External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Thematic (Sector/Industry)

<ul><li>Even though we are trimming our FY22E net profit forecasts, we believe the sector has already bottomed out in 1Q23E, supported by: 1) decent YTD retail sales growth, 2) turn around in inventory level and retail discounts.</li><li>While we expect a more conservative FY23E guidance by the brands, we do see decent upside surprises from GP margin improvements, helped by better retail discounts and cheaper input costs, etc.</li><li>Therefore, for brands with a higher DTC mix, we believe brands like Anta (2020 HK) and Topsports (6110 HK) are going to outperform.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Even though we are trimming our FY22E net profit forecasts, we believe the sector has already bottomed out in 1Q23E, supported by: 1) decent YTD retail sales growth, 2) turn around in inventory level and retail discounts.While we expect a more conservative FY23E guidance by the brands, we do see decent upside surprises from GP margin improvements, helped by better retail discounts and cheaper input costs, etc.Therefore, for brands with a higher DTC mix, we believe brands like Anta (2020 HK) and Topsports (6110 HK) are going to outperform.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Sportswear Sector – We expect prudent guidance but decent margins

HK/China Equity Long-Short

Osbert Tang, CFA

<ul>
<li>
<a href="https://www.smartkarma.com/entities/xinjiang-goldwind-science-technology-h" target="_blank" data-smartkarma-citation="entities:10112:1" rel="noopener">Xinjiang Goldwind Science &amp; Technology (2208 HK)</a> performed badly in 2022 and with sustained pressure on WTG price, earnings will stay under pressure. We will only pick up post-FY22 result.</li>
<li>Removal of "zero COVID" policy and consumption recovery should revive sportswear business of <a href="https://www.smartkarma.com/entities/china-dongxiang-group-co" target="_blank" data-smartkarma-citation="entities:1068:1" rel="noopener">China Dongxiang Group (3818 HK)</a>. Improvement in equity market will boost its investment portfolio value.   </li>
<li>Valuation retreat for <a href="https://www.smartkarma.com/entities/china-longyuan-power-group-corp-ltd" target="_blank" data-smartkarma-citation="entities:14215:1" rel="noopener">China Longyuan Power (916 HK)</a> has made it more attractive. Rebound in electricity demand, continued green energy push and potential asset injection are drivers. </li>
</ul>



Xinjiang Goldwind Science &amp; Technology (2208 HK) performed badly in 2022 and with sustained pressure on WTG price, earnings will stay under pressure. We will only pick up post-FY22 result.
Removal of "zero COVID" policy and consumption recovery should revive sportswear business of China Dongxiang Group (3818 HK). Improvement in equity market will boost its investment portfolio value.   
Valuation retreat for China Longyuan Power (916 HK) has made it more attractive. Rebound in electricity demand, continued green energy push and potential asset injection are drivers. 


Our Three Worst Calls in 2022: Signs of Reversal in 2023

<ul><li>Resilient online sales growth during double 11, where Tik Tok, PDD and JD platforms continued to outperform.</li><li>Based on our channel check and CMBI est., the online GMV growth during 2022’s double 11 was at ~14% YoY, inline with CMBI est. and beat market expectation, similar to online sales growth in Sep 2022 and had picked up vs Oct 2022.</li><li>In terms of platforms, YoY growth for Alibaba (Tmall + Tao Bao)/ JD/ PDD/ TikTok increased by ~flattish/ ~teens/ 27%/ 38%.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Resilient online sales growth during double 11, where Tik Tok, PDD and JD platforms continued to outperform.Based on our channel check and CMBI est., the online GMV growth during 2022’s double 11 was at ~14% YoY, inline with CMBI est. and beat market expectation, similar to online sales growth in Sep 2022 and had picked up vs Oct 2022.In terms of platforms, YoY growth for Alibaba (Tmall + Tao Bao)/ JD/ PDD/ TikTok increased by ~flattish/ ~teens/ 27%/ 38%.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Sportswear Sector – Sequential improvements during double 11

<ul>
<li>More policy measures will be rolled out by the Chinese government to support domestic consumption in 2022; and the growing nationalistic trend will benefit leading domestic brands. </li>
<li>Within the consumer discretionary sector, we identify <a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports Products (2020 HK)</a>, <a href="https://www.smartkarma.com/entities/bosideng-international-holdings-ltd" target="_blank" data-smartkarma-citation="entities:6537:1" rel="noopener">Bosideng International Holdings (3998 HK)</a> and <a href="https://www.smartkarma.com/entities/haier-smart-home-co-ltd-b3ef445f-0f54-4586-8c58-9073de98d60e" target="_blank" data-smartkarma-citation="entities:31105:1" rel="noopener">Haier Smart Home (6690 HK)</a> as the prime beneficiaries of this trend.</li>
<li>All of them are leaders in their respective sub-segment, have exemplary competitive edges against foreign players and are investing heavily in technology and distribution to solidify their moats. </li>
</ul>


More policy measures will be rolled out by the Chinese government to support domestic consumption in 2022; and the growing nationalistic trend will benefit leading domestic brands. 
Within the consumer discretionary sector, we identify Anta Sports Products (2020 HK), Bosideng International Holdings (3998 HK) and Haier Smart Home (6690 HK) as the prime beneficiaries of this trend.
All of them are leaders in their respective sub-segment, have exemplary competitive edges against foreign players and are investing heavily in technology and distribution to solidify their moats. 


China Consumer Discretionary: Beneficiaries of The Nationalistic Trend

<ul>
<li>China Education Sector, specifically <a href="https://www.smartkarma.com/entities/china-education-group-holdin" target="_blank" data-smartkarma-citation="entities:18218:1" rel="noopener">China Education Group (839 HK)</a>, should see better performance in 2022 as regulatory concerns gradually ease. 1H22 result for higher education segment should be a proof.</li>
<li>
<a href="https://www.smartkarma.com/entities/shenzhen-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen International (152 HK)</a> could reverse the bad fortune in 2022 on the back of realisation of undervalued assets, expansion of logistics facilities and better performance at Shenzhen Airlines.</li>
<li>
<a href="https://www.smartkarma.com/entities/china-dongxiang-group-co" target="_blank" data-smartkarma-citation="entities:1068:1" rel="noopener">China Dongxiang (3818 HK)</a> remains an undervalued asset play. Its ability to realise value of its investment portfolio, potential resumption of dividend payout and recovery of sportswear business are drivers.</li>
</ul>


China Education Sector, specifically China Education Group (839 HK), should see better performance in 2022 as regulatory concerns gradually ease. 1H22 result for higher education segment should be a proof.

Shenzhen International (152 HK) could reverse the bad fortune in 2022 on the back of realisation of undervalued assets, expansion of logistics facilities and better performance at Shenzhen Airlines.

China Dongxiang (3818 HK) remains an undervalued asset play. Its ability to realise value of its investment portfolio, potential resumption of dividend payout and recovery of sportswear business are drivers.


Our Three Worst Calls in Last Year and Any Room for a Reversal in 2022?

China

China Dongxiang (Group) Co., Ltd. designs, develops, markets, and sells sport-related apparel, footwear, and accessories under brands such as Kappa and Phenix. The company also engages in retail sales of sportswear, investments in financial assets, and other ventures including children's clothing, hotel management, tourism, and real estate. It was founded in 2002 and is headquartered in Beijing, People's Republic of China.

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China Dongxiang (3818 HK)

China Sportswear Sector – We expect prudent guidance but decent margins

While we expect a more conservative FY23E guidance by the brands, we do see decent upside surprises from GP margin improvements, helped by better...

CMB International

Our Three Worst Calls in 2022: Signs of Reversal in 2023

Share prices of our three worst calls in 2022 experienced good rebounds so far into 2023. We think outlook for China Dongxiang and China Longyuan...

Osbert Tang, CFA

China Sportswear Sector – Sequential improvements during double 11

Based on our channel check and CMBI est., the online GMV growth during 2022’s double 11 was at ~14% YoY, inline with CMBI est. and beat market...

CMB International

China Consumer Discretionary: Beneficiaries of The Nationalistic Trend

We identify Anta Sports, Bosideng and Haier Smart Home as the beneficiaries of rising nationalistic trend of China's consumer discretionary sector...

Osbert Tang, CFA

Our Three Worst Calls in Last Year and Any Room for a Reversal in 2022?

China Education Sector, Shenzhen Intl and China Dongxiang are the three worst calls that we made in last year. We believe there is room for a...

Osbert Tang, CFA

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