HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>While <a href="https://www.smartkarma.com/entities/cimc-enric-holdings-ltd" target="_blank" data-smartkarma-citation="entities:47:1" rel="noopener">CIMC Enric Holdings (3899 HK)</a>'s share price has lagged YTD, its 3Q25 and 9M25 results look decent with 6.2% and 12.9% YoY increase, respectively.</li>
<li>Its backlog orders amount of Rmb30.8bn, up by 10.9% YoY, is a record high. This is already enough to cover the full-year FY26 projected revenue.</li>
<li>With a 13.4% 3-year EPS CAGR, its PERs are inexpensive. Meanwhile, it is in an excellent position to thrive under China's 15th Five-Year Plan (2026-2030).</li>
</ul>


While CIMC Enric Holdings (3899 HK)'s share price has lagged YTD, its 3Q25 and 9M25 results look decent with 6.2% and 12.9% YoY increase, respectively.
Its backlog orders amount of Rmb30.8bn, up by 10.9% YoY, is a record high. This is already enough to cover the full-year FY26 projected revenue.
With a 13.4% 3-year EPS CAGR, its PERs are inexpensive. Meanwhile, it is in an excellent position to thrive under China's 15th Five-Year Plan (2026-2030).


CIMC Enric (3899 HK): A Laggard That Is Poised to Revive

Thematic (Sector/Industry)

<ul>
<li>YTD, the Rmb has appreciated by 1.3% against the USD, reversing the 2.8% depreciation in 2024. The gainers in FY24 may now turn to losers, and vice versa.</li>
<li>The top 5 gainers in FY24 are <a href="https://www.smartkarma.com/entities/shangri-la-asia-ltd" target="_blank" data-smartkarma-citation="entities:19690:1" rel="noopener">Shangri-La Asia (69 HK)</a>, <a href="https://www.smartkarma.com/entities/singamas-container-holdings" target="_blank" data-smartkarma-citation="entities:13602:1" rel="noopener">Singamas Container (716 HK)</a>, <a href="https://www.smartkarma.com/entities/china-everbright-environment-group-limited" target="_blank" data-smartkarma-citation="entities:15946:1" rel="noopener">China Everbright Env (257 HK)</a>, <a href="https://www.smartkarma.com/entities/byd-electronic-international-co-ltd" target="_blank" data-smartkarma-citation="entities:1927:1" rel="noopener">BYD Electronics (285 HK)</a>, and <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>. </li>
<li>The FY24 losers, and potential FY25 gainers, are <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China (753 HK)</a>, <a href="https://www.smartkarma.com/entities/china-southern-airlines-co-ltd" target="_blank" data-smartkarma-citation="entities:1078:1" rel="noopener">China Southern Airlines (1055 HK)</a>, <a href="https://www.smartkarma.com/entities/china-eastern-airlines-co-h" target="_blank" data-smartkarma-citation="entities:1079:1" rel="noopener">China Eastern Airlines (670 HK)</a>, <a href="https://www.smartkarma.com/entities/china-national-building-ma-h" target="_blank" data-smartkarma-citation="entities:184:1" rel="noopener">CNBM (3323 HK)</a>, and <a href="https://www.smartkarma.com/entities/h-world-group-ltd" target="_blank" data-smartkarma-citation="entities:33487:1" rel="noopener">H World (1179 HK)</a>. </li>
</ul>


YTD, the Rmb has appreciated by 1.3% against the USD, reversing the 2.8% depreciation in 2024. The gainers in FY24 may now turn to losers, and vice versa.
The top 5 gainers in FY24 are Shangri-La Asia (69 HK), Singamas Container (716 HK), China Everbright Env (257 HK), BYD Electronics (285 HK), and China Education Group (839 HK). 
The FY24 losers, and potential FY25 gainers, are Air China (753 HK), China Southern Airlines (1055 HK), China Eastern Airlines (670 HK), CNBM (3323 HK), and H World (1179 HK). 


HK & China Strategy: Potential Gainers of Rmb Appreciation Against USD

<ul>
<li>Our list of HK-listed industrial companies indicated that the US generated an average of 22.9% of sales. With diversified production bases, higher tariffs may only affect ~10% of revenue.</li>
<li>
<a href="https://www.smartkarma.com/entities/vesync" target="_blank" data-smartkarma-citation="entities:31067:1" rel="noopener">Vesync (2148 HK)</a>, <a href="https://www.smartkarma.com/entities/chervon-holdings-limited" target="_blank" data-smartkarma-citation="entities:35309:1" rel="noopener">Chervon Holdings (2285 HK)</a>, and <a href="https://www.smartkarma.com/entities/aac-technologies-holdings-inc" target="_blank" data-smartkarma-citation="entities:6544:1" rel="noopener">AAC Technologies Holdings (2018 HK)</a> are more exposed given their significant US sales yet most production is still in China. </li>
<li>While the US generated over 50% of the revenue of <a href="https://www.smartkarma.com/entities/techtronic-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:4561:1" rel="noopener">Techtronic Industries (669 HK)</a> and <a href="https://www.smartkarma.com/entities/nexteer-automotive-group-ltd" target="_blank" data-smartkarma-citation="entities:15483:1" rel="noopener">Nexteer Automotive (1316 HK)</a>, they are less exposed given their worldwide manufacturing presence. </li>
</ul>


Our list of HK-listed industrial companies indicated that the US generated an average of 22.9% of sales. With diversified production bases, higher tariffs may only affect ~10% of revenue.

Vesync (2148 HK), Chervon Holdings (2285 HK), and AAC Technologies Holdings (2018 HK) are more exposed given their significant US sales yet most production is still in China. 
While the US generated over 50% of the revenue of Techtronic Industries (669 HK) and Nexteer Automotive (1316 HK), they are less exposed given their worldwide manufacturing presence. 


China & HK Strategy: Stocks Exposed to the US and Higher Tariffs

<ul>
<li>Foreign exchange gains/losses are major swing factors in FY22 results of many companies and we think investors may have overlooked their importance in driving FY23 earnings. </li>
<li>With Rmb/USD exchange rate appreciated YTD, reversing the 8.5% depreciation in last year, the demons of many companies in last year will become positive earnings contributor. </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>, <a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a>, <a href="https://www.smartkarma.com/entities/shenzhen-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2875:1" rel="noopener">Shenzhen Expressway (548 HK)</a> and <a href="https://www.smartkarma.com/entities/kunlun-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:10054:1" rel="noopener">Kunlun Energy (135 HK)</a> are key beneficiaries, while <a href="https://www.smartkarma.com/entities/cimc-enric-holdings-ltd" target="_blank" data-smartkarma-citation="entities:47:1" rel="noopener">CIMC Enric (3899 HK)</a> may turned into exchange losses.</li>
</ul>


Foreign exchange gains/losses are major swing factors in FY22 results of many companies and we think investors may have overlooked their importance in driving FY23 earnings. 
With Rmb/USD exchange rate appreciated YTD, reversing the 8.5% depreciation in last year, the demons of many companies in last year will become positive earnings contributor. 

Shenzhen International (152 HK), ENN Energy (2688 HK), Shenzhen Expressway (548 HK) and Kunlun Energy (135 HK) are key beneficiaries, while CIMC Enric (3899 HK) may turned into exchange losses.


China Strategy: It Is the Foreign Exchange Impact, Stupid!

<ul>
<li>The NPC and CPPCC will likely to cover more on the future of China's energy security and potential development of a national master plan for the hydrogen energy industry chain. </li>
<li>The latest announcement of the 14th 5-year hydrogen energy Plan in Inner Mongolia is another important mark for the industry, with the province's end-2025 industry value set at Rmb100bn.  </li>
<li>We expect more opportunities after the "Two Meetings" for key players including <a href="https://www.smartkarma.com/entities/cimc-enric-holdings-ltd" target="_blank" data-smartkarma-citation="entities:47:1" rel="noopener">Cimc Enric (3899 HK)</a>, <a href="https://www.smartkarma.com/entities/dongfang-electric-corporation-limited" target="_blank" data-smartkarma-citation="entities:1251:1" rel="noopener">Dongfang Electric (1072 HK)</a> and <a href="https://www.smartkarma.com/entities/weichai-power-co-ltd-h" target="_blank" data-smartkarma-citation="entities:12508:1" rel="noopener">Weichai Power H (2338 HK)</a> to benefit. </li>
</ul>


The NPC and CPPCC will likely to cover more on the future of China's energy security and potential development of a national master plan for the hydrogen energy industry chain. 
The latest announcement of the 14th 5-year hydrogen energy Plan in Inner Mongolia is another important mark for the industry, with the province's end-2025 industry value set at Rmb100bn.  
We expect more opportunities after the "Two Meetings" for key players including Cimc Enric (3899 HK), Dongfang Electric (1072 HK) and Weichai Power H (2338 HK) to benefit. 


China's Hydrogen Economy: NPC and CPPCC to Give a Boost?

China

CIMC Enric provides key equipment, engineering services, and system solutions for the transport, storage, and processing of clean energy, chemicals, and liquid food. The company manufactures equipment for natural gas, LPG, and hydrogen, including storage tanks, transportation vehicles, and refueling station systems, alongside stainless steel tanks for liquid food and tank containers for chemicals. Headquartered in Shenzhen, China, the company was founded in 2004.

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CIMC Enric (3899 HK)