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.

Equity Bottom-Up

<ul><li>Feihe pre-announced its 1H results which came in as a miss with flattish revenue (vs CMBIe: LSD increase) and a 23% to 36% net profit decline (vs CMBIe: flattish).</li><li>We have alerted in our previous downgrade report that a nearterm recovery could just be wishful thinking given 1) likely persistent low birthrates, 2) heightening industry competition, 3) a down-trending product mix, and 4) production economy deleveraging. In our view, an inflection point remains remote and should there be any, it would take time for fertility intention to manifest into legit IMF consumption.</li><li>This is not to mention that family and child planning consumption is late-cycle beneficiary as opposite to dine-out and shorthaul travel demand. </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.

Feihe pre-announced its 1H results which came in as a miss with flattish revenue (vs CMBIe: LSD increase) and a 23% to 36% net profit decline (vs CMBIe: flattish).We have alerted in our previous downgrade report that a nearterm recovery could just be wishful thinking given 1) likely persistent low birthrates, 2) heightening industry competition, 3) a down-trending product mix, and 4) production economy deleveraging. In our view, an inflection point remains remote and should there be any, it would take time for fertility intention to manifest into legit IMF consumption.This is not to mention that family and child planning consumption is late-cycle beneficiary as opposite to dine-out and shorthaul travel demand. 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 Feihe (6186 HK) – 1H below us; near-term recovery could just be wishful thinking

Thematic (Sector/Industry)

<ul><li>We had diverging takeaways from our distributor chancel check after the Dragon Boat Festival holiday, with beer being the only segment with positive momentum over 2Q.</li><li>Considering the price gap between beer and other alcoholic drinks, and also the growing preference of low alcoholic content, in our view, breweries still offer a multi-year story that looks to be sustainable in the next 4-5 years.</li><li>In the contrary, we continue to see near-term drags in baijiu, dairies and condiments that not only led to a lacklustre 2Q but also a possible slow 2H. </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.

We had diverging takeaways from our distributor chancel check after the Dragon Boat Festival holiday, with beer being the only segment with positive momentum over 2Q.Considering the price gap between beer and other alcoholic drinks, and also the growing preference of low alcoholic content, in our view, breweries still offer a multi-year story that looks to be sustainable in the next 4-5 years.In the contrary, we continue to see near-term drags in baijiu, dairies and condiments that not only led to a lacklustre 2Q but also a possible slow 2H. 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 Consumer Staples – Divergence continues

<ul><li>We untangle the “household excess saving” enigma.</li><li>Instead of a silver bullet, we consider it a status-quo in which consumers are confident enough to spend (or invest) beyond their pre-pandemic budgets by tapping into their savings accumulated during the pandemic, after they first normalize their spending to prepandemic level.</li><li>In other words, we believe the use of “excess saving” would predominantly kick-in upon a full-fledged consumption recovery. </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.

We untangle the “household excess saving” enigma.Instead of a silver bullet, we consider it a status-quo in which consumers are confident enough to spend (or invest) beyond their pre-pandemic budgets by tapping into their savings accumulated during the pandemic, after they first normalize their spending to prepandemic level.In other words, we believe the use of “excess saving” would predominantly kick-in upon a full-fledged consumption recovery. 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 Consumer – From Reopening to Recovery

<ul><li>We take the view that family and child planning is unlikely to top the consumers’ wallet (as opposite to dine-out and short-haul travel demand), and IMF is unlikely to share a high sensitivity to China’s reopening.</li><li>While we concur with market view that the number of new borns could have troughed, however, it does not necessarily infer an immediate V-shape recovery that could take place within 1H23, not to mention seeing one over the course of the year.</li><li>The scenario should leave Feihe’s new capacity in Canada and Harbin under-utilized, and further weigh on GPM that has already seen pressure from an unfavorable sales mix change. </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.

We take the view that family and child planning is unlikely to top the consumers’ wallet (as opposite to dine-out and short-haul travel demand), and IMF is unlikely to share a high sensitivity to China’s reopening.While we concur with market view that the number of new borns could have troughed, however, it does not necessarily infer an immediate V-shape recovery that could take place within 1H23, not to mention seeing one over the course of the year.The scenario should leave Feihe’s new capacity in Canada and Harbin under-utilized, and further weigh on GPM that has already seen pressure from an unfavorable sales mix change. 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 Feihe (6186 HK) – Limited Upside upon a Lacklustre Outlook

<ul><li>2023 outlook. During the earnings call, management guided for a doubledigit growth for both revenue and net profits for 2023.</li><li>Despite the completion of its channel reform, we note that competition remains keen at a low birth rate.</li><li>We take the view that family and child planning is unlikely to top the spending agenda (as opposite to dine-out and short-haul travel demand), despite China’s reopening.</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.

2023 outlook. During the earnings call, management guided for a doubledigit growth for both revenue and net profits for 2023.Despite the completion of its channel reform, we note that competition remains keen at a low birth rate.We take the view that family and child planning is unlikely to top the spending agenda (as opposite to dine-out and short-haul travel demand), despite China’s reopening.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 Feihe (6186 HK) – A 5%+ dividend yield looks attractive despite sluggish growth

China

China Feihe Limited manufactures and sells dairy products. The Company provides infant milk formula products processing, production, marketing, and other services. China Feihe also sells infant milk formula products on some electronic commerce platforms.

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China Feihe (6186 HK)