M N 11 Apr 2024 CMB International Global Markets | Equity Research | Company Update GigaCloud (GCT US) Improving fundamentals with BaaS initiatives Target Price US$46.00 After short-term stock price volatility on insider filings, we suggest investors to (Previous TP US$43.00) refocus on GigaCloud (GCT)’s strong organic growth and fundamentals Up/Downside 45.6% improvement. We expect GCT to deliver another eye-catching 1Q24E, with topline accelerating to +96% YoY (5% above high-end of guidance) and bottom Cu ...

Investment Rating - The report maintains a "BUY" rating for Baidu with a target price of US$183.20, slightly adjusted from the previous target of US$186.20, indicating a potential upside of 77.8% from the current price of US$103.05 [2][3]. Core Insights - Baidu Core is expected to achieve mild ads revenue growth in 1Q24, primarily driven by strong performance in travel and e-commerce sectors, although this is partially offset by weaker offline verticals due to macroeconomic conditions [2]. - The company is focusing on investing in generative AI opportunities to enhance long-term revenue and earnings growth while improving operational efficiency in non-core businesses [2]. - The pace of monetization for generative AI-related ads and cloud revenue is identified as a key catalyst for future growth [2]. Financial Performance Summary - For 1Q24, Baidu Core is estimated to generate revenue of RMB23.5 billion, reflecting a 2% year-over-year increase, but 3% below Bloomberg consensus estimates [2]. - The forecast for Baidu Core ads revenue is RMB16.9 billion, also up 2% year-over-year, driven by travel and e-commerce, but impacted by weaker offline performance post-Chinese New Year [2]. - Non-GAAP operating profit for 1Q24 is projected at RMB5.1 billion, down 5% year-over-year, resulting in a non-GAAP operating profit margin of 21.8% [2][3]. Revenue and Profit Forecast - Revenue projections for Baidu are as follows: RMB141.6 billion for FY24E, RMB150.9 billion for FY25E, and RMB159.4 billion for FY26E, with slight downward revisions compared to previous estimates [6]. - Non-GAAP net profit is expected to be RMB27.0 billion for FY24E, with a decrease in growth rate due to increased investments in AI [6]. - The adjusted net profit for FY24E is forecasted at RMB27.0 billion, reflecting a 6% decrease from the previous year [3][6]. Valuation Breakdown - The SOTP-based valuation of US$183.2 per ADS includes: - US$68.1 for Baidu Core ads based on a 7.0x 2024E non-GAAP PE - US$1.8 for Apollo ASD based on a 2.0x 2030E revenue - US$35.2 for Baidu Cloud based on a 4.3x 2024E PS - US$65.0 in net cash - US$13.2 for iQIYI and other investments, applying a 30% holding discount [7][9].

M N 10 Apr 2024 CMB International Global Markets | Equity Research | Company Update Tongcheng Travel (780 HK) Continued outperformance during Qingming Target Price HK$26.10 The three-day Qingming Festival holiday embraced booming demand, with (Previous TP HK$26.10) domestic tourist trips +11.5% and tourism revenue +12.7% (both vs. the Up/Downside 23.7% 2019 level), according to the Ministry of Culture and Tourism. Tongcheng Current Price HK$21.10 Travel (TC) kept its strong momentum during the Qingming Fest ...

| --- | --- | |------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------| | | | | A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors | Jose Acosta, Senior System Administrator II, Division of Inf ...

Investment Rating - The report maintains a "BUY" rating for TK Group with a target price (TP) adjusted to HK$2.79, based on an 8.2x FY24E P/E ratio, which aligns with its 5-year historical forward P/E [2][20][34]. Core Insights - Management expressed a positive outlook on order restocking, new client acquisitions, and capacity expansion in Vietnam and Huizhou, particularly in the automotive, medical device, and e-cigarette sectors. Following a challenging FY23, net profit is expected to grow by 38% and 19% year-on-year in FY24 and FY25, respectively, driven by new orders and operational efficiency improvements [2][38]. - The stock is currently trading at 4.4x FY24E P/E with a yield of 10%, indicating an attractive risk/reward profile [2][38]. Financial Summary - FY23 revenue and net profit declined by 15% and 10% year-on-year, respectively, primarily due to weak demand in consumer electronics and communications, although the automotive and e-cigarette segments showed growth [38]. - Revenue projections for FY24E are set at HK$2,318 million, with a year-on-year growth of 19%, and net profit is expected to reach HK$282 million, reflecting a 38% increase [9][10][38]. - Gross profit margin improved to 26.4% in FY23 from 23.7% in FY22, attributed to favorable foreign exchange rates and easing supply chain issues in the automotive sector [38]. Revenue Breakdown - The revenue mix indicates a significant contribution from various segments, with mobile and wearable devices, medical devices, and automotive sectors being key growth drivers [6][9][10]. - The automotive segment is projected to grow by 25% in FY24E, while the e-cigarette segment is expected to continue its strong performance with a 40% growth forecast [9][10][38]. Valuation Metrics - The report highlights a P/E ratio of 4.4x for FY24E, which is considered attractive compared to historical averages, alongside a dividend payout ratio of 83% [2][38]. - The expected return on equity (ROE) is projected to improve to 16.0% in FY24E, reflecting enhanced profitability and operational efficiency [10][15][38].

M N 9 Apr 2024 CMB International Global Markets | Equity Research | Company Update Yunkang Group (2325 HK) Back to normal growth Target Price HK$13.78 Yunkang Group reported 2023 revenue of RMB891.5mn, down by 76.3% YoY, (Previous TP HK$16.01) primarily due to the sharp decline of diagnostic testing demand for COVID-19 Up/Downside 24.3% in China. The blended gross margin improved to 36.5% in 2023 (+1.7 ppts), Current Price HK$11.08 mainly due to enhanced operation efficiency and effective cost control. The ...

Investment Rating - The report maintains a BUY rating for Haidilao with a target price (TP) of HK$ 21.52, reflecting a 25.1% upside from the current price of HK$ 17.20 [2][4][9]. Core Insights - Haidilao's downside is protected by a 5.6% dividend yield for FY24E and a 90% payout ratio, while the upside is linked to the acceleration of store expansion once the franchising model is finalized [2][7]. - The company has shown strong momentum in 2024, with table turnover increasing by over 30% in January-February, despite a slight seasonal retreat in March [2][7]. - Management is targeting a single-digit percentage increase in store counts for FY24E, focusing on a cautious expansion strategy after lessons learned from previous overexpansion [2][7]. Financial Performance - In FY23, Haidilao's revenue increased by 34% YoY to RMB 41.5 billion, and net profit surged by 175% YoY to RMB 4.5 billion, both in line with prior positive profit alerts [7]. - The company has revised its FY24E and FY25E net profit forecasts upward by 12% and 15%, respectively, due to improved table turnover recovery and better sourcing costs [2][8]. - The operating profit margin is expected to increase to 14.6% in FY24E from 14.3% in FY23, driven by a lower breakeven point for table turnover [2][8]. Earnings Summary - Revenue projections for FY24E are set at RMB 47,018 million, with a YoY growth of 13.4% [3][12]. - Net profit for FY24E is estimated at RMB 4,996.6 million, reflecting a 10.6% increase from FY23 [3][12]. - The earnings per share (EPS) for FY24E is projected at RMB 0.89, with a P/E ratio of 16.0x [3][12]. Store Expansion and Strategy - The company currently has 13 stores with signed lease agreements, primarily in tier 2 cities, and plans to refine its franchising model to enhance local knowledge and capital utilization [2][11]. - The total number of restaurants is expected to grow to 1,424 by FY24E, with a focus on maintaining quality over rapid expansion [11].

M N 9 Apr 2024 CMB International Global Markets | Equity Research | Company Update Akeso (9926 HK) Promising Ph3 data of cadonilimab in 1L GC  Promising Ph3 data of cadonilimab in 1L GC, especially for patients with Target Price HK$59.61 low PD-L1 expression. The interim Ph3 (NCT05008783) data of (Previous TP HK$59.61) cadonilimab in 1L GC was recently released at the AACR meeting (link). With Up/Downside 27.8% a median follow-up of 18.7 months, cadonilimab + chemo (XELOX) extended Current Price HK$46.65 t ...

Investment Rating - The report maintains a "BUY" rating for Haier Smart Home with a target price raised to HK$31.24, indicating a potential upside of 21.8% from the current price of HK$25.65 [2][4]. Core Insights - Haier's FY24E guidance is expected to be resilient, supported by steady growth in the Casarte brand, improvements in the Air-conditioning business, and favorable macroeconomic policies [2][6]. - The company has raised its dividend payout ratio to over 45% for FY24E, reflecting a strong commitment to returning value to shareholders amidst a challenging macro environment [2][6]. - Management remains confident in achieving sales growth of mid-single digits to high-single digits (MSD to HSD) and over 10% net profit growth for FY24E [2][6]. Financial Summary - FY23 results showed a 7% YoY increase in sales to RMB261.4 billion and a 14% YoY rise in net profit to RMB16.7 billion, aligning with Bloomberg estimates [6]. - The dividend per share (DPS) increased by 42% YoY to RMB8.04, with a payout ratio significantly up from 36% the previous year [6]. - Revenue projections for FY24E are set at RMB278.9 billion, with expected net profit of RMB19.3 billion, reflecting a 14% growth [3][12]. Growth Drivers - Key growth drivers for FY24E include: 1. Steady sales growth of 10% to 15% for the Casarte brand due to increased presence in high-end markets and repeat orders from members [2]. 2. A ramp-up in the Air-conditioning business, aided by improved operational efficiencies and in-house production [2]. 3. Potential subsidies and favorable policies in the EU market, alongside a rebound in demand in the ANZ market [2]. 4. Continued demand from high-end segments, particularly in the US market [2]. Margin Improvement - Expected improvements in both gross profit (GP) and net profit (NP) margins due to: 1. Centralized sourcing of raw materials and better freight rate negotiations [2]. 2. Increased automation and digitization across global factories [2]. 3. Enhanced product premiumization through high-end brand sales [2]. 4. Targeted marketing strategies and manpower rationalization in the EU market [2]. Earnings Revision - FY24E net profit estimates have been fine-tuned down by 1% to RMB19.1 billion, while FY25E estimates have been adjusted up by 2% to RMB21.8 billion [7]. - Revenue estimates for FY24E have been slightly reduced by 0.8% to RMB278.9 billion, reflecting slower growth in certain segments [7]. Valuation Metrics - The stock is currently trading at 12x FY24E P/E, which is below its 5-year average of 15x, indicating potential undervaluation [2][4]. - The new target price is based on a 14x FY24E P/E, reflecting a positive outlook for the company's performance [2].

Investment Rating - The report maintains a BUY rating for China Life, with a new target price set at HK$13.7, implying a potential upside of 47.2% from the current price of HK$9.31 [2][4][16]. Core Insights - China Life reported a full-year net profit attributable to shareholders of RMB 46.2 billion, a decrease of 30.7% year-over-year, but the net loss in 4Q23 significantly narrowed to RMB 610 million from a loss of RMB 10.6 billion in 3Q23 [2][6]. - The company achieved a low-teen growth in Value of New Business (VNB), increasing by 11.9% year-over-year to RMB 36.9 billion, despite revised Economic Value (EV) assumptions [2][6]. - The insurer's insurance revenue saw a strong rebound, growing by 32.6% in the second half of 2023, supported by a release of RMB 44.1 billion in contractual service margin [2][6]. Summary by Sections Financial Performance - For FY23, China Life's net profit was RMB 46.2 billion, with a net profit of RMB 10.6 billion in 4Q23, reflecting a significant improvement from the previous quarter [2][6]. - The company reported a total investment yield of 2.43% and a net investment yield of 3.70% by the end of 2023, both showing a decline compared to the previous year [2][6]. VNB and EV Growth - The VNB for FY23 was RMB 36.9 billion, reflecting an 11.9% increase year-over-year, while the EV grew by 5.6% to RMB 1.26 trillion [2][6]. - The report indicates that the revisions in EV assumptions had a limited impact on VNB growth, with the long-term investment return revised down to 4.5% [2][6]. Investment Strategy - The report anticipates a positive turnaround in net investment results in 1H24, driven by improved index performances and a higher allocation to bonds [2][6]. - The target price adjustment reflects a new valuation approach based on P/EV and DDM, with the new target price of HK$13.7 implying a P/EV of 0.3x for FY24E [2][6].