HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>Russia-Ukraine war has raised commodity prices which are negative towards commodity users in short term. However, we see silver linings for Chinese utilities and energy companies in the longer term.</li>
<li>The conflict is expected to accelerate the progress of renewable projects currently under development, lead to a faster diversification away from fossils and increase gas supply from Russia to China. </li>
<li>Key beneficiaries include <a href="https://www.smartkarma.com/entities/xinjiang-goldwind-science-technology-h" target="_blank" data-smartkarma-citation="entities:10112:1" rel="noopener">Xinjiang Goldwind (2208 HK)</a>, <a href="https://www.smartkarma.com/entities/dongfang-electric-corporation-limited" target="_blank" data-smartkarma-citation="entities:1251:1" rel="noopener">Dongfang Electric (1072 HK)</a>, <a href="https://www.smartkarma.com/entities/china-longyuan-power-group-corp-ltd" target="_blank" data-smartkarma-citation="entities:14215:1" rel="noopener">China Longyuan Power (916 HK)</a>, <a href="https://www.smartkarma.com/entities/china-energy-engineering-group" target="_blank" data-smartkarma-citation="entities:21017:1" rel="noopener">Energy China (3996 HK)</a>, <a href="https://www.smartkarma.com/entities/power-construction-corporation-of-china-limited" target="_blank" data-smartkarma-citation="entities:24220:1" rel="noopener">Power China (601669 CH)</a> and the gas utilities.</li>
</ul>


Russia-Ukraine war has raised commodity prices which are negative towards commodity users in short term. However, we see silver linings for Chinese utilities and energy companies in the longer term.
The conflict is expected to accelerate the progress of renewable projects currently under development, lead to a faster diversification away from fossils and increase gas supply from Russia to China. 
Key beneficiaries include Xinjiang Goldwind (2208 HK), Dongfang Electric (1072 HK), China Longyuan Power (916 HK), Energy China (3996 HK), Power China (601669 CH) and the gas utilities.


Russia-Ukraine War: Longer Term Implications for China Utilities and Energy

Equity Bottom-Up

China Energy Engineering / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-energy-engineering-group" target="_blank" data-smartkarma-citation="entities:21017:1" rel="noopener">China Energy Engineering (3996 HK)</a> and <a href="https://www.smartkarma.com/entities/power-construction-corporation-of-china-limited" target="_blank" data-smartkarma-citation="entities:24220:1" rel="noopener">Power Construction Corporation Of China (601669 CH)</a> are the two giants in power construction industry in China; but there are significant differences between them.</li>
<li>Power China has better business and generation mix while Energy China won in terms of margin and profitability, leverage and financial position, new order momentum and hydrogen energy expansion. </li>
<li>We like Energy China "H" for cheap valuation, secured earnings and deep discount to Energy China "A". For just the A-shares, we prefer Power China "A" to Energy China "A".</li>
</ul>



China Energy Engineering (3996 HK) and Power Construction Corporation Of China (601669 CH) are the two giants in power construction industry in China; but there are significant differences between them.
Power China has better business and generation mix while Energy China won in terms of margin and profitability, leverage and financial position, new order momentum and hydrogen energy expansion. 
We like Energy China "H" for cheap valuation, secured earnings and deep discount to Energy China "A". For just the A-shares, we prefer Power China "A" to Energy China "A".


Compare and Contrast: Energy China 中国能建 (3996 HK/601868 CH) And Power China 中国电建 (601669 CH)

<ul>
<li>We expect more supportive measures to be rolled out on hydrogen energy development in 2022, and the recently announced MIIT Plan already showed an escalation of its industrial use. </li>
<li>Hydrogen may potentially account for 5% of final energy consumption in 2030 and 20% in 2060. Industrial use may represent 60% of total, driving tremendous opportunities for the players.</li>
<li>We think <a href="https://www.smartkarma.com/entities/dongfang-electric-corporation-limited" target="_blank" data-smartkarma-citation="entities:1251:1" rel="noopener">Dongfang Electric (1072 HK)</a>, <a href="https://www.smartkarma.com/entities/cimc-enric-holdings-ltd" target="_blank" data-smartkarma-citation="entities:47:1" rel="noopener">Cimc Enric Holdings (3899 HK)</a> and <a href="https://www.smartkarma.com/entities/weichai-power-co-ltd-h" target="_blank" data-smartkarma-citation="entities:12508:1" rel="noopener">Weichai Power Co Ltd H (2338 HK)</a> are the prime beneficiaries and they have made good progress lately.</li>
</ul>


We expect more supportive measures to be rolled out on hydrogen energy development in 2022, and the recently announced MIIT Plan already showed an escalation of its industrial use. 
Hydrogen may potentially account for 5% of final energy consumption in 2030 and 20% in 2060. Industrial use may represent 60% of total, driving tremendous opportunities for the players.
We think Dongfang Electric (1072 HK), Cimc Enric Holdings (3899 HK) and Weichai Power Co Ltd H (2338 HK) are the prime beneficiaries and they have made good progress lately.


China's Hydrogen Economy: More Excitements into 2022

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

Smartkarma

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Research Reinvented

Equity Capital Markets

Inner Mongolia Energy Engineering / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/24217" target="_blank" data-smartkarma-citation="entities:24217:1">Inner Mongolia Energy Engineering (1649 HK)</a>, a China Inner Mongolia-based provincial power solution provider, is seeking to raise US$150m to fund its expansion. In this insight, we will briefly go through the company's fundamentals, the industry's prospects, highlight red flags, compare its valuation to peers, and score the deal in our ECM Framework. </p><div><h2>Deal and framework score overview</h2></div><p>The below embed is from our IPO tool, which has been designed to provide you with timely information on all IPO…</p>

Inner Mongolia Energy Engineering (1649 HK), a China Inner Mongolia-based provincial power solution provider, is seeking to raise US$150m to fund its expansion. In this insight, we will briefly go through the company's fundamentals, the industry's prospects, highlight red flags, compare its valuation to peers, and score the deal in our ECM Framework. Deal and framework score overviewThe below embed is from our IPO tool, which has been designed to provide you with timely information on all IPO…

Inner Mongolia Energy Engineering IPO: Beware Power Investment Trends and Red Flags

Asia Ex-J Consumer/ Transport analyst

Valerie Law, CFA

<p>Extending my point about more demanding transportation frameworks going forward (see <a href="https://www.smartkarma.com/insights/comfortdelgro-fy16-results-an-era-where-competition-hits-a-higher-gear" target="_blank" data-smartkarma-citation="insights:8719">ComfortDelGro FY16 Results: An Era Where Competition Hits a Higher Gear</a> ), the recent fire-bomb attack on Hong Kong’s MTR that left 19 injured signals increasing costs for transport operators. This article presents another reason why investors should sell MTR Corp, on top of points already provided by fellow insight provider Sameer Taneja in an earlier piece <a href="https://www.smartkarma.com/insights/mtr-66-hk-conviction-sell-thesis" target="_blank" data-smartkarma-citation="insights:7982">MTR (66 HK): Conviction Sell Thesis</a></p><h2><strong>Security Costs to</strong></h2>…

Extending my point about more demanding transportation frameworks going forward (see ComfortDelGro FY16 Results: An Era Where Competition Hits a Higher Gear ), the recent fire-bomb attack on Hong Kong’s MTR that left 19 injured signals increasing costs for transport operators. This article presents another reason why investors should sell MTR Corp, on top of points already provided by fellow insight provider Sameer Taneja in an earlier piece MTR (66 HK): Conviction Sell ThesisSecurity Costs to…

66 HK and SBUS SP: Attack on HK Metro Signals Increases in Transport Operators' Costs

Hong Kong

China Energy Engineering Group Co. Ltd. (CEEC) provides infrastructure construction and investment for hydroelectrical works. The Company also offers power engineering, electric power equipment, technology, and human resources. CEEC provides its services in China and internationally.

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China Energy Engineering (3996 HK)

Russia-Ukraine War: Longer Term Implications for China Utilities and Energy

We should not overlook the potential long term impact of the Russia-Ukraine war on the Chinese utilities and energy companies as we find some...

Osbert Tang, CFA

Compare and Contrast: Energy China 中国能建 (3996 HK/601868 CH) And Power China 中国电建 (601669 CH)

We like Energy China "H" for cheap valuation, secured earnings and deep discount to "A". For just the A-shares, we prefer Power China "A" to Energy...

Osbert Tang, CFA

China's Hydrogen Economy: More Excitements into 2022

China's push for hydrogen energy use is likely to further escalate in 2022, following a soon-to-be announcement of top-level design plan for the...

Osbert Tang, CFA

Inner Mongolia Energy Engineering IPO: Beware Power Investment Trends and Red Flags

Inner Mongolia Energy Engineering (1649 HK), a China Inner Mongolia-based provincial power solution provider, is seeking to raise US$150m to fund...

Ke Yan, CFA, FRM

66 HK and SBUS SP: Attack on HK Metro Signals Increases in Transport Operators' Costs

Extending my point about more demanding transportation frameworks going forward (see ComfortDelGro FY16 Results: An Era Where Competition Hits a...

Valerie Law, CFA

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