Daily Brief China: Oriental Watch, Semiconductor Manufacturing International Corp (SMIC), Sino-Ocean Group and more

• Oriental Watch (398 HK) cycled into favorable comps for April-June 2023 owing to COVID-related closures in China in 2022 for the same period. 
• Another favorable data point was the Emperor Watch & Jewellery (887 HK) positive profit alert for H1 FY23 ( Jan-Jun 2023), where the company guided >100% net profit growth. 
• Oriental Watch (398 HK) trades at 6.9x FY24e, with more than 50% of the market cap in cash and a ~100% payout ratio resulting in a 14% dividend yield. 

• We expect SMIC to report C1Q23 top-line and non-IFRS net income 2% and 16% vs. consensus, respectively.
• We suggest SMIC’s ability to supply sanctioned firms with 14/7nm nodes provides it with significant pricing power. We expect the decline in SMIC’s wafer ASP to slow.
• We expect overall 2H demand to improve due to (1) normalizing fabless inventory levels, and (2) stabilized smartphone demand. We maintain BUY rating and raise our TP to HK$ 26.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

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