In today’s briefing:
- Dongfang Electric (1072 HK): Heading Towards Another Fruitful Year
- Remegen Co Ltd (9995.HK/688331.CH) – The Story Has Changed
- Meilan Airport (357 HK): Higher Visibility into Earnings Recovery Outlook
- Space Race Reality Check
Dongfang Electric (1072 HK): Heading Towards Another Fruitful Year
- Dongfang Electric (1072 HK)‘s 35.1% increase in FY22 recurring earnings demonstrated its healthy operations. Slowdown in 4Q22 (+14.4% YoY) is more a result of pandemic disruption.
- Record new orders of Rmb65.6bn were signed FY22 (+16.3% YoY), and 4Q22 even saw a 25% growth. End-FY22 backlog is estimated to be enough to cover 1.66x FY22 revenue.
- DEC targets a 35% growth in power generation equipment production volume in FY23. Power storage, including pumped storage, and hydrogen energy are important engines going forward.
Remegen Co Ltd (9995.HK/688331.CH) – The Story Has Changed
- Considering DS-8201’s outstanding data and strong competing drugs, RC48 would probably contribute revenue to RemeGen mainly from GC and UC indications in China.Overseas revenue would be mainly from UC indication.
- After Pfizer acquired Seagen, there are concerns that RC48 (a “Me-Worse”) may be returned by Pfizer. If it is the case, only the revenue in China market should be considered.
- Based on 2022 annual results, we think it is time to reassess the outlook and sales forecast of RC48 and RC18, because the story has changed for RemeGen.
Meilan Airport (357 HK): Higher Visibility into Earnings Recovery Outlook
- FY22 results announced last week were in line excluding non-recurring items. The results provided latest evidence of monetization potential of its passenger traffic and insights into its cost base.
- We trim 2023 net profit estimate by 10% to RMB520 million and maintain RMB1 billion net profit estimate for 2025. Expect 25%/150% return by 2023/25 respectively based on 20x P/E.
- Duty-Free concession agreement renewal in 2025 is a key positive catalyst, but we also caution potential follow-on share issuance this year could be an overhang on stock price.
Space Race Reality Check
- This week, space launch company Virgin Galactic’s funding woes escalated as emergency talks with potential investors fell through.
- As a result, the company announced a staggering 85% workforce reduction and paused operations until further funding is secured.
- Since going public in 2021 with a $3.7 billion valuation, Virgin Orbit’s value has plummeted by 99% as of its last close, highlighting the realities of space investing.
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