8 October 2024 | 6:08PM CST revenue recognition will likely accelerate per mgmt as ocean freight congestion eases) and we forecast +28% yoy revenue into 2H24E. Shenzhen Inovance Technology Co. (300124.SZ): Sept IA orders slightly down yoy/up mom | --- | --- | |------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---- ...

Investment Rating - The investment rating for Angel Yeast is "Sell" with a 12-month target price of Rmb30.3, reflecting a downside of 16.8% from the current price of Rmb36.42 [1][2][15]. Core Insights - The company is expected to achieve 23% year-on-year sales growth in Q3 2024, driven by a rebound in domestic bakery yeast volume and strong overseas demand, which is projected to grow over 20% year-on-year [1][3]. - Despite the sales growth, the company anticipates a contraction in gross profit margin (GPM) and net profit margin (NPM) due to rising logistics costs, with expected GPM/NPM contractions of 1.5 percentage points and 0.7 percentage points year-on-year, respectively [1][2]. - The management has raised the full-year sales growth estimate for 2024 from approximately 10% to 12.5%, with net profit growth now expected to reach 9% year-on-year [1][2][12]. Summary by Sections Sales and Growth - The company reported a year-to-date sales growth of approximately 12% and aims for over 20% sales growth in October [3][4]. - Domestic sales in the baking segment grew 7%-8% year-on-year in September, while overseas sales surged by 40% year-on-year [3][4]. Profitability and Costs - Logistics costs have increased significantly, impacting overseas profitability, although these costs are stabilizing [5][6]. - Raw material prices, particularly for molasses, have shown a downward trend, which may influence pricing strategies moving forward [7][8]. Capacity and Future Outlook - The utilization rate remains high at around 90%, with new production capacity expected from the Egyptian and Russian factories in Q4 2024 [9]. - The company is exploring mergers and acquisitions to enhance growth, although suitable targets are limited [9]. Financial Estimates - Revised financial estimates indicate a 2% increase in net profit estimates for 2024-2026, with expected sales growth of 12.5% and net profit growth of 9% for 2024 [12][14].

Investment Rating - The report assigns a "Buy" rating for Naura (002371.SZ) with a 12-month target price raised to Rmb502, reflecting a 14.6% increase from the previous target of Rmb438 [1][11]. Core Insights - Naura is positioned to benefit from the strong growth in China's semiconductor industry, with expected capital expenditures (capex) rising to US$36 billion in 2024, US$40 billion in 2025, and US$42 billion in 2026, up from US$30 billion in 2023 [1][10]. - The company is expected to achieve a revenue growth of 31% year-over-year (YoY) in Q3 2024, reaching Rmb8.1 billion, driven by increasing demand from domestic foundries and integrated device manufacturers (IDMs) [2][10]. - Naura's competitive advantage lies in its comprehensive product offerings across various semiconductor manufacturing processes, including etching, deposition, and cleaning tools, which positions it well to capture market opportunities [2][10]. Summary by Sections Revenue and Earnings Forecast - The report anticipates Naura's revenues for 2024E to be Rmb30,554 million, with subsequent years showing growth to Rmb41,064 million in 2025E, Rmb50,543 million in 2026E, and Rmb59,447 million in 2027E, reflecting increases of 4%, 11%, and 16% respectively [5][10]. - Net income is projected to grow to Rmb5,991 million in 2024E, Rmb8,581 million in 2025E, Rmb10,727 million in 2026E, and Rmb12,030 million in 2027E, with growth rates of 0%, 11%, 18%, and 19% respectively [5][10]. Margin Analysis - The gross margin is expected to sustain at 43% in Q3 2024, compared to 41% in 2023 and 45% in the first half of 2024 [2][10]. - Operating expenses are projected to decrease, with the operating expense ratio expected to be 22% in Q3 2024, down from 25% in 2023 [2][10]. Market Position and Competitive Landscape - Naura is recognized as a leader in the domestic semiconductor equipment market, benefiting from its technology leadership and strong relationships with first-tier customers [2][10]. - The company is expanding its product line to include high-end tools, which will enhance its market share and competitive positioning within the semiconductor value chain [2][10].

Investment Rating - The investment rating for Guangzhou Automobile Group is Overweight [3][15]. Core Viewpoints - The stock GAC-H rose 19% on October 7, 2024, outperforming the market and H-share peers, driven by potential short position coverage and an expanded A/H share premium of 220% from a previous low of approximately 50% in 2018 [2]. - Key points to monitor include southbound flow due to elevated A/H premium, deepening SOE reform, potential accelerated spin-off of GAC's EV subsidiary Aion, and fundamental vehicle demand supported by capital market rally [2]. Financial Metrics - Price target is set at HK$3.70 with a downside of 3% from the current price of HK$3.81 [3]. - Market capitalization is approximately RMB 72,565 million with an average daily trading value of HK$53 million [3]. - For the fiscal year ending December 2023, net revenue is projected at RMB 129,706 million, with EPS at RMB 0.42 [3]. - The P/E ratio is 7.7, and the dividend yield is 7.4% [3]. Future Projections - Revenue projections for the next few years are as follows: RMB 116,202 million for 2024, RMB 125,991 million for 2025, and RMB 134,303 million for 2026 [3]. - Expected EPS for 2024 and 2025 is RMB 0.31, with a slight increase to RMB 0.35 in 2026 [3]. - The return on equity (ROE) is expected to be 3.9% in 2023, declining to 2.8% in 2024 and 2025, before recovering to 3.1% in 2026 [3].

Investment Rating - The report maintains a **Neutral** rating for COSCO SHIPPING Holdings (601919.SS) with a 12-month price target of Rmb13.80 for A-shares and HK$10.70 for H-shares [1][2][4] Core Views - COSCO SHIPPING Holdings reported a strong 9M24 net profit of Rmb38bn, up 73% YoY, accounting for 87% of the full-year Bloomberg consensus of Rmb43bn [1] - Q3 net profit surged 286% YoY and 110% QoQ to Rmb21.3bn, driven by higher contract rates for Europe routes due to rerouting amid the Red Sea disruption [1][3] - The company's new pricing strategy, which includes more floating adjustments on contract rates, contributed to the earnings beat [1][3] - The FY24 dividend yield of 8.8%/12.0% for A/H-shares is attractive, trading above its historical average [1] Financial Performance - Revenue for 12/24E is projected at Rmb230.3bn, with EBITDA expected to reach Rmb74.2bn [2] - EPS for 12/24E is forecasted at Rmb2.62, with a P/E ratio of 6.0x [2] - The company's net debt/EBITDA ratio is expected to improve to -1.5x by 12/24E [2] Industry and Market Context - The average SCFI (Shanghai Containerized Freight Index) for Europe and Med routes increased by 308% YoY and 86% from March-May, reflecting higher freight rates [1][3] - The Red Sea disruption has led to longer voyage times, delaying revenue recognition for Europe routes, with Q3 revenue reflecting freight rates from June to August [1][3] - Fuel costs, historically 15-20% of total opex, decreased by 2% QoQ in Q3, contributing to higher profits [3] Valuation and Risks - The 12-month price targets are based on 0.8x/1.1x FY25E target P/BV multiples, above historical averages, reflecting higher ROE expectations due to supply chain complexity [7] - Upside risks include unexpected events reducing effective capacity and potential special dividend payouts [7][8] - Downside risks include faster-than-expected new ship deliveries and weaker-than-expected global trade demand [7][8] Freight Rate Analysis - The SCFI Comprehensive index stood at 2,135 as of 27-Sep-24, with Europe and Med routes showing significant YoY increases of 279% and 242%, respectively [6] - US West Coast and East Coast freight rates also saw substantial YoY growth, at 265% and 140%, respectively [6]

Investment Rating - The report maintains a "Buy" rating on Daqo and Flat H/Xinyi, while Longi is rated "Neutral" and GCL/Tongwei/TCL Zhonghuan are rated "Sell" [3][8]. Core Insights - The solar industry is experiencing a re-balancing of supply and demand, with upstream prices for Poly and Wafer seeing moderate increases, while downstream prices for Cell and Module are under intense competition, leading to a decline in profitability for these segments [1][11]. - Cash burn trends for covered companies are diverging, with Daqo expected to improve due to lower production and disciplined capital expenditure, while Tongwei and Longi are facing deterioration due to high capital expenditures and decreasing prices [2][5]. - A potential price rebound of 5%-10% across the solar value chain is anticipated by 2025, driven by continued supply cuts [3][8]. Summary by Sections Pricing Trends - In September, spot prices for Poly/Wafer increased by 1%, while Cell/Module prices decreased by 2% and 2% respectively, indicating a mixed pricing environment across the solar value chain [11][31]. - The average cash gross profit margin (GPM) for Poly improved slightly, while other segments like Wafer, Cell, and Module saw further declines [1][5]. Production and Inventory - Production for Poly, Wafer, Cell, and Glass decreased by 4%, 4%, 4%, and 8% respectively, while Module production remained flat [8][9]. - Inventory levels showed a moderate decline for downstream Cell and Module, but increased for Wafer and Glass, indicating ongoing inventory pressure [8][9]. Demand Dynamics - Demand for solar installations in China showed a sequential decline, with August installations down 22% month-over-month but up 3% year-over-year [31]. - Module exports remained flat month-over-month but increased by 23% year-over-year, with strong demand noted in the Middle East and APAC regions [31].

Investment Rating - The report does not explicitly state an investment rating for the industry or specific companies within the New Energy Vehicle (NEV) sector. Core Insights - The NEV sector in China is experiencing significant growth, with weekly insurance registrations for passenger vehicles reaching 658k units, a 44.3% increase week-over-week (wow) from 456k units. New energy vehicle registrations also saw a rise to 327k units, up 43.4% wow from 228k units [8][10]. - The penetration rate of new energy vehicles is at 49.7%, showing a slight decrease of 0.3 percentage points from the previous week [8]. - BYD Group, Tesla China, and Li Auto are the top three companies in terms of market share, holding 33.8%, 6.9%, and 4.3% respectively [10]. Summary by Sections NEV Market Performance - NEV weekly insurance registration was 327k units, +43.4% wow from 228k units in the previous week [8]. - The overall passenger vehicle weekly insurance registration was 658k units, +44.3% wow from 456k units [8]. - NEV penetration was 49.7%, down 0.3pp from 50.0% [8]. Brand Performance - Fangchengbao, Denza, and XPeng showed the strongest volume growth of 104%, 100%, and 80% respectively [10]. - Tesla China, Aion, and XPeng gained market share by 0.9pp, 0.4pp, and 0.4pp respectively, while BYD Group, Li Auto, and AITO lost market share by 2.6pp, 0.9pp, and 0.4pp respectively [10]. Pricing Dynamics - The average discount of dealer prices vs. MSRPs for NEVs was 7.71% as of September 30, down from 8.10% on September 23 [4]. - The average discount for ICE vehicles was 21.07% as of September 30, slightly up from 20.93% [5]. - Battery grade lithium carbonate price was Rmb78.3k/ton, +2.0% wow, and LFP prismatic cell price was Rmb0.350/Wh, flat wow [6]. Trade-in Applications - As of September 25, the Ministry of Commerce's trade-in information platform received over 1.13 million applications for the auto trade-in subsidy program, with an average of 10k new applications daily during the period of September 23-25 [11][12]. Upcoming Events - Key events to watch include the NEV OEM monthly volume release on October 1 and the Shenzhen Auto Show from October 1-5 [15][16].

Investment Rating - The investment rating for Ganyuan Foods is maintained as BUY with a target price of RMB 69.36, indicating a potential upside of 26% from the closing price of RMB 54.90 as of August 7, 2024 [8][9]. Core Insights - Ganyuan Foods experienced a quarter-on-quarter slowdown in revenue growth in 2Q24 due to off-season effects and personnel adjustments within the distribution team. However, year-on-year growth remains strong with revenue, attributable net profit, and recurring net profit for 1H24 increasing by 26.1%, 39.3%, and 40.0% respectively [3][4]. - The company’s gross profit margin (GPM) declined by 0.6 percentage points year-on-year in 2Q24, attributed to structural changes in product sales channels and weakening economies of scale. Despite this, the company expects to increase its payout ratio, enhancing shareholder returns [5][6]. - Ganyuan Foods' classic products, including green peas, melon seeds, and flavored nuts, showed robust revenue growth, with significant contributions from membership supermarkets and bulk sales channels [4][6]. Financial Performance Summary - For 1H24, Ganyuan Foods reported revenues of RMB 1,040 million, with a net profit of RMB 170 million. In 2Q24, revenues were RMB 460 million, reflecting a 4.9% year-on-year increase [3][4]. - The company’s revenue projections for the upcoming years are as follows: RMB 2,254 million for 2024, RMB 2,714 million for 2025, and RMB 3,193 million for 2026, with corresponding net profits of RMB 380.61 million, RMB 468.71 million, and RMB 551.05 million [7][9]. - The estimated earnings per share (EPS) for 2024, 2025, and 2026 are RMB 4.08, RMB 5.03, and RMB 5.91 respectively, with a price-to-earnings (PE) ratio projected at 17x for 2024 [6][7].

Investment Rating - Maintain Buy rating on Wanhua Chemical Group (600309 SS) with a revised 12-month target price of Rmb106 0 per share, up from Rmb103 0 [2][5] Core Thesis - The polyurethane cycle is bottoming out, with volume recovery across major players and sequentially improved pricing, although spread recovery was delayed due to high raw material prices [3] - Wanhua Chemical is well-positioned for cyclical recovery, with a leading position in one of the most consolidated commodity chemical supply chains and long-term structural growth opportunities [8] - The company is expected to grow earnings at a +c 20% CAGR over 2023-26E, driven by new capacity projects for high-margin specialty chemicals and normalization of petrochemical earnings [6][8] Financial Estimates - 2024E-26E EPS estimates reduced by 5-9% to reflect weaker-than-expected margins in performance chemicals and new materials segment, higher opex, impairment losses, and finance expenses [2] - 2024E revenue estimate revised to Rmb198 310mn (from Rmb199 624mn), 2025E to Rmb228 460mn (from Rmb231 413mn), and 2026E to Rmb261 360mn (from Rmb262 856mn) [5] - 2024E net profit estimate revised to Rmb16 670mn (from Rmb18 227mn), 2025E to Rmb22 071mn (from Rmb24 199mn), and 2026E to Rmb26 748mn (from Rmb28 149mn) [5] Valuation and Catalysts - Target EV/EBITDA multiple slightly lowered to 10 5x (from 11 0x) to reflect reduced growth forecasts, but valuation base year rolled forward to average 2024E-25E [2] - Potential catalysts include US rate cuts and improving construction activities in Europe in early-mid 2025, which should support recovery in polyurethane demand and drive pricing/margin upside [2] - Strong pipeline of new capacity projects for high-margin specialty chemicals (e g , polyolefin elastomers and flavor and fragrance) scheduled to come on stream in 2H24 [3] Industry Position - Wanhua Chemical is the largest global producer of MDI (30% share of 2023 global capacity) and TDI (25% share of 2022 capacity) [6] - The company accounts for ~80% of global new polyurethane supply over 2023-25E, with continued volume share gains expected [6]

Investment Rating - The investment rating for Angel Yeast is maintained as BUY with a target price of RMB 38.39, indicating a potential upside of 24% from the closing price of RMB 30.87 as of August 12, 2024 [8][9]. Core Insights - Angel Yeast reported 2Q24 earnings that exceeded expectations, with revenue and net profit showing significant year-on-year growth of 11.3% and 17.3% respectively. The company is expected to resume growth momentum due to increased demand in its main business and improved overseas performance [3][4]. - The gross profit margin (GPM) for 2Q24 rose by 0.3 percentage points year-on-year to 23.9%, attributed to faster revenue growth from high-margin products and declining molasses prices, which are expected to reduce cost pressures [5][6]. - The company has revised its earnings forecasts upward, projecting EPS of RMB 1.60, RMB 1.80, and RMB 2.07 for 2024, 2025, and 2026 respectively, reflecting a positive outlook on domestic demand recovery and overseas market expansion [5][6]. Revenue and Profit Performance - For 1H24, Angel Yeast's revenue reached RMB 7,180 million, with attributable net profit of RMB 690 million, marking a year-on-year increase of 6.9% and 3.2% respectively. The overseas revenue grew by 17.9% year-on-year, while domestic revenue saw a modest increase of 0.9% [3][4]. - The performance of various product segments showed mixed results, with yeast and deep processing products increasing by 8.8% year-on-year, while sugar and packaging segments experienced declines of 26.5% and 12.8% respectively [4]. Financial Projections - The financial outlook for Angel Yeast includes projected revenues of RMB 14,969 million, RMB 16,629 million, and RMB 18,364 million for 2024, 2025, and 2026 respectively, indicating a steady growth trajectory [7][13]. - The company’s net profit is expected to reach RMB 1,390 million, RMB 1,565 million, and RMB 1,799 million for the same years, reflecting a positive growth trend [7][13].