerns, the long-term investment theme in AI remains positive, with major CSPs expected to continue their investments in AI infrastructure, which is projected to grow by 39% and 13% in capex for 2024 and 2025, respectively [1].

2024 年 8 月 7 日 招银国际环球市场 | 策略报告 | 市场策略 策略观点 市场期待政策转向促消费 | --- | --- | --- | |-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|----------------| | | | | | | 宏观：中国经济走弱，房地产价跌量升，消费者和企业家信心依然较弱，通 | 叶丙南 , Ph.D | | | 缩压力仍存。三中全会确认政策优先项是支持科技行业和高端制造业发展， | 刘泽晖 | | | 近期政治局会议提出经济政策重点转向提振消费，但仍缺乏具体政策细节， 下半年宏观政策或延续温和放松。美国经济、通胀与就业延续放缓，我们认 | 伍力恒 | | | 为美联储或在 9 月开始降息，年内降息幅度约 50 个基点。 | 李汉卿 | | | 科技：乐观，近期全球科技板块有所回调，主 ...

Investment Rating - Maintains a **Buy** rating with a target price of **HKD 294.91**, based on a **15x FY25E P/E** [1] - The stock is currently trading at **13x FY25E P/E**, indicating it is not overvalued [1] Core Views - Despite weak sales growth in Q2 2024, net profit saw a significant increase, driven by cost management initiatives [1] - The report remains cautious about revenue growth in 2H24E due to high base effects and a weak macroeconomic environment [1] - Confidence in a turnaround in 4Q24E is supported by initiatives like **Project Fresh Eye**, **Project Red Eye**, and the introduction of more profitable store formats such as **K-Coffee** and **Pizza Hut's WOW model** [1] - The report expects **Q3 and Q4 sales/OP/NP growth** to be around **2%/8%/7%** and **+1%/30%/13%**, respectively [1] Sales and Profitability - Q2 2024 sales grew by **1% YoY** to **USD 2.68 billion**, below expectations, but net profit increased by **8% YoY** to **USD 212 million**, exceeding estimates [5] - **KFC's SSSG** declined by **3%** in Q2 2024, while **Pizza Hut's SSSG** fell by **8%**, though Pizza Hut's profitability outperformed KFC [5] - **Delivery sales** grew by **11%**, while **dine-in sales** declined by **3%** in Q2 2024 [5] - **FY24E net store opening target** remains at **1,500 to 1,700**, with a capital expenditure target of **USD 700-850 million** [5] Cost Management and Efficiency - **Project Red Eye** aims to improve supply chain efficiency by simplifying SKUs and reducing unnecessary items [1] - **Project Fresh Eye** focuses on reducing operational complexity, allowing store managers to focus on other tasks [1] - Increased use of **AI and automation**, with over **80% of Pizza Hut stores** equipped with automated rice cookers and **50% with robotic servers** [1] - **Labor costs** are expected to remain low, around **LSD levels** in FY24E, and **G&A expenses** are targeted at **5% of sales**, down from **5.8% in FY23** [1] Store Expansion and Formats - **K-Coffee** targets **500-600 stores** by FY24E, with **300 stores** already opened by July 2024 [1] - **Pizza Hut's WOW model** aims for **200 stores** by FY24E, with **100+ stores** opened by July 2024 [1][9] - The **WOW model** features simpler operations, targeting solo diners and value-conscious consumers, with promising initial results [10] Financial Performance and Forecasts - **FY24E revenue** is expected to grow by **1.4% YoY** to **USD 11.13 billion**, with **net profit** increasing by **5.1% YoY** to **USD 869 million** [12] - **FY25E revenue** is forecasted to grow by **9.1% YoY** to **USD 12.14 billion**, with **net profit** rising by **8.5% YoY** to **USD 943 million** [12] - **FY26E revenue** is projected to grow by **8.7% YoY** to **USD 13.19 billion**, with **net profit** increasing by **14.4% YoY** to **USD 1.08 billion** [12] Valuation and Peer Comparison - The stock is trading at a **15.4x FY24E P/E**, compared to the industry average of **28.8x** [13] - **ROE** is expected to remain stable at **11.6%** in FY24E and FY25E, increasing slightly to **11.9%** in FY26E [12] - **Dividend yield** is forecasted to increase from **1.8% in FY24E** to **2.8% in FY26E** [12] Key Initiatives and Innovations - **Pizza Hut's entry-level priced pizzas** saw double-digit growth in Q2 2024, driven by expanded price ranges and innovative new products [1] - **Single-person meals** and new store formats like **K-Coffee** and **Pizza Hut's WOW model** are expected to drive incremental sales and profit [1][9]

Group 1: Economic Indicators - The July Services PMI rebounded significantly from 48.8 to 51.4, indicating a return to expansion, surpassing market expectations of 51[3] - The Services sector, which accounts for nearly half of the US GDP, shows signs of resilience, with business activity, new orders, and employment indices all returning to expansion territory[2] - The Manufacturing PMI fell sharply from 48.5 to 46.8, marking the largest contraction in nearly a year, with significant declines in key indices[3] Group 2: Future Projections - US GDP growth is projected to decline from 2.5% last year to 2.2% this year and further to 1.8% next year[2] - The Federal Reserve is expected to begin cutting interest rates in September, with a total reduction of 50 basis points this year and an additional 100 basis points next year[2] - Long-term US Treasury yields are anticipated to decrease to 4% by the end of this year and 3.9% by the end of next year[2] Group 3: Inflation and Employment - Inflation is expected to cool as it declines faster than nominal interest rates, leading to higher real interest rates and further tightening of policies[2] - The unemployment rate is rising primarily due to an influx of immigrants increasing the labor force, raising concerns about potential acceleration in job losses[2] - The Services PMI's return to expansion is crucial for maintaining overall economic resilience amid manufacturing sector weaknesses[3]

7 Aug 2024 CMB International Global Markets | Equity Research | Company Update Yum China (9987 HK) The best-in-class costs management in 2Q24 Sales growth was indeed a miss in 2Q24, but the net profit was a significant beat. For 2H24E, we are still very cautious about the demand and so as the level of competition. However, thanks to various efforts like Project Fresh Eye, Project Red Eye, rationalizing number of SKUs, more direct sourcing, and ramp up of more profitable store formats (e.g. K-coffee and Pizz ...

2024 年 8 月 7 日 CMB 国际全球市场 | 股票研究 | 公司更新 越秀运输 （ 1052 香港 ） 上半年收益同比下降 27% ， 低于我们的预期 ； 预计下半年业绩会更好 越秀运输上半年的净利润同比下降 27%，至 3.14 亿元人民币，比我们的预期低 14% 。此次 错过是由于 （ 1 ） 毛利率低于预期 ； （ 2 ） 自 2024 年 3 月起北环路特许经营权到期，保 险损失份额 （ 2000 万元人民币 ） 。越秀运输建议中期股息为 0.12 港元 / 股，意味着 58.5% 的股息支付率 （ 1H23 ： 53.8% ） 。该公司预计 2H24E 的流量将有所改善，并预计可以维 持 50 - 60% 的支付率目标。我们对越秀运输仍持积极态度，预计今年母公司资产注入将成为 催化剂。维护。购买基于 DCF 的 TP 保持不变 ， 为 5.9 港元。 1H24 业绩突出。收入同比下降 6%，至 18.2 亿元人民币 （ 比我们的预期低 1% ） 。由 于经营去杠杆化，毛利率同比收窄 6.5 个百分点至 50.1% （ 而我们的估计为 54.6% ） 。由于北环路特许经营权于 2024 年 ...

7 Aug 2024 CMB International Global Markets | Equity Research | Company Update Yuexiu Transport (1052 HK) 1H24 earnings down 27% YoY below our expectation; expect a better 2H24E Yuexiu Transport's net profit in 1H24 dropped 27% YoY to RMB314mn, 14% below our estimate. The miss was due to (1) lower-than-expected gross margin and (2) share of loss insured (RMB20mn) due to the expiration of concession right of Northern Ring Road starting from Mar 2024. Yuexiu Transport proposed interim dividend of HK$0.12/shar ...

6 Aug 2024 Earnings Summary CMB International Global Markets | Equity Research | Company Update Tongda (698 HK) 1H24E preview: eyes on Android recovery and smart tech growth Tongda will report 1H24 results on 28 Aug. We estimate 1H24 revenue/net profit of HK$ 2.6bn/35mn (-10%/+82% YoY) mainly driven by Android smartphone recovery, inventory restocking from overseas household & sports goods customers, network communications router demand pick-up on Wifi-7 upgrade and stabilized GPM for each segment. Looking ...