HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>Although the 1Q24 revenue of <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> has edged down by 6.8%, this is not a concern as its order backlog suggested a resilient pipeline.</li>
<li>New orders signed increased by 35.7% with that for clean energy surged 100.2%. Order backlog of Rmb26.9bn represents a growth of 41.9% YoY and 17.8% against end-FY23.</li>
<li>Management also commented that there is a marked improvement in gross margin for 1Q24 and expects this trend to continue. Its 10.8x PER is inexpensive.</li>
</ul>


Although the 1Q24 revenue of CIMC Enric Holdings (3899 HK) has edged down by 6.8%, this is not a concern as its order backlog suggested a resilient pipeline.
New orders signed increased by 35.7% with that for clean energy surged 100.2%. Order backlog of Rmb26.9bn represents a growth of 41.9% YoY and 17.8% against end-FY23.
Management also commented that there is a marked improvement in gross margin for 1Q24 and expects this trend to continue. Its 10.8x PER is inexpensive.


CIMC Enric (3899 HK): Robust Order Backlog Outshined Lower 1Q24 Revenue

<ul>
<li>Despite weaker 2H23 results, <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> guided for solid recovery in FY24. Order backlogs reached Rmb22.9bn, which almost equals the full-year revenue.</li>
<li>Clean energy segment will be supported by vessel demand, hydrogen orders, and Angang Steel project contribution. Chemical and environmental segment should rebound in 2H24.</li>
<li>Liquid food spin-off is in process and it has won several domestic whiskey projects. As net cash equals 13% of share price, payout will be maintained at 50% (FY22: 40%). </li>
</ul>


Despite weaker 2H23 results, CIMC Enric Holdings (3899 HK) guided for solid recovery in FY24. Order backlogs reached Rmb22.9bn, which almost equals the full-year revenue.
Clean energy segment will be supported by vessel demand, hydrogen orders, and Angang Steel project contribution. Chemical and environmental segment should rebound in 2H24.
Liquid food spin-off is in process and it has won several domestic whiskey projects. As net cash equals 13% of share price, payout will be maintained at 50% (FY22: 40%). 


CIMC Enric (3899 HK): Positive Takeaways from Post-Result Call

<ul>
<li>
<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> has applied for its liquid food segment, under CLTP, to be quoted on the NEEQ. Subsequently, it plans to be listed on the BSE.</li>
<li>The move will not only provide an additional funding channel for this business but also enhance the valuations of CIMC Enric. BSE's IPOs have historically performed very well.</li>
<li>Upon successful listing, the attributable market cap of its two listed subsidiaries will be greater than its current market cap. This means its clean energy business is free.</li>
</ul>



CIMC Enric Holdings (3899 HK) has applied for its liquid food segment, under CLTP, to be quoted on the NEEQ. Subsequently, it plans to be listed on the BSE.
The move will not only provide an additional funding channel for this business but also enhance the valuations of CIMC Enric. BSE's IPOs have historically performed very well.
Upon successful listing, the attributable market cap of its two listed subsidiaries will be greater than its current market cap. This means its clean energy business is free.


CIMC Enric (3899 HK): One More Spin-Off Progressing

<ul>
<li>We like the 17.7% core earnings growth for <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> as this has demonstrated its operating strengths under a challenging environment in 1H23. </li>
<li>With orders on hand of Rmb20.6bn (+18.8% YoY), we see forward earnings well-covered. Also, management has turned even more positive on earnings and margin outlook in 2H23. </li>
<li>The hydrogen energy business maintains solid momentum with order backlog surging 116.9%. The spin-off of CIMC Safeway Technologies on the ChiNext Board is a near-term catalyst.</li>
</ul>


We like the 17.7% core earnings growth for CIMC Enric Holdings (3899 HK) as this has demonstrated its operating strengths under a challenging environment in 1H23. 
With orders on hand of Rmb20.6bn (+18.8% YoY), we see forward earnings well-covered. Also, management has turned even more positive on earnings and margin outlook in 2H23. 
The hydrogen energy business maintains solid momentum with order backlog surging 116.9%. The spin-off of CIMC Safeway Technologies on the ChiNext Board is a near-term catalyst.


CIMC Enric (3899 HK): Demonstrating Sustained Resilience

<ul>
<li>We see the recent sell-down of <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> unjustified. 1Q23 revenue grew a healthy 19.6%, and management indicated excellent margin expansion as well. </li>
<li>New orders signed accelerated in Mar to 21.6%, from just 10.7% in Jan-Feb. Its order backlog reached Rmb18.9bn (+22.3%). For hydrogen business, new orders even grew 61%. </li>
<li>Guidances are for double-digit revenue growth in FY23, and besides better gross margin, lower tax rates have benefited net margin. We estimate 1Q23 profit may have increased ~50%.</li>
</ul>


We see the recent sell-down of CIMC Enric Holdings (3899 HK) unjustified. 1Q23 revenue grew a healthy 19.6%, and management indicated excellent margin expansion as well. 
New orders signed accelerated in Mar to 21.6%, from just 10.7% in Jan-Feb. Its order backlog reached Rmb18.9bn (+22.3%). For hydrogen business, new orders even grew 61%. 
Guidances are for double-digit revenue growth in FY23, and besides better gross margin, lower tax rates have benefited net margin. We estimate 1Q23 profit may have increased ~50%.


CIMC Enric (3899 HK): It's Not My Fault, I'm Resilient

Hong Kong

CIMC Enric Holdings Ltd. designs, manufactures, and markets gas equipment.  The Company produces compressors, pressure vessels, gas refueling station trailers, and other gas equipment, as well as transportation equipment such as containers, trailers, tank equipments and airport equipments.

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CIMC Enric Holdings (3899 HK)

CIMC Enric (3899 HK): Robust Order Backlog Outshined Lower 1Q24 Revenue

While CIMC Enric's 1Q24 revenue was down, new orders signed increased by 35.7%. Order backlog also grew 41.9% YoY and 17.8% against end-FY23....

Osbert Tang, CFA

CIMC Enric (3899 HK): Positive Takeaways from Post-Result Call

CIMC Enric expects a solid recovery in FY24 despite weaker 2H23 results. Order backlogs nearly match full-year revenue, with clean energy and...

Osbert Tang, CFA

CIMC Enric (3899 HK): One More Spin-Off Progressing

CIMC Enric has applied to quote its liquid food segment on the NEEQ and then list it on the BSE, providing funding and boosting valuations. A...

Osbert Tang, CFA

CIMC Enric (3899 HK): Demonstrating Sustained Resilience

The 18.8% surge in orders on hand at end-1H23 means good forward earnings coverage and management has gotten more optimistic about the 2H23...

Osbert Tang, CFA

CIMC Enric (3899 HK): It's Not My Fault, I'm Resilient

1Q23 revenue grew 19.8% with excellent margin expansion. New order growth accelerated to 21.6%, from just 10.7% in Jan-Feb, with backlog rose 22.3%...

Osbert Tang, CFA

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52-week Range

Market Cap (USDm)

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CIMC Enric (3899 HK): Robust Order Backlog Outshined Lower 1Q24 Revenue

While CIMC Enric's 1Q24 revenue was down, new orders signed increased by 35.7%. Order backlog also grew 41.9% YoY and 17.8% against end-FY23....

Osbert Tang, CFA

CIMC Enric (3899 HK): Positive Takeaways from Post-Result Call

​CIMC Enric expects a solid recovery in FY24 despite weaker 2H23 results. Order backlogs nearly match full-year revenue, with clean energy and...

Osbert Tang, CFA

CIMC Enric (3899 HK): One More Spin-Off Progressing

​CIMC Enric has applied to quote its liquid food segment on the NEEQ and then list it on the BSE, providing funding and boosting valuations. A...

Osbert Tang, CFA

CIMC Enric (3899 HK): Demonstrating Sustained Resilience

The 18.8% surge in orders on hand at end-1H23 means good forward earnings coverage and management has gotten more optimistic about the 2H23...

Osbert Tang, CFA

CIMC Enric (3899 HK): It's Not My Fault, I'm Resilient

1Q23 revenue grew 19.8% with excellent margin expansion. New order growth accelerated to 21.6%, from just 10.7% in Jan-Feb, with backlog rose 22.3%...

Osbert Tang, CFA

CIMC Enric expects a solid recovery in FY24 despite weaker 2H23 results. Order backlogs nearly match full-year revenue, with clean energy and...

CIMC Enric has applied to quote its liquid food segment on the NEEQ and then list it on the BSE, providing funding and boosting valuations. A...