Core Viewpoint - The report initiates coverage on Yuehai Investment with a "Buy" rating and a target price of HKD 9.10, corresponding to a 2025 target PE of 14.0 times [1] Group 1: Company Overview - Yuehai Investment is a quality water service platform controlled by Guangdong state-owned assets, with its core asset being the Dongshen Water Supply Project [1] - The company's business includes five main segments: water services, property investment and development, department store operations, hotel ownership and management, and energy road and bridge [1] - After divesting Yuehai Land, the company's fundamentals have stabilized, and it has strong free cash flow, which is expected to continue providing high dividend returns [1] Group 2: Dongshen Water Supply Project - The Dongshen Water Supply Project has supplied a cumulative total of 30 billion cubic meters of water to Hong Kong since 1965, accounting for nearly 80% of Hong Kong's freshwater consumption [2] - The projected water supply to Hong Kong in 2024 is 8 million tons, with a water price of HKD 6.42 per ton [2] - The project has undergone two pricing phases, with a "bundled reduction" mechanism implemented since 2020, and the basic water price is expected to grow at a rate of 2.39% year-on-year from 2024 to 2026 [2] - The DCF valuation of the Dongshen Water Supply Project is estimated to be between HKD 45 billion and HKD 62 billion, assuming contract renewal until 2120 [2] Group 3: Financial Performance and Dividend Outlook - Free cash flow is expected to reach HKD 9.229 billion in 2024, with a cash dividend payout ratio of 65% following the divestment of Yuehai Land [3] - The dividend payout ratio, considering physical dividends, is projected to be 78.87%, significantly higher than the industry average of 57.76%, with a dividend yield of 5.65% [3] - For 2025-2027, the company is expected to maintain a dividend payout ratio of 65%, with projected dividend yields of 6.02%, 6.28%, and 6.54% respectively, making it attractive compared to peers [3] Group 4: Market Perspective and Valuation - The market expresses concerns regarding the uncertainties surrounding the renewal of the Dongshen Water Supply Project's franchise rights, water pricing, and transaction pricing [3] - The company believes that the visibility of the renewal is strong due to its historical significance and multiple asset restructuring plans [3] - The DCF valuation of the Dongshen project, along with contributions from other water resources and businesses, indicates that Yuehai Investment remains a valuable investment even under pessimistic assumptions [3] - The forecasted net profits for 2025-2027 are HKD 4.218 billion, HKD 4.397 billion, and HKD 4.576 billion, with year-on-year growth rates of 34.2%, 4.2%, and 4.1% respectively [4] - The company is assigned a target PE of 14.0 times for 2025, leading to a target price of HKD 9.10, reflecting its stable growth and high dividend yield compared to industry averages [4]

Investment Rating - The report initiates coverage on Yuehai Investment with a "Buy" rating and sets a target price of HKD 9.10, corresponding to a 2025 target PE of 14.0 times [1][7]. Core Views - Yuehai Investment is a high-quality water utility platform controlled by Guangdong state-owned assets, with its core asset being the Dongshen Water Supply Project, which has undergone significant structural changes since 1997 [1]. - The company has a strong free cash flow and is expected to maintain high dividend returns following the divestment of Yuehai Land [1][19]. Summary by Sections Investment Highlights - The Dongshen Water Supply Project is a premium asset, accounting for nearly 80% of Hong Kong's freshwater supply, with a projected revenue of HKD 63.60 billion in 2024, representing 34% of total revenue [20]. - The company has turned positive in free cash flow since 2023, with projections of HKD 92.29 billion in 2024, and maintains a high dividend payout ratio of 65% [21]. - The divestment of Yuehai Land allows the company to focus on its core water business, enhancing stability and potentially increasing valuation [22]. Valuation and Financial Projections - The DCF valuation of the Dongshen Water Supply Project is estimated between HKD 450 billion and HKD 620 billion, with a stable profit contribution from other water resources and businesses [2][23]. - The forecasted net profit for 2025-2027 is HKD 42.18 billion, HKD 43.97 billion, and HKD 45.76 billion, with corresponding EPS of HKD 0.65, HKD 0.67, and HKD 0.70 [5][11]. Market Perspective - The report contrasts with market concerns regarding the uncertainty of the Dongshen project's operating rights renewal, water pricing, and transaction pricing, asserting that the renewal visibility is strong due to the project's historical significance [4][23]. - The report emphasizes that the water pricing will remain reasonable despite rising costs, as the Hong Kong Water Supplies Department aims to adjust water pricing cautiously [4][23].

Investment Rating - The report maintains a "Buy" rating for Yum China (9987.HK / YUMC.US) with a target price of HKD 476.9, indicating a potential upside of 36% from the current stock price of HKD 370.8 [1][5]. Core Insights - In Q2 2025, Yum China's total revenue increased by 4% year-on-year to USD 2.8 billion, with system sales also growing by 4%. Operating profit rose by 14% to USD 304 million, exceeding market expectations. Net profit attributable to shareholders grew by 1% to USD 215 million, primarily impacted by an investment loss of USD 18 million [1][2]. - The company experienced a positive same-store sales growth of 1% for the first time since last year, driven by improved efficiency and a reduction in expense ratios due to same-store growth. Additionally, the recent competition in the food delivery market contributed to a 22% increase in delivery revenue, which now accounts for 45% of total revenue [2][5]. - KFC's revenue grew by 4.1% to USD 2.09 billion, with same-store sales also increasing by 1%. The restaurant's profit margin improved to 16.9%, benefiting from favorable raw material prices and operational efficiencies [3]. - Pizza Hut's operating profit increased by 16% to USD 46 million, with a profit margin of 8.3%, marking a significant improvement. The company plans to maintain its store opening guidance for the year, targeting 1,600 to 1,800 new stores [4][5]. Financial Summary - For the first half of 2025, Yum China reported total revenue of USD 4.34 billion, a 2% increase year-on-year, and a net profit of USD 510 million, also up by 1% [2]. - The forecast for net profit attributable to shareholders is USD 944.6 million for 2025, USD 1.015 billion for 2026, and USD 1.05 billion for 2027, with corresponding EPS of HKD 20.07, HKD 21.57, and HKD 22.24 [5][9]. - The company’s financial metrics indicate a projected revenue growth rate of 2.89% for 2025 and 6.98% for 2026, with a net profit margin of 8.12% for 2025 [9][10]. Valuation Analysis - The report employs both comparable company analysis and DCF methods for valuation, suggesting a target price of HKD 476.9 based on a 23x PE ratio for 2025, with an estimated EPS of HKD 20.07 [11][12]. - The DCF valuation estimates a reasonable market capitalization of HKD 181.9 billion, translating to a stock price of HKD 492.3 [11][14].

Core Viewpoint - Laopu Gold's store efficiency is significantly ahead of its peers, yet its cash flow performance is concerning, raising questions about the sustainability of its growth and financial health [1][5][19]. Group 1: Financial Performance - Laopu Gold's stock price surged from an IPO price of 40.50 HKD to a peak of 1108 HKD, representing a more than 26-fold increase [2]. - In 2024, Laopu Gold reported sales of approximately 9.8 billion RMB, a year-on-year increase of 166%, and a net profit of 1.47 billion RMB, up 254% [4]. - The company's gross profit reached 3.5 billion RMB, reflecting a 162.9% increase [4]. Group 2: Store Efficiency - Laopu Gold operates 36 self-owned stores, achieving sales of 8.53 billion RMB, with an average store efficiency of approximately 240 million RMB, the highest among all known jewelry brands in China [5][7]. - The average revenue per store for Laopu Gold surpasses that of luxury brands such as Van Cleef & Arpels and Cartier, which reported average revenues of 220 million RMB and 110 million RMB, respectively [5][7]. Group 3: Cash Flow Concerns - Despite high sales growth, Laopu Gold's cash flow has been negative since 2023, with a net cash outflow of 1.228 billion RMB in 2024 [7][14]. - The company has shown a significant increase in accounts receivable, rising from 100 million RMB in 2022 to 801 million RMB in 2024, indicating potential liquidity issues [20][22]. Group 4: Market Position and Competition - Laopu Gold holds a mere 2% market share in the ancient gold jewelry market, ranking seventh among major brands [15][16]. - The company faces competition from established players like Chow Tai Fook and Chow Sang Sang, which have reported declines in revenue and profit [4]. Group 5: Fundraising Activities - Laopu Gold raised 1.042 billion HKD during its IPO and announced a new share placement plan to raise approximately 2.715 billion HKD, nearly three times the IPO amount [17][19]. - The funds raised are intended to enhance the company's financial strength and support core business development, including store expansion and optimization [19]. Group 6: Inventory and Supply Chain Risks - Laopu Gold's inventory surged to 4.088 billion RMB, a 222.4% increase, outpacing revenue growth, which raises concerns about potential inventory mismanagement [25][26]. - The company relies heavily on a single supplier, with 92.6% of total procurement coming from its top five suppliers, indicating a risk of supply chain disruptions [27]. Group 7: Valuation and Future Outlook - Following a significant lock-up period expiration, 39.99% of Laopu Gold's shares were released, raising concerns about the sustainability of its current valuation [29]. - Analysts suggest that the company's valuation may be overstretched, requiring profit levels to reach 5 billion RMB by 2026 to justify its market cap, which may be challenging given its current cash flow situation [30][31].

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 112.46 CNY [3][7]. Core Insights - The company reported better-than-expected earnings in Q1, with significant growth from emerging brands [1]. - Revenue and net profit for 2024 are projected to be 10.778 billion CNY and 1.552 billion CNY, respectively, reflecting year-on-year growth of 21% and 30% [6]. - The company is expected to continue expanding its brand portfolio and market share in various segments, including men's skincare and medical post-operative recovery [6]. Financial Forecasts - The adjusted earnings per share (EPS) estimates for 2025-2027 are 4.56 CNY, 5.36 CNY, and 6.06 CNY, respectively [2][7]. - The company's revenue is forecasted to grow from 8.905 billion CNY in 2023 to 15.577 billion CNY in 2027, with a compound annual growth rate (CAGR) of approximately 10.7% [2][10]. - The gross margin is expected to improve from 69.9% in 2023 to 73.0% in 2027, indicating enhanced profitability [2][10]. Brand Performance - The main brand and the Cai Tang brand showed stable performance, while emerging brands like OR and Yuan Se Bo Ta experienced rapid growth, with revenue increases of 71.1% and 138.4%, respectively [6]. - Online sales channels grew by 23.7% in 2024, while offline channels saw a decline of 13.6% [6]. Market Position - The company has demonstrated resilience in a challenging consumer environment, maintaining strong performance across its brand matrix [6]. - The report highlights the company's ability to adapt and thrive despite market pressures, positioning it well for future growth [6].