13 Aug 2024 CMB International Global Markets | Equity Research | Company Update 361 Degrees (1361 HK) The cautious outlook is likely priced in We are certainly cautious about the sportswear sector. However, brands like Anta, Xtep and 361 Degrees have outperformed in 1H24 and we think this should sustain into 2H24E. For 361, supported by stepped-up efforts in 2H24E and its fairly undemanding valuation at 6x FY24E P/E and 7% FY24E yield, we maintain BUY. FY24E guidance maintained but we are more cautious on m ...

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 24.00, indicating a potential upside of 32.7% from the current price of HKD 18.08 [1][2]. Core Insights - The company has shown signs of recovery in market demand, with capacity utilization rates nearing full capacity. The second quarter revenue was USD 479 million, a year-on-year decline of 24.2% but a quarter-on-quarter increase of 4.0% [2]. - The gross margin for the second quarter improved to 10.5%, up from 6.4% in the previous quarter, despite a year-on-year decline from 27.7% [2]. - The company is expected to benefit from the trend of self-sufficiency in China's semiconductor industry, with a forecasted revenue of USD 510 million for the third quarter, reflecting a year-on-year decline of 10.3% but a quarter-on-quarter increase of 6.6% [2]. Financial Data Summary - For FY24E, the company is projected to have sales revenue of USD 1,983 million, a year-on-year decline of 13.3%. The gross margin is expected to be 11.4%, with a net profit of USD 135 million, reflecting a 51.9% year-on-year decline [5][6]. - The company’s capacity utilization rates are projected to remain high, with expectations of 84% in Q4 2023 and 92% and 98% in Q1 and Q2 2024, respectively [2]. - The company’s financial outlook includes a slight downward adjustment of revenue forecasts by 3% and 4% for FY24 and FY25, respectively, while gross margin forecasts have been increased by 0.5 percentage points [2].

13 Aug 2024 CMB International Global Markets | Equity Research | Company Update 361 Degrees (1361 HK) The cautious outlook is likely priced in We are certainly cautious about the sportswear sector. However, brands like Anta, Xtep and 361 Degrees have outperformed in 1H24 and we think this should sustain into 2H24E. For 361, supported by stepped-up efforts in 2H24E and its fairly undemanding valuation at 6x FY24E P/E and 7% FY24E yield, we maintain BUY. ■ FY24E guidance maintained but we are more cautious on ...

Investment Rating - The report assigns a "Buy" rating for Ke Holdings with a target price of $21.50, slightly adjusted from the previous target of $22.00, reflecting a potential upside of 53.2% from the current price of $14.03 [2]. Core Insights - Ke Holdings reported a 20% year-over-year revenue growth in Q2, reaching RMB 23.4 billion, exceeding both the forecast and consensus estimates by 9% [2]. - Non-GAAP net income for the quarter was RMB 2.7 billion, surpassing expectations by 48%, attributed to revenue growth and optimized operating expenses [2]. - The company is expected to maintain its market share growth in core business segments due to strong industry demand and an efficient agency network [2]. Summary by Sections Financial Performance - Q2 revenue reached RMB 23.4 billion, a 20% increase year-over-year, driven by new home transactions (NHT) and existing home transactions (EHT) [2]. - Non-GAAP net income was RMB 2.7 billion, exceeding expectations by 48% [2]. - The company anticipates a revenue growth of 44% year-over-year in the home renovation and furniture business for 2024 [2]. Market Share and Business Outlook - Ke Holdings experienced significant market share growth in both EHT and NHT segments, with EHT online registrations increasing by 16% year-over-year in major cities [2]. - The company’s NHT gross transaction value (GTV) declined by 20% year-over-year, while the overall industry saw a 35% decline, indicating strong competitive positioning [2]. - Management is shifting focus from rapid scale expansion to profit margin improvement in the home renovation segment, with profit margins increasing to 31% in Q2 2024 [2]. Shareholder Returns - The management has repurchased shares worth $480 million, representing 2.75% of shares outstanding as of the end of 2023, and has expanded the buyback program to $3 billion [2]. - The company aims to maintain a shareholder return target of 6-7% annually through buybacks and dividends [2]. Real Estate Market Trends - The report notes a slowdown in sales momentum during the typical summer sales lull, with new home sales in July and August showing a month-over-month decline of 24% and 19%, respectively [2]. - Leading indicators suggest a narrowing decline in new home sales, with expectations for increased project launches in September and October [4].

13 Aug 2024 CMB International Global Markets | Equity Research | Company Update Ke Holdings (BEKE US) Solid market share gains amid uncertain environment Beike reported (12 Aug) 2Q24 results: revenue increased 20% YoY to RMB23.4bn, and was 9% ahead of both our forecast and Bloomberg consensus estimates, thanks to a beat on GTV of both new home transactions (NHT) and existing home transactions (EHT), and stronger-than-expected expansion of NHT aided by strong industry demand. Non-GAAP net income was RMB2.7bn ...

Investment Rating - The report initiates coverage on Sangfor Technologies with a "Buy" rating and a target price of HKD 9.56, indicating a positive outlook for the company's growth potential [2][5]. Core Views - Sangfor Technologies is positioned as a pioneer in China's biopharmaceutical industry, with core products expected to achieve steady revenue growth due to expanded indications and increased penetration in the oncology field [2][5]. - The company is anticipated to enter a harvest period for its innovative pipeline, which will further drive growth [2][5]. - The report forecasts a compound annual growth rate (CAGR) of 10.9% for revenue and 13.4% for net profit attributable to shareholders from 2023 to 2026 [5]. Industry Summary - The Chinese pharmaceutical industry is showing signs of recovery, with supportive policies expected to improve profitability for innovative drug and medical device companies [1]. - The MSCI China Healthcare Index has underperformed, down 22.9% year-to-date, but is currently trading at a dynamic P/E ratio of 23.8, below its historical average [1]. - The report highlights a positive outlook for leading medical device companies and innovative drug firms, driven by policy support and normalization of regulatory environments [1].

Investment Rating - The report maintains an "Outperform" rating for the Chinese pharmaceutical industry, indicating that the sector is expected to outperform the market over the next 12 months [12]. Core Insights - The report highlights a confirmed rebound trend in the industry, with expectations for performance recovery starting in the second half of 2024 due to supportive policies and normalization of regulatory environments [1]. - The MSCI China Healthcare Index has declined by 22.9% year-to-date, underperforming the MSCI China Index by 22.5%, with the current dynamic P/E ratio at 23.8 times, below the 12-year historical average [1]. - Key drivers for optimism include the implementation of DRG/DIP 2.0 policies, ongoing support for innovative drugs and medical devices, and a favorable regulatory environment that is expected to enhance profitability for leading companies in the sector [1]. Summary by Sections Industry Overview - The report notes that the healthcare sector's profitability is anticipated to gradually recover starting from the second half of 2024, aided by the normalization of regulatory practices and supportive government policies [1]. - The introduction of DRG/DIP 2.0 aims to accelerate medical insurance fund settlements and support reimbursement for innovative drugs and devices [1]. Policy Support - Recent policies from the National Medical Insurance Administration and the State Drug Administration are designed to expedite the clinical trial approval process for innovative drugs, with a target of completing reviews within 30 days [1]. - The report emphasizes the importance of ongoing support for the biopharmaceutical industry, including comprehensive backing for research, registration, and financing of innovative drugs and devices [1]. Market Opportunities - The report identifies significant growth potential in the medical device sector, driven by government initiatives to support large-scale equipment upgrades and consumer goods replacement programs, with an expected peak in demand from late 2024 to 2025 [1]. - The report expresses confidence in leading companies such as Mindray Medical, United Imaging, Innovent Biologics, BeiGene, and others, highlighting their solid performance and attractive valuations [1]. Valuation Metrics - The report provides a valuation table for key companies in the industry, indicating a bullish outlook with target prices suggesting substantial upside potential for several stocks [2][3].

Investment Rating - The report maintains a "Buy" rating for the company, with a new target price of 150.76 RMB, up from the previous target price of 130.71 RMB, indicating a potential upside of 33.0% from the current price of 113.32 RMB [1][2][3]. Core Insights - The report highlights strong fundamentals in the cloud sector, with major players like Google, Microsoft, Amazon, and Meta collectively spending 52.9 billion USD in capital expenditures in Q2 2024, a 57.1% year-over-year increase, surpassing Bloomberg's consensus estimate of 50.6 billion USD [2][3]. - Despite recent market volatility, the report emphasizes that the primary cloud vendors continue to reaffirm their commitment to significant investments in AI infrastructure to meet growing computational demands [2][3]. - The company is identified as a key beneficiary of the AI investment theme, with its stock currently trading at attractive valuations, projected P/E ratios of 22.8x for 2024 and 15.3x for 2025 [2][3]. Financial Summary - The company’s revenue is projected to grow significantly, with estimates of 23,877 million RMB for FY24, representing a 122.8% year-over-year increase, and 34,149 million RMB for FY25, a 43.0% increase [7][9]. - Net profit is expected to reach 5,462 million RMB in FY24, reflecting a 151.3% increase, and 8,127 million RMB in FY25, a 48.8% increase [7][9]. - The report also notes an increase in gross margin, projected at 33.2% for FY24 and 32.3% for FY25 [7][9]. Market Context - The report discusses the broader market context, noting that concerns over mixed earnings from overseas tech companies and potential U.S. economic recession have led to market fluctuations [2][3]. - It mentions that the recent unexpected interest rate hike by the Bank of Japan has exacerbated market sell-offs, but the strong capital expenditure guidance from cloud vendors remains a positive indicator for the AI sector [2][3].

Investment Rating - The report initiates coverage with a "Buy" rating for the company, setting a target price of HKD 9.56, which corresponds to an 11x P/E ratio for 2024 [4][25]. Core Insights - The company is a pioneer in China's biopharmaceutical industry, with core products such as recombinant human thrombopoietin Tevaz (特比澳) and the OTC hair loss treatment product Mandi (蔓迪). The growth of Tevaz is expected to be steady due to expanded indications and increased penetration in the oncology field [1][15]. - The hair loss and acne treatment markets present significant demand, with Mandi and the investigational acne treatment expected to continue driving growth for the company [2][15]. - The company's innovative pipeline is approaching a harvest period, with multiple blockbuster products expected to be approved between 2025 and 2027 [2][21]. Financial Overview - The company achieved revenue of RMB 7.816 billion in 2023, representing a year-on-year growth of 13.8%. The revenue compound annual growth rate (CAGR) from 2019 to 2023 was 10.1% [3][15]. - The net profit for 2023 was RMB 1.586 billion, showing a decline of 16.9% year-on-year, primarily due to the impact of zero-coupon convertible bonds and changes in fair value of financial assets [3][18]. - The company maintains a robust gross margin above 80%, reaching 85% in 2023, while the adjusted net profit margin was 25% [17][18]. Product and Market Analysis - Tevaz has a dominant position in the Chinese thrombocytopenia treatment market, with a market share of 65% in 2023. The sales revenue for Tevaz grew by 23.8% year-on-year to RMB 4.2 billion [1][16]. - Mandi leads the domestic minoxidil market with a 72.6% market share, achieving sales revenue of RMB 1.12 billion in 2023, reflecting a year-on-year growth of 25.8% [2][15][29]. - The company has a diverse product matrix around the Mandi brand, including various formulations and delivery systems, which are expected to enhance brand value and market penetration [30]. Research and Development Pipeline - The company has a rich R&D pipeline with 29 products under development, of which 15 are in late-stage clinical trials. Key upcoming products include long-acting EPO SSS06 and several monoclonal antibodies targeting various conditions [21][22][24]. - The company is focusing on expanding its presence in the hematology/oncology, nephrology, and dermatology sectors, with several products expected to be launched in the coming years [21][22][23]. Market Potential - The hair loss treatment market in China is substantial, with over 250 million individuals affected. The market for hair loss treatment and care products is projected to grow from RMB 106.9 billion in 2021 to RMB 203.5 billion by 2030, with a CAGR exceeding 7% [27][30]. - The company is well-positioned to capitalize on the growing demand for hair loss treatments, particularly with the increasing acceptance of minoxidil products among consumers [2][27].

Investment Rating - The report initiates coverage with a "Buy" rating for the company, with a target price of HKD 9.56, representing a potential upside of 53.4% from the current price of HKD 6.23 [1][3][24]. Core Insights - The company is a pioneer in China's biopharmaceutical industry, with robust growth in core products such as recombinant human thrombopoietin Tevaz (特比澳) and the OTC hair loss treatment product Mandi (蔓迪) [1][14]. - Tevaz is expected to maintain steady revenue growth due to expanded insurance reimbursement coverage and ongoing indication expansions, with a 23.8% year-on-year sales increase in 2023 [1][15]. - The hair loss treatment market is significant, with Mandi capturing a 72.6% market share in the minoxidil market, and the company is expanding its product matrix to include various hair loss treatment options [1][14][29]. - The innovation pipeline is entering a harvest phase, with multiple blockbuster products expected to be approved between 2025 and 2027, including long-acting EPO SSS06 and various monoclonal antibodies [1][20][24]. Financial Summary - The company achieved a revenue of RMB 7.816 billion in FY23, reflecting a 13.8% year-on-year growth, with projections for continued growth in the coming years [2][14]. - The net profit for FY23 was RMB 1.586 billion, a decrease of 16.9% year-on-year, primarily due to specific financial impacts, but adjusted operating net profit showed a 17.7% increase [2][17]. - The company expects a revenue compound annual growth rate (CAGR) of 10.9% and a net profit CAGR of 13.4% from 2023 to 2026 [1][24]. Market Position - Tevaz holds a dominant position in the Chinese thrombocytopenia treatment market, with a 65.0% market share, and is expanding its indications to include treatment for chronic liver disease-related thrombocytopenia [1][15][30]. - Mandi leads the OTC hair loss treatment market, with a strong brand recognition and a significant growth trajectory, supported by a diverse sales strategy across online and offline channels [1][14][29]. Innovation Pipeline - The company has a rich pipeline focusing on various therapeutic areas, with 29 products in development, including 15 in late-stage clinical trials [20][23]. - Key products in the pipeline include Tevaz for new indications, long-acting EPO SSS06, and several monoclonal antibodies targeting autoimmune diseases [20][21][23].