HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/dongfang-electric-corporation-limited" target="_blank" data-smartkarma-citation="entities:1251:1" rel="noopener">Dongfang Electric Corporation (1072 HK)</a> (DEC) has been rallying on the back of its hydrogen energy angle and the pumped storage story. Given the company's experience and leadership in hydro generating equipment, we think it is well positioned to capture the gigantic market opportunity from the government's push to increase pumped storage capacity in the country by potentially a CAGR of 16% between 2020 and 2035. </p><p>DEC's edges are its expertise and technical competence - it has completed complicated projects like the world's largest pumped storage (Fengning, Hebei), highest operating water heads in China (Changlongshan, Zhejiang) and largest single unit size of generation (Xianju, Zhejiang). Currently, it has pipeline in Fujian, Xinjiang, Chongqing and Henan among others. Despite the recent spike in share price, valuations are still not too demanding at 12.7x PER for FY21 and 11.4x for FY22. We even see likeliness for earnings upgrade after 1H21 result announcement set for 27-Aug.</p>

Dongfang Electric Corporation (1072 HK) (DEC) has been rallying on the back of its hydrogen energy angle and the pumped storage story. Given the company's experience and leadership in hydro generating equipment, we think it is well positioned to capture the gigantic market opportunity from the government's push to increase pumped storage capacity in the country by potentially a CAGR of 16% between 2020 and 2035. DEC's edges are its expertise and technical competence - it has completed complicated projects like the world's largest pumped storage (Fengning, Hebei), highest operating water heads in China (Changlongshan, Zhejiang) and largest single unit size of generation (Xianju, Zhejiang). Currently, it has pipeline in Fujian, Xinjiang, Chongqing and Henan among others. Despite the recent spike in share price, valuations are still not too demanding at 12.7x PER for FY21 and 11.4x for FY22. We even see likeliness for earnings upgrade after 1H21 result announcement set for 27-Aug.

Dongfang Electric (1072 HK): Pumped Additionally by Pumped Storage Story

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

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyse the changes of A-H premium on 146 stocks over the last week. The average A-H premium was 105.7% as of Jul 12th.</li>
<li>The average A-H premium changed by -2.5ppt week-on-week, led by consumer staples, energy, consumer discretionary and offset by real estate, utilities, information technology.</li>
<li>We highlight weekly changes in A-H premium for Wuapptec, China Telecom, Remegen, Hua Hong Semi, Flat Glass .</li>
</ul>


We analyse the changes of A-H premium on 146 stocks over the last week. The average A-H premium was 105.7% as of Jul 12th.
The average A-H premium changed by -2.5ppt week-on-week, led by consumer staples, energy, consumer discretionary and offset by real estate, utilities, information technology.
We highlight weekly changes in A-H premium for Wuapptec, China Telecom, Remegen, Hua Hong Semi, Flat Glass .


A-H Premium Weekly (Jul 12th):Wuapptec, China Telecom, Remegen, Hua Hong Semi, Flat Glass

Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

Shanghai Rural Commercial Bank / Event-Driven

<ul>
<li>CSI 300 represents the 300 largest stocks by market cap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500.</li>
<li>The reference period for the June 2024 review is now complete. There are some changes to the expected ADDs/DELs list since I published my last insight (<a href="https://www.smartkarma.com/insights/quiddity-leaderboard-csi-300-500-jun-24-shorts-down-11-vs-index-since-mid-feb-change-the-hedge" target="_blank" rel="noopener">link</a>) ~3 weeks ago.</li>
<li>In this insight, we take a look at our final expectations for index changes in June 2024.</li>
</ul>


CSI 300 represents the 300 largest stocks by market cap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500.
The reference period for the June 2024 review is now complete. There are some changes to the expected ADDs/DELs list since I published my last insight (link) ~3 weeks ago.
In this insight, we take a look at our final expectations for index changes in June 2024.


Quiddity Leaderboard CSI 300/​​500 Jun 24: Final Expectations; US$3.4bn One-Way; New Trade Idea

<ul>
<li>We analyse the changes of A-H premium on 146 stocks over the last week. The average A-H premium was 132.9% as of Apr 5th.</li>
<li>The average A-H premium changed by 5.3ppt week-on-week, led by consumer staples, health care, real estate.</li>
<li>We analyzed A-H premium changes in the past week and highlight A-H premium changes for Baiyunshan, Jiangxi Copper, ZTE, Fosun Pharma, Air China, Joinn Lab.</li>
</ul>


We analyse the changes of A-H premium on 146 stocks over the last week. The average A-H premium was 132.9% as of Apr 5th.
The average A-H premium changed by 5.3ppt week-on-week, led by consumer staples, health care, real estate.
We analyzed A-H premium changes in the past week and highlight A-H premium changes for Baiyunshan, Jiangxi Copper, ZTE, Fosun Pharma, Air China, Joinn Lab.


A-H Premium Weekly (Apr 5th): 21 Stocks at 1Y High

<ul>
<li>
<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> reached another record year with net profit surging 24.2% in FY23. Favourable product mix has benefited gross margin which expanded 0.8pp YoY.</li>
<li>Record new orders of Rmb86.5bn (+31.9% YoY) have been signed and there is a recovery in momentum in 4Q23. Its end-FY23 backlog should be enough to cover 3.1x FY24F revenue.</li>
<li>DEC is well-positioned to capture the demand for hydrogen energy and power storage. With 19.3% 3-year earnings CAGR, its 5.1x PER and 8.2% dividend yield are attractive.</li>
</ul>



Dongfang Electric (1072 HK) reached another record year with net profit surging 24.2% in FY23. Favourable product mix has benefited gross margin which expanded 0.8pp YoY.
Record new orders of Rmb86.5bn (+31.9% YoY) have been signed and there is a recovery in momentum in 4Q23. Its end-FY23 backlog should be enough to cover 3.1x FY24F revenue.
DEC is well-positioned to capture the demand for hydrogen energy and power storage. With 19.3% 3-year earnings CAGR, its 5.1x PER and 8.2% dividend yield are attractive.


Dongfang Electric (1072 HK): Good Profit, Record Orders

China

Zhuzhou CRRC Times Electric Co., Ltd. provides and integrates train-borne electrical systems for the PRC Railway industry.  The Company also develops, manufactures, and sells train power converters, auxiliary power supply equipment and control systems for trains for urban rail systems

Zhuzhou CRRC Times Electric Co., Ltd. (3898 HK)

Ningbo Sanxing Electric Company Limited develops, produces and sells energy measurement and data acquisition products and power distribution equipment. The Company's prodcuts include intelligent power meters, general electronic energy meters, induction meters, amorphous alloy transformers, oil-immersed transformers, dry type transformers, box-type substation and switchgear boxes.

Ningbo Sanxing Medical Electric (601567 CH)

Dongfang Electric Corporation Limited manufactures and sells hydro and steam power generators and AC/DC electric motors. The Company also provides repair, upgrade, maintenance, and other services for the products.

Dongfang Electric Corporation (600875 CH)

Jiangsu Zhongtian Technology Co., Ltd. manufactures and markets optic cables, optic fibers, electric cable materials and accessories, related components, and related controlling systems.

Jiangsu Zhongtian Technologies Co, Ltd. (600522 CH)

Sieyuan Electric Company Limited manufactures and markets power supply and converting equipment as well as high voltage electrical apparatus and high voltage monitoring instruments.  The Company's  main products include arc suppression coils, variable frequency power sources, lightning arrester on-line monitoring instruments, and anti-disturbance test instruments.

TBEA Co., Ltd. manufactures and markets electrical transformers, wires and cables, and other accessory equipment. Through its subsidiaries, the Company also develops and manages real estate.

Henan Pinggao Electric Co., Ltd. manufactures and markets electrical equipment. The Company produces high pressure plates, high voltage equipment, circuit breakers, switches, insulated switchgears, and other products. Henan Pinggao Electric also operates import and export businesses.

China XD Electric Co., Ltd. designs, produces, sells and tests power transmission, distribution and control equipment. The company's products include high voltage switchgear substation, transformer, inductor, capacitor, instrument transformer, and insulator.

Sunwoda Electronic Company Limited develops, designs, produces and sells li-ion battery module.  The company also produces membrate switches and precision structures.

Xinjiang Goldwind Science & Technology Co., Ltd. manufactures wind generator sets, provides consulting service in building and operating wind generating plants, builds and operates middle-sized wind generating plants.

Xinjiang Goldwind Science & Technology (2208 HK)

Suzlon Energy Ltd. designs, manufactures, operates, and maintains wind generating equipment.  The Company constructs large wind parks.

Acuity Brands, Inc. designs, produces, and distributes a full range of indoor and outdoor lighting and control systems for commercial and institutional, industrial, infrastructure, and residential applications. The Company manufactures or procures lighting products primarily in North America, Europe, and Asia.

Regal Rexnord Corporation designs, manufactures, and sells electric motors and controls. The Company offers gearboxes, automotive transmissions, rotary cutting tools, automatic transfer switches, and electric generators. Regal Beloit markets its products to distributors, original equipment manufacturers, and end users worldwide.

Fujikura Ltd. manufactures and sells wires and cables such as optical fiber cables and coaxial cables. The Company's products include optical transmission system, electronic materials, and telecommunication cables.

FUJI ELECTRIC CO.,LTD manufactures electric machinery and electronic devices. The Company's products include automatic vending machines, factory automation equipment, and power supplies, as well as information and electronic components such as power semiconductors and integrated circuits (ICs).

Generac Holdings, Inc. manufactures automatic, stationary standby and portable generators.  The Company's generators serve the residential, commercial, industrial and telecommunications markets.

Fortune Electric Co., Ltd. designs, manufactures, and markets power transformers, distribution transformers, switchgears, capacitors, and distribution apparatus.

Hyundai Electric & Energy Systems (HE&E), which makes various electric equipment including transformers, switchgear, motors, low & medium voltage circuit breakers, power electronics, and power electronics & control systems.

Sensata Technologies Holding plc manufactures and distributes electronic components. The Company offers automotive sensors, motor protectors, circuit breakers, thermostats, pressure sensors, and switches. Sensata Technologies Holding serves energy, aerospace, agriculture, automotive, and construction industries worldwide.

Bharat Heavy Electricals Limited manufactures power plant equipment. The Company's products include gas turbines, generators, thermal sets, diesel shunters, turbo sets, hydro sets, power transformers, switch gears, circuit breakers and boilers. The Company also manufactures compressors, valves, rectifiers, pumps, capacitors, oil rigs, as well as castings and forgings.

Shanghai Electric Group Company Limited manufactures power generation equipment. The Company produces and sells thermal generator set, nuclear power units, wind power equipment, power transmission and distribution equipment, and other products. Shanghai Electric Group also manufactures environmental protection equipment.

Shanghai Electric Group Company (601727 CH)

Price Gauge
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Shanghai Electric Group Company (601727 CH)

Dongfang Electric (1072 HK): Pumped Additionally by Pumped Storage Story

Dongfang Electric has interesting angles of being a play on China's hydrogen energy and pumped storage development push. Despite recent rally, the...

Osbert Tang, CFA

A-H Premium Weekly (Jul 12th):Wuapptec, China Telecom, Remegen, Hua Hong Semi, Flat Glass

We analyzed A-H premium changes in the past week and highlight A-H premium changes for Wuapptec, China Telecom, Remegen, Hua Hong Semi, Flat Glass .

Ke Yan, CFA, FRM

Quiddity Leaderboard CSI 300/500 Jun 24: Final Expectations; US$3.4bn One-Way; New Trade Idea

The official changes is expected at the end of this month. I expect the names with clear positive flow expectations to outperform those with clear...

Janaghan Jeyakumar, CFA

A-H Premium Weekly (Apr 5th): 21 Stocks at 1Y High

We analyzed A-H premium changes in the past week and highlight A-H premium changes for Baiyunshan, Jiangxi Copper, ZTE, Fosun Pharma, Air China,...

Ke Yan, CFA, FRM

Dongfang Electric (1072 HK): Good Profit, Record Orders

Dongfang Electric reports record profits and new orders in FY23, positioning well for growth in hydrogen energy and power storage. Order backlog...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Dongfang Electric (1072 HK): Pumped Additionally by Pumped Storage Story

Dongfang Electric has interesting angles of being a play on China's hydrogen energy and pumped storage development push. Despite recent rally, the...

Osbert Tang, CFA

A-H Premium Weekly (Jul 12th):Wuapptec, China Telecom, Remegen, Hua Hong Semi, Flat Glass

We analyzed A-H premium changes in the past week and highlight A-H premium changes for Wuapptec, China Telecom, Remegen, Hua Hong Semi, Flat Glass .

Ke Yan, CFA, FRM

Quiddity Leaderboard CSI 300/​​500 Jun 24: Final Expectations; US$3.4bn One-Way; New Trade Idea

The official changes is expected at the end of this month. I expect the names with clear positive flow expectations to outperform those with clear...

Janaghan Jeyakumar, CFA

A-H Premium Weekly (Apr 5th): 21 Stocks at 1Y High

We analyzed A-H premium changes in the past week and highlight A-H premium changes for Baiyunshan, Jiangxi Copper, ZTE, Fosun Pharma, Air China,...

Ke Yan, CFA, FRM

Dongfang Electric (1072 HK): Good Profit, Record Orders

​Dongfang Electric reports record profits and new orders in FY23, positioning well for growth in hydrogen energy and power storage. Order backlog...

Osbert Tang, CFA

Quiddity Leaderboard CSI 300/500 Jun 24: Final Expectations; US$3.4bn One-Way; New Trade Idea

Dongfang Electric reports record profits and new orders in FY23, positioning well for growth in hydrogen energy and power storage. Order backlog...