HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>Despite weaker 2H23 results, <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> guided for solid recovery in FY24. Order backlogs reached Rmb22.9bn, which almost equals the full-year revenue.</li>
<li>Clean energy segment will be supported by vessel demand, hydrogen orders, and Angang Steel project contribution. Chemical and environmental segment should rebound in 2H24.</li>
<li>Liquid food spin-off is in process and it has won several domestic whiskey projects. As net cash equals 13% of share price, payout will be maintained at 50% (FY22: 40%). </li>
</ul>


Despite weaker 2H23 results, CIMC Enric Holdings (3899 HK) guided for solid recovery in FY24. Order backlogs reached Rmb22.9bn, which almost equals the full-year revenue.
Clean energy segment will be supported by vessel demand, hydrogen orders, and Angang Steel project contribution. Chemical and environmental segment should rebound in 2H24.
Liquid food spin-off is in process and it has won several domestic whiskey projects. As net cash equals 13% of share price, payout will be maintained at 50% (FY22: 40%). 


CIMC Enric (3899 HK): Positive Takeaways from Post-Result Call

<ul>
<li>
<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> has applied for its liquid food segment, under CLTP, to be quoted on the NEEQ. Subsequently, it plans to be listed on the BSE.</li>
<li>The move will not only provide an additional funding channel for this business but also enhance the valuations of CIMC Enric. BSE's IPOs have historically performed very well.</li>
<li>Upon successful listing, the attributable market cap of its two listed subsidiaries will be greater than its current market cap. This means its clean energy business is free.</li>
</ul>



CIMC Enric Holdings (3899 HK) has applied for its liquid food segment, under CLTP, to be quoted on the NEEQ. Subsequently, it plans to be listed on the BSE.
The move will not only provide an additional funding channel for this business but also enhance the valuations of CIMC Enric. BSE's IPOs have historically performed very well.
Upon successful listing, the attributable market cap of its two listed subsidiaries will be greater than its current market cap. This means its clean energy business is free.


CIMC Enric (3899 HK): One More Spin-Off Progressing

Thematic (Sector/Industry)

<ul>
<li>Supportive policies from central and local governments on the development of the hydrogen energy industry have boosted the share prices of the sector (up 12.3% YTD).</li>
<li>Inner Mongolia has eased regulations on electrolysis water hydrogen production projects while Shandong has waived hydrogen-powered vehicle tolls on highways. </li>
<li>
<a href="https://www.smartkarma.com/entities/beijing-sinohytec-co-ltd-57df3cd9-bd23-4f74-899b-d589f67fa85f" target="_blank" data-smartkarma-citation="entities:36866:1" rel="noopener">Beijing SinoHytec (2402 HK)</a>, <a href="https://www.smartkarma.com/entities/weichai-power-co-ltd-h" target="_blank" data-smartkarma-citation="entities:12508:1" rel="noopener">Weichai Power (2338 HK)</a>, <a href="https://www.smartkarma.com/entities/dongyue-group-ltd" target="_blank" data-smartkarma-citation="entities:20429:1" rel="noopener">Dongyue Group (189 HK)</a>, <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>, and <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> have recorded good progress in hydrogen business.</li>
</ul>


Supportive policies from central and local governments on the development of the hydrogen energy industry have boosted the share prices of the sector (up 12.3% YTD).
Inner Mongolia has eased regulations on electrolysis water hydrogen production projects while Shandong has waived hydrogen-powered vehicle tolls on highways. 

Beijing SinoHytec (2402 HK), Weichai Power (2338 HK), Dongyue Group (189 HK), CIMC Enric (3899 HK), and Dongfang Electric (1072 HK) have recorded good progress in hydrogen business.


China's Hydrogen Economy: Re-Igniting Interests

<ul>
<li>We like the 17.7% core earnings growth for <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> as this has demonstrated its operating strengths under a challenging environment in 1H23. </li>
<li>With orders on hand of Rmb20.6bn (+18.8% YoY), we see forward earnings well-covered. Also, management has turned even more positive on earnings and margin outlook in 2H23. </li>
<li>The hydrogen energy business maintains solid momentum with order backlog surging 116.9%. The spin-off of CIMC Safeway Technologies on the ChiNext Board is a near-term catalyst.</li>
</ul>


We like the 17.7% core earnings growth for CIMC Enric Holdings (3899 HK) as this has demonstrated its operating strengths under a challenging environment in 1H23. 
With orders on hand of Rmb20.6bn (+18.8% YoY), we see forward earnings well-covered. Also, management has turned even more positive on earnings and margin outlook in 2H23. 
The hydrogen energy business maintains solid momentum with order backlog surging 116.9%. The spin-off of CIMC Safeway Technologies on the ChiNext Board is a near-term catalyst.


CIMC Enric (3899 HK): Demonstrating Sustained Resilience

<ul>
<li>We see the recent sell-down of <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> unjustified. 1Q23 revenue grew a healthy 19.6%, and management indicated excellent margin expansion as well. </li>
<li>New orders signed accelerated in Mar to 21.6%, from just 10.7% in Jan-Feb. Its order backlog reached Rmb18.9bn (+22.3%). For hydrogen business, new orders even grew 61%. </li>
<li>Guidances are for double-digit revenue growth in FY23, and besides better gross margin, lower tax rates have benefited net margin. We estimate 1Q23 profit may have increased ~50%.</li>
</ul>


We see the recent sell-down of CIMC Enric Holdings (3899 HK) unjustified. 1Q23 revenue grew a healthy 19.6%, and management indicated excellent margin expansion as well. 
New orders signed accelerated in Mar to 21.6%, from just 10.7% in Jan-Feb. Its order backlog reached Rmb18.9bn (+22.3%). For hydrogen business, new orders even grew 61%. 
Guidances are for double-digit revenue growth in FY23, and besides better gross margin, lower tax rates have benefited net margin. We estimate 1Q23 profit may have increased ~50%.


CIMC Enric (3899 HK): It's Not My Fault, I'm Resilient

Hong Kong

CIMC Enric Holdings Ltd. designs, manufactures, and markets gas equipment.  The Company produces compressors, pressure vessels, gas refueling station trailers, and other gas equipment, as well as transportation equipment such as containers, trailers, tank equipments and airport equipments.

CIMC Enric Holdings (3899 HK)

CIMC Enric (3899 HK): Positive Takeaways from Post-Result Call

CIMC Enric expects a solid recovery in FY24 despite weaker 2H23 results. Order backlogs nearly match full-year revenue, with clean energy and...

Osbert Tang, CFA

CIMC Enric (3899 HK): One More Spin-Off Progressing

CIMC Enric has applied to quote its liquid food segment on the NEEQ and then list it on the BSE, providing funding and boosting valuations. A...

Osbert Tang, CFA

China's Hydrogen Economy: Re-Igniting Interests

Sichuan province held "the conference on further promoting the development and promotion of the entire green hydrogen industry chain" in the last...

Osbert Tang, CFA

CIMC Enric (3899 HK): Demonstrating Sustained Resilience

The 18.8% surge in orders on hand at end-1H23 means good forward earnings coverage and management has gotten more optimistic about the 2H23...

Osbert Tang, CFA

CIMC Enric (3899 HK): It's Not My Fault, I'm Resilient

1Q23 revenue grew 19.8% with excellent margin expansion. New order growth accelerated to 21.6%, from just 10.7% in Jan-Feb, with backlog rose 22.3%...

Osbert Tang, CFA

CIMC Enric (3899 HK): Positive Takeaways from Post-Result Call

​CIMC Enric expects a solid recovery in FY24 despite weaker 2H23 results. Order backlogs nearly match full-year revenue, with clean energy and...

Osbert Tang, CFA

CIMC Enric (3899 HK): One More Spin-Off Progressing

​CIMC Enric has applied to quote its liquid food segment on the NEEQ and then list it on the BSE, providing funding and boosting valuations. A...

Osbert Tang, CFA

China's Hydrogen Economy: Re-Igniting Interests

Sichuan province held "the conference on further promoting the development and promotion of the entire green hydrogen industry chain" in the last...

Osbert Tang, CFA

CIMC Enric (3899 HK): Demonstrating Sustained Resilience

The 18.8% surge in orders on hand at end-1H23 means good forward earnings coverage and management has gotten more optimistic about the 2H23...

Osbert Tang, CFA

CIMC Enric (3899 HK): It's Not My Fault, I'm Resilient

1Q23 revenue grew 19.8% with excellent margin expansion. New order growth accelerated to 21.6%, from just 10.7% in Jan-Feb, with backlog rose 22.3%...

Osbert Tang, CFA

CIMC Enric expects a solid recovery in FY24 despite weaker 2H23 results. Order backlogs nearly match full-year revenue, with clean energy and...

CIMC Enric has applied to quote its liquid food segment on the NEEQ and then list it on the BSE, providing funding and boosting valuations. A...