Daily Brief Industrials: Cssc Offshore & Marine Engg Group, Takasago Thermal Engineering, Adani Ports & Special Economic Zone, China State Construction Int’L, Hutchmed China Ltd, S.F. Holding and more

• Huge volumes continue to be traded on the mainland share markets. SOUTHBOUND volumes dropped sharply but net buying continued strongly.
• Stocks in HK and mainland markets fell heavily with HK’s main indices down 6-7% and China’s blue chip indices down 3.3-3.6% (CSI 500 – 4.8%).
• Within H/A Pairs, after outperforming the HK/mainland spread for weeks, spreads got shellacked. Worst week in a long time (-3.7%), perhaps on the back of “disappointing” lack of stimulus measures.

• Takasago Thermal Engineering (1969 JP) is one of the top 10 players in Japan for energy efficiency players for industrial clients, especially semiconductors. 
• Japan Metropolitan Govt bought stake in Rapidus, signifying a potential long-term business potential for Takasago Thermal Engineering. 
• Valuation is no longer dirt cheap but still at a favorable level given its potential enlarged revenue growth. 

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.

• Adani Ports & Special Economic Zone
• Bharti Airtel

• China State Construction Int’l (3311 HK)‘s backlog of HK$418.26bn is enough to cover 3x consensus forecast revenue of FY25, providing comfort for secured earnings outlook. 
• The focus on public housing and municipal projects limits its exposure to the real estate market. Its consecutive earnings growth in last five years demonstrated its resilience.
• With ROE of 15-16%, its P/B of 0.8x is cheap. The reduction in operating cash outflow supports higher payout ratio, and its dividend yield of 5.6-6.3% is healthy. 

• HUTCHMED will receive a US$20 million milestone payment from its partner Takeda. In our view, peak sales of fruquintinib is expected to reach about US$700 million in overseas markets.
• After the Head of AstraZeneca China has been detained by authorities, AstraZeneca’s future commercialization would be affected, which will have a negative impact on savolitinib and HUTCHMED in short term.
• Reasonable market value of HUTCHMED based on the three major products is about US$2.7-3.3 billion assuming P/S of 4. If market value is below US$2.5 billion, HUTCHMED is undervalued.

• October volume firmed, but price data is mixed; X-border activity trended stronger
• ZTO’s shares sagged after it reported weaker Q324 margins & lowered FY24 guidance
• Market leader SF Holding’s long-awaited HK IPO should price & begin trading this week