Greater China Equity Long/Short Analyst

Eric Chen

Equity Bottom-Up

Anhui Conch Cement Company Limited manufactures cement products. The Company produces silicate cements, slag silicate cements, composite silicate cements, cement clinkers, and other products. Anhui Conch Cement Cement markets its products throughout China and worldwide.

<ul>
<li>We believe Anhui Conch is near the end of a prolonged downturn. Earnings should have bottomed out in 1Q24, with highly visible sequential Q/Q improvements throughout the rest of 2024.</li>
<li>The recovery is not demand-driven but cost-led as implementation of new national standards resulting in higher production costs led to industry-wide price-hikes, benefiting Anhui Conch the low-cost producer.</li>
<li>We see mild rebound in cement demand in 2025 will pave the way for further price hikes, reinforce the company’s earnings recovery and catalyze valuation expansion.</li>
</ul>


We believe Anhui Conch is near the end of a prolonged downturn. Earnings should have bottomed out in 1Q24, with highly visible sequential Q/Q improvements throughout the rest of 2024.
The recovery is not demand-driven but cost-led as implementation of new national standards resulting in higher production costs led to industry-wide price-hikes, benefiting Anhui Conch the low-cost producer.
We see mild rebound in cement demand in 2025 will pave the way for further price hikes, reinforce the company’s earnings recovery and catalyze valuation expansion.


Anhui Conch (914 HK): Turnaround in Sight

Asia Economist and CEO, Centennial Asia Advisors

Manu Bhaskaran

Asia Economist and CEO

Centennial Asia Advisors

At Centennial Asia Advisors, we tell it like it is. We have no vested interests, no need for a China wall, and no reason to skew our outlook any other way. With over 30 years experience covering Asia’s political economy, you can be sure our conclusions and analyses are based on the unadulterated facts. Through years of fine-tuning our research methodologies, we deliver a quality of macroeconomic analysis few other houses can match.

Centennial Asia Advisors is an independent research and advisory firm that works with governments, multilateral institutions, financial firms and leading MNCs.

Economic Policy and Strategic Advisors

Macroeconomics

<ul>
<li>China’s landmark Third Plenum of the ruling party disappointed by offering policy tweaks which appeared underwhelming given concerns over supply-demand imbalances and feeble animal spirits among consumers and investors. </li>
<li>Beijing appears fixated on long-term national security, self-sufficiency and technological superiority, perhaps believing that near-term headwinds can be managed. </li>
<li>But achieving these aims is a herculean task for an economy which remains stuck in a low-growth rut. We do not see a strong comeback in the economy.    </li>
</ul>


China’s landmark Third Plenum of the ruling party disappointed by offering policy tweaks which appeared underwhelming given concerns over supply-demand imbalances and feeble animal spirits among consumers and investors. 
Beijing appears fixated on long-term national security, self-sufficiency and technological superiority, perhaps believing that near-term headwinds can be managed. 
But achieving these aims is a herculean task for an economy which remains stuck in a low-growth rut. We do not see a strong comeback in the economy.    


China Economics: Third Plenum Fails To Move The Dial Despite Growth Headwinds

Founder & Head of Research, Fortress Hill Advisors

Alex Ng

Founder & Head of Research

Fortress Hill Advisors

Founded in Hong Kong in 2019, Fortress Hill Advisor seeks to provide premium economic and financial researches.

Premium Economic & Investment Research

Cross Asset Strategy

<ul>
<li>The Third Plenum of the Chinese Communist Party ended last Thursday and emphasise supporting private enterprises to take the lead in participating in major national technology projects.</li>
<li>The resolution emphasises on small-scale private enterprises and offer nothing for big tech enterprises except vague, questionable tax reform.</li>
<li>Therefore, as the resolution confines only to small-scale private enterprises, big techs like Tencent and Alibaba are hardly benefited.</li>
</ul>


The Third Plenum of the Chinese Communist Party ended last Thursday and emphasise supporting private enterprises to take the lead in participating in major national technology projects.
The resolution emphasises on small-scale private enterprises and offer nothing for big tech enterprises except vague, questionable tax reform.
Therefore, as the resolution confines only to small-scale private enterprises, big techs like Tencent and Alibaba are hardly benefited.


China: Does the Invitation to Private Enterprises for Public Projects Represent Major Policy Shift?

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

China Meidong Auto Holdings Limited is an automobile dealership and maintenance group in China.

<ul><li>Maintain BUY. Despite strong headwinds that dealers faced, we still project Meidong’s 1H24 net profit to be positive with subsidies from Porsche and Lexus.</li><li>We expect industrywide headwinds to continue in 2H24 but we believe investors could turn a bit more positive on Meidong’s FY25 outlook given removal of the convertible bond (CB) burden and a new NEV model cycle for BMW.</li><li>We project 1H24E net profit to be RMB43mn assuming no significant impairment. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Maintain BUY. Despite strong headwinds that dealers faced, we still project Meidong’s 1H24 net profit to be positive with subsidies from Porsche and Lexus.We expect industrywide headwinds to continue in 2H24 but we believe investors could turn a bit more positive on Meidong’s FY25 outlook given removal of the convertible bond (CB) burden and a new NEV model cycle for BMW.We project 1H24E net profit to be RMB43mn assuming no significant impairment. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Meidong Auto (1268 HK) - We Expect 1H24 to Be Still Profitable

Sunny Optical Technology Group / Equity Bottom-Up

Sunny Optical Technology Group Co., Limited designs and manufactures optical and optical related products. The Company's products include glass/plastic lenses, prisms, mobile phone camera modules, microscopes, surveying instruments, and other analytical instruments.

<ul><li>We upgrade Sunny Optical to BUY and raise our TP to HK$67.88 following 1H24 positive profit alert of 140-150% YoY growth, as we think Sunny’s GPM recovery, iPhone share gain and hybrid/periscope cam adoption are tracking ahead of expectations.</li><li>We revised up our FY24-25E EPS by 46-82% to reflect stronger GPM, iPhone share gain (18%/25% in 2024/25E, vs 15% in 2023), iPhone order wins (front-cam/TOF in 2024, hybrid lens in 2025) and periscopecam adoption in Android flagships.</li><li>We also believe AI smartphone launches will accelerate upgrade cycle in 2H24E. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We upgrade Sunny Optical to BUY and raise our TP to HK$67.88 following 1H24 positive profit alert of 140-150% YoY growth, as we think Sunny’s GPM recovery, iPhone share gain and hybrid/periscope cam adoption are tracking ahead of expectations.We revised up our FY24-25E EPS by 46-82% to reflect stronger GPM, iPhone share gain (18%/25% in 2024/25E, vs 15% in 2023), iPhone order wins (front-cam/TOF in 2024, hybrid lens in 2025) and periscopecam adoption in Android flagships.We also believe AI smartphone launches will accelerate upgrade cycle in 2H24E. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Sunny Optical (2382 HK) - Positive Profit Alert Alleviates GPM Concerns; Upgrade to BUY