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M N 14 May 2024 CMB International Global Markets | Equity Research | Company Update Huya (HUYA US) Fundamentals to bottom out Target Price US$6.8 Huya’s 1Q24 results beat on margin, with topline/bottom line 1%/84% (Previous TP US$6.8) above consensus. Looking into 2Q24E, we expect revenue to achieve 5% Up/Downside 44.5% QoQ growth, in which livestreaming would bottom out and others revenue Current Price US$4.73 +25% OoQ. We are positive on Huya’s game-related business monetization and expect upside from mul ...

Investment Rating - The investment rating for FIT Hon Teng is maintained as "Buy" with a target price (TP) set at HK$2.42, corresponding to a 12.5x 2024 price-to-earnings ratio (PER) [2][3][7]. Core Insights - FIT Hon Teng's 1Q2024 results were in line with expectations, showing a revenue increase of 12.0% year-over-year (yoy) to US$965 million, with a gross profit margin improvement of 4.5 percentage points yoy to 20.3% [2][8]. - The company anticipates a ramp-up in its True Wireless Stereo (TWS) business for major customers in North America in the second half of 2024, with significant growth expected in 2025 [2][10]. - The management projects a double-digit revenue growth for the full year 2024, with gross margins stabilizing around 20% and a significant increase in operating profit [10][11]. Financial Performance - In 1Q2024, the gross profit increased by 44% yoy, and shareholders' net profit reached US$10 million, compared to a net loss of US$9 million in 1Q2023 [2][8]. - Forecasted earnings per share (EPS) for 2024, 2025, and 2026 are US$0.025, US$0.034, and US$0.042, respectively [2][7]. - The revenue mix from Electric Vehicle (EV) Mobility, new Generation 5G AIoT, and Audio is expected to reach 30% in 2024 and 40% in 2025 [11]. Strategic Initiatives - The company is implementing a "3+3" strategy focusing on the development of EVs, 5G AIoT, and acoustics, which is expected to drive growth [11]. - FIT Hon Teng plans to expand its production capacity significantly, including the addition of six more production lines in India by 2025 [2][10]. - The management is optimistic about capturing opportunities in the US$1.7 billion server connector and cable market, with plans to mass-produce AI-related products in the second half of 2024 [9][10].

M N 14 May 2024 CMB International Global Markets | Equity Research | Company Update TME (TME US) 1Q24 beat on strong music business growth and GPM expansion Target Price US$16.00 TME reported 1Q24 results: total revenue declined by 3% YoY to RMB6.77bn, (Previous TP US$12.50) beating consensus estimate by 3% on strong online music revenue growth; non-IFRS Up/Downside 19.9% net income grew by 21% YoY to RMB1.70bn, 7% ahead of consensus estimate, Current Price US$13.34 primarily attributable to the solid GPM e ...

Investment Rating - The report maintains a "BUY" rating for SANY International with an unchanged target price of HK$8, indicating a potential upside of 24.8% from the current price of HK$6.41 [2][5]. Core Views - SANY International is expected to report a net profit decrease of approximately 15% year-on-year for 1Q24E, primarily due to reduced capital expenditure from miners, increased competition in certain product segments, and losses in the solar power segment. However, a recovery is anticipated in the second half of 2024, driven by improvements in the solar business and strong overseas demand for large mining trucks and telescopic handlers [2][3]. Financial Summary - Revenue for FY24E is projected to reach RMB 26,717 million, reflecting a year-on-year growth of 31.8% [4][19]. - Adjusted net profit for FY24E is estimated at RMB 2,131.3 million, with a growth rate of 10.5% compared to FY23A [4][19]. - The earnings per share (EPS) for FY24E is forecasted to be RMB 0.67, with a price-to-earnings (P/E) ratio of 8.8x [4][19]. Segment Performance - Mining equipment revenue is expected to decline by approximately 15% year-on-year due to decreased sales of coal mining equipment and a slowdown in wide-body truck sales, despite some growth in large-size mining trucks [3][4]. - Logistics equipment revenue is projected to grow by around 25% year-on-year, driven by strong demand for small-size port machinery and a solid backlog of large-size machinery [3][4]. - The solar power segment is anticipated to remain loss-making in 1Q24E, but the completion of certain projects may help mitigate losses in the future [3][4]. Market Context - The report highlights that the coal mining sector in China is experiencing a downturn, which is impacting SANY International's performance. However, the company is expected to benefit from strong overseas demand for its products, particularly in the mining and logistics sectors [2][3].

Investment Rating - The report maintains a "BUY" rating for GigaCloud (GCT US) with a target price of US$46, representing a 23.2% upside from the current price of US$37.35 [5][12]. Core Insights - GigaCloud delivered strong 1Q24 results with revenue growth of 96% YoY, reaching US$251 million, and net profit of US$27 million, up 71% YoY. The net profit margin slightly declined due to expenses from new fulfillment centers and foreign exchange fluctuations [2][4]. - The company expects 2Q24 revenue to be between US$265 million and US$280 million, indicating a growth of 73% to 83% YoY, driven by increased demand for outdoor furniture and an expanding fulfillment network [2][4]. - GigaCloud's global fulfillment network has expanded to 42 locations with over 10.5 million square feet, a 169% increase compared to March 31, 2023, which supports robust growth in both first-party and third-party business [2][4]. - The launch of the BaaS (Business as a Service) program is anticipated to unlock total addressable market (TAM) opportunities and enhance engagement between buyers and sellers, with a competitive fee structure [2][4]. Financial Summary - Revenue is projected to grow from US$704 million in FY23 to US$1,112 million in FY24, with further increases to US$1,353 million in FY25 and US$1,632 million in FY26 [17]. - Net profit is expected to rise from US$94 million in FY23 to US$116 million in FY24, reaching US$150 million in FY25 and US$188 million in FY26 [17]. - The gross margin is forecasted to stabilize around 27% for FY24E to FY26E, while the net margin is expected to improve from 10.4% in FY24E to 11.5% in FY26E [12][17]. Valuation - The report employs a sum-of-the-parts (SOTP) valuation method, estimating the equity value at US$1,896 million, leading to a target price of US$46 based on a 16x FY24E P/E multiple [13][14]. - A discounted cash flow (DCF) analysis suggests a target price of US$46, with a terminal value of US$2,356 million, assuming a WACC of 15.7% and a long-term growth rate of 3% [14][15].

Investment Rating - The report maintains a BUY rating for Xtep with a new target price of HK$7.63, reflecting a 40.4% upside from the current price of HK$5.43 [4][7]. Core Views - The strategic disposal of K&P is expected to enhance short-term growth and improve cash flow, leading to a revision of FY24E-26E net profit estimates upwards by 2% to 5% [2][7]. - The valuation remains attractive at 10x FY24E P/E, compared to an 8-year average of 15x, alongside a 14% dividend yield for FY24E [7]. Financial Summary - Revenue projections for FY24E are set at RMB 15,371 million, with a growth forecast of 10.1% for FY26E [3][9]. - Operating profit is expected to increase from RMB 1,464.3 million in FY24E to RMB 2,557.2 million by FY26E, indicating a positive trend in profitability [3]. - Net profit is forecasted to rise from RMB 912.3 million in FY24E to RMB 1,775.7 million in FY26E, reflecting a strong growth trajectory [3]. Earnings Revision - The report revises FY24E net profit to RMB 1,275 million, FY25E to RMB 1,479 million, and FY26E to RMB 1,763 million, with respective growth rates of 3.6%, 2.2%, and 4.6% [8][9]. - Gross margin is expected to remain stable around 42.3% for FY24E, while EBIT margin is projected to improve to 14.1% by FY25E [8]. Market Performance - Xtep's stock has shown a 39.9% increase over the past three months, outperforming the market [5]. - The company has a market capitalization of HK$14,307.2 million, with significant shareholding by Mr. Ding Shui Po and family at 49% [5].

Investment Rating - FIT Hon Teng maintains a BUY rating with a new target price of HK$2 40 based on 11x FY24E P/E [2][13] Core View - FIT Hon Teng's 1Q24 results were in line with expectations driven by recovery in PC/server markets solid Voltaira business and strong Networking segment [2] - The company is expected to benefit from AirPods ramp-up integration of Voltaira auto electronics business and AI server/networking products in 2H24E [2] - Revenue and net profit are forecasted to rebound 12% and 52% YoY respectively in FY24E [2] - The stock's recent correction is attributed to profit-taking after a 101% rally in the past three months [2] Financial Performance - 1Q24 revenue reached US$965mn a 12% YoY increase while net profit was US$10 2mn compared to a loss of US$9 3mn in 1Q23 [2] - Gross profit margin improved by 450bps YoY to 20 3% due to a better product mix [2] - EV segment revenue surged 205% YoY driven by the Voltaira merger while Computing and Networking segments grew 6% and 9% YoY respectively [2] - FY24E revenue is projected at US$4 715mn with a 12 4% YoY growth and net profit is expected to reach US$199 6mn a 51 4% YoY increase [3][9] Segment Analysis - EV Mobility segment revenue jumped 205% YoY in 1Q24 due to the Voltaira merger [7] - Networking segment grew 9% YoY driven by AI demand and new CPU-related products [2] - Computing segment increased 6% YoY supported by market recovery [2] AI Server Opportunity - FIT Hon Teng expects US$500-1 000 content value per compute tray for AI servers in FY24E [2] - AI revenue share is projected to be 7-9% in FY24E up from 1% in FY23 [2] Valuation - The stock is trading at 8 9x/6 7x FY24/25E P/E which is considered attractive given multiple growth drivers [2][13] - The new target price of HK$2 40 is based on 11x FY24E P/E reflecting accelerated growth and profitability recovery [13] Growth Drivers - Key catalysts include AirPods shipments AI server product updates and continued revenue upside from auto business consolidation [13] - The company's "3+3 Strategy" is expected to drive accelerated growth and profitability recovery [13]

Investment Rating - Maintain BUY rating for BeiGene, reflecting strong growth potential and robust pipeline [2][4][16] Core Insights - BeiGene's product sales in 1Q24 reached US$747 million, showing an 18% quarter-over-quarter increase and an 82% year-over-year increase, representing 25.7% of the previous FY24 estimate [2] - Zanubrutinib (zanu) sales were particularly strong, increasing 18% QoQ and 131% YoY to US$489 million, driven by market share gains in CLL in the US and expanded reimbursement in the EU [2] - The company is on track to achieve profitability, with expectations to break even by FY26E, supported by improving operating margins and narrowing net losses [2][3] Summary by Sections Product Sales Performance - Total product sales for BeiGene in 1Q24 were US$747 million, up 18% QoQ and 82% YoY [2] - Zanubrutinib captured approximately 21% of the global BTK inhibitor market in 1Q24, up from 18% in 4Q23 [2] Patent Dispute - A patent dispute with Pharmacyclics is nearing resolution, with the USPTO expected to issue a final decision on the validity of the contested patent within 12 months [2] Financial Performance - Gross profit margin improved to 83.3% in 1Q24 from 82.7% in FY23, driven by high-margin product sales [2] - Net loss narrowed to US$251 million in 1Q24 from US$368 million in 4Q23, better than expectations [2][3] Future Growth Potential - Upcoming clinical trials for sonrotoclax and BGB-16673 are expected to yield significant data, with potential blockbuster status anticipated [2] - Forecast for zanubrutinib sales in FY24 is US$2.2 billion, representing a 69% YoY increase [2] Target Price Adjustment - The DCF-based target price for BeiGene has been raised from US$268.20 to US$269.73, indicating a potential upside of 59.9% from the current price of US$168.64 [4][12]

Investment Rating - The report maintains a "BUY" rating for Xiaomi with a new target price (TP) of HK$23.77, reflecting a 24.5% upside from the current price of HK$19.10 [3][20]. Core Insights - Xiaomi is expected to report strong earnings for 1Q24, with estimated revenue and adjusted net profit growth of 26% and 67% year-over-year, respectively, driven by robust smartphone shipments and improved gross profit margins across all segments [1][15]. - The company is anticipated to continue gaining global smartphone market share, particularly in Latin America, EMEA, SEA, and EU markets, supported by multiple product launches in the second half of 2024 [1][18]. - The report highlights a positive outlook for Xiaomi's smart electric vehicle (EV) business and resilient performance in core segments, leading to an upward revision of FY24-26E earnings per share (EPS) by 11-21% [1][15]. Summary by Sections Earnings Summary - FY24E revenue is projected at RMB 335.7 billion, with a year-over-year growth of 23.9%. Adjusted net profit is expected to reach RMB 20.03 billion, reflecting a 3.9% increase in adjusted EPS to RMB 0.80 [2][16]. - The report indicates a gross margin of 20.5% for FY24E, with operating and adjusted net margins of 6.4% and 6.0%, respectively [2][17]. Smartphone Segment - Xiaomi's global smartphone shipments are estimated to increase by 14% year-over-year to 167 million units in FY24E, with a market share of 14% in 1Q24, up from 11% in 1Q23 [1][10]. - The average selling price (ASP) is expected to remain flat in 1Q24, with a gross profit margin projected to decline to 14.5% due to rising component costs [1][13]. AIoT and Internet Services - Revenue from AIoT and Internet services is expected to grow by 19% and 7% year-over-year in 1Q24, respectively, driven by strong sales in pads and home appliances [1][15]. - The gross profit margin for AIoT is projected to improve to 18.5%, while the Internet services margin is expected to remain stable at 75.0% [1][15]. Valuation - The new SOTP-based target price of HK$23.77 is derived from applying a 15x P/E multiple to the smartphone, AIoT, and Internet businesses, and a 0.75x P/S multiple for the EV business [18][19]. - The report emphasizes upcoming catalysts, including the ramp-up of EV product shipments and further smartphone market share gains [18][19].