ab 18 October 2024 Global Research Life Sciences & Diagnostic Tools China Pharma Mfg Returned to Double-digit Growth in Sept. | --- | --- | |------------|-------| | Equities | | | Americas | | | Healthcare | | Bottom Line We track China's monthly industrial output data as a key indicator for the China end market health in our Life Sciences Tools coverage. The September high-technology manufacturing output growth was +10.1% vs. +8.6% in August. Pharma manufacturing output returned to double-digit growth in S ...

Investment Rating - The investment rating for Zijin Mining Group is "Overweight" [3] - The industry view is considered "Attractive" [3] Core Insights - Zijin Mining Group reported a net profit of Rmb24.357 billion for the first nine months of 2024, representing a 51% year-over-year increase. The net profit for Q3 2024 was Rmb9.27 billion, a 5% quarter-over-quarter growth, marking the highest quarterly profit since 2007 [1][2] - The strong performance in Q3 2024 was attributed to an all-time high gold price and the reversal of fair value loss, despite a 6% quarter-over-quarter correction in copper prices [1] - Gross profit for Q3 2024 was Rmb14.7 billion, with a gross margin of 18.4%, down from 19.7% in Q2 2024, primarily due to the impact of copper profitability [2] Financial Metrics - Revenue projections for Zijin Mining Group are as follows: Rmb288.553 billion for FY 2023, Rmb348.224 billion for FY 2024e, Rmb367.022 billion for FY 2025e, and Rmb348.463 billion for FY 2026e [3] - EBITDA is projected to be Rmb40.958 billion for FY 2023, Rmb51.671 billion for FY 2024e, Rmb55.116 billion for FY 2025e, and Rmb54.940 billion for FY 2026e [3] - The expected EPS for FY 2024e is Rmb1.16, with a P/E ratio of 13.6 [3] Production and Cost Metrics - Copper and gold output increased by 5.7% and 1.4% quarter-over-quarter, respectively, with year-to-date volumes reaching 790,000 tons of copper and 54.3 tons of gold [2] - The unit cost for copper decreased by 4.2% year-over-year to Rmb19,564 per ton, while the unit cost for gold increased by 1.3% year-over-year to Rmb286 per gram [2]

Investment Rating - The stock rating for Zhejiang Huayou Cobalt Co Ltd is Equal-weight [4] - The industry view is Attractive [4] Core Insights - The company reported a net profit of Rmb1.3 billion for 3Q24, which is an increase from Rmb1.1 billion in 2Q24 and Rmb928 million in 3Q23, exceeding expectations [1] - The 9M24 profit reached Rmb3 billion, reflecting a year-on-year increase of 0.2% [1] - The good performance is attributed to better-than-expected gross profit margin (GPM), lower tax expenses, and reduced minority interest [2] - The GPM for 3Q24 was 18.8%, only slightly down by 1.4 percentage points quarter-on-quarter [2] - The effective tax rate decreased to 3.7% in 3Q24 from 4.4% in 2Q24 and 12.1% in 3Q23 [2] - Minority interest accounted for 4.5% of profit after tax, significantly lower than 35.5% in 2Q24 [2] Capacity Expansion - Ongoing construction of the Huaneng 50kt ternary precursor project in Indonesia was completed on October 18, 2024 [2] - The Huaxiang 50kt sulfuric nickel project and the Hungary 25kt cathode material projects are currently under construction [2] Financial Metrics - The price target for the stock is set at Rmb27.00, indicating a downside of 7% from the current price of Rmb28.95 [4] - The market capitalization is Rmb49.507 billion, with an enterprise value of Rmb70.270 billion [4] - Projected EPS for fiscal years ending in 2023, 2024, 2025, and 2026 are Rmb2.05, Rmb1.34, Rmb1.42, and Rmb2.00 respectively [4] - Revenue projections for the same fiscal years are Rmb65.936 billion, Rmb63.642 billion, Rmb66.235 billion, and Rmb70.900 billion respectively [4] - The P/E ratio is projected to be 16.1 for 2023 and 21.5 for 2024 [4]

Investment Rating - The investment rating for Shenzhen Inovance Technology is "Overweight" with an attractive industry view [3][10]. Core Insights - The revenue for 3Q24 increased by 20% year-on-year to Rmb9.2 billion, aligning with market expectations, primarily driven by the NEV powertrain business [1]. - The automation and elevator business experienced a year-on-year revenue decline in 3Q, which was slightly below expectations [1]. - The net profit (NP) for 3Q was largely in line with expectations, with a midpoint of Rmb1.2 billion, reflecting a year-on-year change of -5% to +5% [1]. - Recurring net profit decreased by 4% to 15%, falling short of market expectations due to gross profit margin erosion attributed to product mix and competition, although SG&A expense control and one-off gains provided some support [1]. Revenue and Profit Forecast - The target for 4Q NP growth is set at a minimum of 14% year-on-year, which is expected to be challenging due to a lower growth base for new automation orders starting in November [2]. Valuation Methodology - The price target for Shenzhen Inovance Technology is set at Rmb64.00, based on a 30x P/E ratio for 2025 estimates, reflecting its average valuation during the 2016-2019 period [4]. Market Data - As of October 18, 2024, the share price was Rmb58.50, with a market capitalization of Rmb156.6 billion [3]. - The 52-week price range for the stock was Rmb74.94 to Rmb39.17 [3]. Analyst Coverage - The report includes contributions from analysts Sheng Zhong, Chelsea Wang, and Serena Chen, who have certified their views on the company and its securities [8].

M Idea Shanghai Fudan Microelectronics | Asia Pacific October 20, 2024 11:20 PM GMT Research Tactical Idea We believe the share price will fall relative to the country index over the next 30 days. This is because of an earnings release. The company announced preliminary 3Q24 earnings will be around Rmb77mn, down 59% QoQ and 62% YoY. This would represent only 18% of our 2H24 estimate of Rmb423mn, well below normal seasonality. The company has lowered some product pricing in the face of intense competition, a ...

Investment Rating - The report maintains a "Buy" rating on Chalco and Hongqiao, indicating a positive outlook for these companies due to expected benefits from rising alumina prices [15][23][26]. Core Insights - China alumina prices are expected to remain strong due to tight bauxite and alumina supply, influenced by recent production cuts and adverse weather conditions affecting shipments [12][14]. - Chalco and Hongqiao, as vertically-integrated aluminum producers, are projected to benefit from higher alumina prices, with estimated net profit increases of 2% and 4% for 2024E, respectively, for a 5% rise in alumina prices [15][23]. - A 30-day Positive Catalyst Watch has been initiated for both Chalco and Hongqiao, reflecting the anticipated positive impact of strong alumina prices on their financial performance [15][23]. Summary by Sections Bauxite Supply - Following production cuts since November 2023, the government has begun approving production resumption for bauxite mines in Henan, but the process in Shanxi is slower. Stricter safety requirements may prevent output from returning to previous levels [13]. Alumina Price - As of October 14, 2024, the spot alumina price in China reached Rmb4,350 per ton, marking a 9.4% month-over-month increase and a 46.5% year-over-year increase. The alumina output in September 2024 was 6.91 million tons, reflecting a 2.69% year-over-year increase but a 4.27% month-over-month decrease due to tight bauxite supply and maintenance work [14]. Financial Projections for Chalco - The report revises Chalco's net profit estimates for 2024, 2025, and 2026 upwards by 44%, 23%, and 6% respectively, with new target prices set at HK$9.09 for H-shares and Rmb10.96 for A-shares [23][26]. Financial Projections for Hongqiao - Hongqiao's net profit estimates for 2024, 2025, and 2026 are revised upwards by 11%, 5%, and -6% respectively, with a new target price of HK$14.80 [23][26].

Investment Rating - The report assigns a Neutral rating to Shenzhen Inovance Technology, indicating a cautious outlook on the company's performance due to potential risks associated with revenue guidance cuts [3][7]. Core Insights - The report expresses concerns about the company's ability to meet its 2024 revenue growth guidance of 20% year-over-year, particularly in the general automation sector, due to a high base effect from previous quarters and weaker demand from new energy sectors [7]. - The target price for Shenzhen Inovance Technology is set at Rmb55.0, reflecting a valuation based on approximately 30 times the estimated earnings per share (EPS) for FY24E [3][7]. Financial Summary - The earnings summary indicates a net profit of Rmb4,320 million for 2022, projected to increase to Rmb4,911 million in 2024, with a diluted EPS growth from Rmb1.640 in 2022 to Rmb1.847 in 2024 [4]. - The expected total return for the stock is projected at -5.8%, with an expected share price return of -6.6% and a dividend yield of 0.8% [3][4]. Market Capitalization - The market capitalization of Shenzhen Inovance Technology is reported at Rmb157,769 million, equivalent to approximately US$22,260 million [3].

Investment Rating - The report maintains a "Buy" rating for Yealink Network Technology with a target price raised to Rmb50, implying an expected share price return of approximately 25.4% [4][24]. Core Insights - Yealink's 3Q24 preliminary results slightly exceeded forecasts, leading to an upgrade in EPS forecasts by 7%, 6%, and 3% for 2024, 2025, and 2026 respectively [3][24]. - The company achieved a net profit growth of 27.5% year-on-year for the first nine months of 2024, surpassing the management's target of over 20% for the year [3][4]. - The report highlights the anticipated increase in corporate capital expenditures in the US and EU due to rate reductions, which is expected to drive demand for Yealink's communication systems [5][24]. Summary by Sections Financial Performance - For 2024, the expected net profit is projected at Rmb2,511 million, reflecting a growth of 40.4% year-on-year, with a diluted EPS of Rmb1.987 [6][11]. - The revenue split for the first half of 2024 shows SIP phone systems contributing 57%, video conferencing systems 36%, and cloud office systems 7%, with respective year-on-year growth rates of 20.3%, 51.3%, and 29.3% [14][24]. Market Position and Strategy - Yealink is positioned as a leading provider of unified communication solutions, holding over 30% of the global SIP phone market share in 2023 [25]. - The company is expected to benefit from the ongoing trend towards hybrid workplaces, which is anticipated to enhance its market share in enterprise communication [24][25]. Valuation Metrics - The target price of Rmb50 is based on a discounted cash flow (DCF) model, assuming a discount rate of 9.1% and a terminal growth rate of 1.0%, which aligns with the stock's historical mean PE ratio of 25-26x [24][26].

Investment Rating - The report assigns a "Buy" rating for China Tourism Group Duty Free Corp with a target price of Rmb81.000, indicating an expected share price return of 17.3% and an expected total return of 19.5% [1][11]. Core Insights - The preliminary results for 9M24 show a revenue drop of 15% year-on-year to Rmb43 billion and a net profit decline of 25% year-on-year to Rmb3.9 billion. In 3Q24, revenue decreased by 22% year-on-year to Rmb11.7 billion, with net profit down by 53% year-on-year to Rmb632 million [3][4]. - The decline in performance is attributed to weak sales in the Hainan duty-free market, which saw a 34% year-on-year drop in sales during July and August 2024. However, there was a significant rebound in airport duty-free sales, with Beijing airports reporting over 140% year-on-year growth in 9M24 [3][4]. - The report anticipates that weak consumer sentiment will continue to impact sales trends into 4Q24 [3]. Summary by Sections Financial Performance - In 3Q24, total revenue was Rmb11.7 billion, a 22% decline year-on-year. The net profit margin fell to 5.4%, with operating profit dropping by 42% year-on-year [3][8]. - The core business gross margin improved by 1.09 percentage points year-on-year to 32.6%, although it was slightly lower than the 32.9% in the first half of 2024 [3][8]. Hainan Duty-Free Market - Hainan duty-free sales during the National Day Golden Week totaled Rmb785 million, with average daily sales down 33% year-on-year to Rmb112 million. The decline was primarily due to a 26% drop in the number of buyers [4][8]. - The report suggests that the Hainan duty-free market will remain soft in the short term, reflecting ongoing consumer sentiment challenges [4][8]. Valuation - The report utilizes a DCF-based valuation approach with a target price of Rmb81, based on a WACC of 11.0% and a terminal growth rate of 4% [11].

Investment Rating - The report assigns a price target of HK$20.20 for Shandong Gold Mining Co. Ltd, indicating a potential upside of 20% from the current price of HK$16.88 as of October 14, 2024 [4]. Core Insights - Shandong Gold Mining Co. Ltd has guided for a 9M24 net profit range of Rmb1.85-2.25 billion, representing a year-over-year increase of 38-67%. The reported net profit for 1H24 was Rmb1.38 billion, suggesting a 3Q24 net profit range of Rmb467-867 million, compared to Rmb684 million in 2Q24. The company needs to achieve the upper end of this guidance to meet market expectations [3][4]. Financial Metrics - The fiscal year ending for Shandong Gold is December 2023, with projected earnings per share (EPS) of Rmb0.52 for FY23, increasing to Rmb0.86 in FY24e and Rmb1.25 in FY25e [4]. - Revenue projections are Rmb59.275 billion for FY23, Rmb63.878 billion for FY24e, and Rmb71.614 billion for FY25e [4]. - EBITDA is expected to grow from Rmb8.414 billion in FY23 to Rmb12.058 billion in FY24e and Rmb15.450 billion in FY25e [4]. - The company’s market capitalization is currently Rmb114.234 million, with an enterprise value of Rmb161.343 million [4]. Valuation Metrics - The report indicates a P/E ratio of 25.9 for FY23, decreasing to 17.8 for FY24e and further to 12.3 for FY25e [4]. - The EV/EBITDA ratio is projected to decline from 16.8 in FY23 to 12.8 in FY24e and 9.5 in FY25e [4].