HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>The collapse in share price of <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> is too excessive. The concerns on margin and orders are overplayed and its latest financial result is solid.</li>
<li>Recurring profit surged 24.8% in 3Q23 and gross margin expanded both YoY and QoQ. For 9M23, new orders rose 19.2% to reach 98% of full-year FY22 level.</li>
<li>We estimate backlog at Rmb197bn, or 3x consensus FY23F revenue, and this provides excellent protection to forward earnings. Its 5.8x and 4.4x PERs are just too undervalued.</li>
</ul>


The collapse in share price of Dongfang Electric (1072 HK) is too excessive. The concerns on margin and orders are overplayed and its latest financial result is solid.
Recurring profit surged 24.8% in 3Q23 and gross margin expanded both YoY and QoQ. For 9M23, new orders rose 19.2% to reach 98% of full-year FY22 level.
We estimate backlog at Rmb197bn, or 3x consensus FY23F revenue, and this provides excellent protection to forward earnings. Its 5.8x and 4.4x PERs are just too undervalued.


Dongfang Electric (1072 HK): We See an Opportunity

<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

<ul>
<li>After posting a decent FY22 result, earnings momentum 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> should sustain, underpinned by clean energy recovery and chemical and environmental equipment demand.  </li>
<li>2M23 new orders growth stayed healthy at 10.7%, evidencing positive demand outlook. Hydrogen Energy is a growing driver as revenue will reach Rmb700m in FY23 and Rmb3bn in FY25.</li>
<li>The stock's PERs of 11.7x and 9.5x for FY23 and FY24, respectively, appear inexpensive in view of 19% earnings CAGR. Net cash position also adds an appeal to us.</li>
</ul>


After posting a decent FY22 result, earnings momentum for CIMC Enric Holdings (3899 HK) should sustain, underpinned by clean energy recovery and chemical and environmental equipment demand.  
2M23 new orders growth stayed healthy at 10.7%, evidencing positive demand outlook. Hydrogen Energy is a growing driver as revenue will reach Rmb700m in FY23 and Rmb3bn in FY25.
The stock's PERs of 11.7x and 9.5x for FY23 and FY24, respectively, appear inexpensive in view of 19% earnings CAGR. Net cash position also adds an appeal to us.


CIMC Enric (3899 HK): Growth Outlook Secured by Encouraging Orderbook

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyse the changes of A-H premium on 160 stocks over the last week. The average A-H premium was 63.7% as of Dec 12th.</li>
<li>The average A-H premium changed by 1.1ppt week-on-week, led by real estate, energy, information technology and offset by communication services.</li>
<li>We highlight weekly changes in A-H premium for MCC, China Merchants Securities, Chongqing Rural Commercial Bank, CNOOC, Cgn Power, Baiyunshan Pharma.</li>
</ul>


We analyse the changes of A-H premium on 160 stocks over the last week. The average A-H premium was 63.7% as of Dec 12th.
The average A-H premium changed by 1.1ppt week-on-week, led by real estate, energy, information technology and offset by communication services.
We highlight weekly changes in A-H premium for MCC, China Merchants Securities, Chongqing Rural Commercial Bank, CNOOC, Cgn Power, Baiyunshan Pharma.


A-H Premium Weekly (Dec 12th): MCC, China Merchants Securities, Chongqing Rural Commercial Bank

<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

China

Dongfang Electric Corporation Limited manufactures and sells hydro and steam power generators and AC/DC electric motors. The Company also provides repair, upgrade, maintenance, and other services for the products.

Dongfang Electric Corporation (600875 CH)

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
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Dividend (Yield)	0.00

Dongfang Electric Corporation (600875 CH)

Dongfang Electric (1072 HK): We See an Opportunity

The collapse in share price is excessive, and concerns about margins and orders are overplayed. Its estimated order backlog stood at 3x FY23F...

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): Growth Outlook Secured by Encouraging Orderbook

CIMC Enric's earnings growth will stay encouraging and this is supported by healthy orders on hand and good new orders momentum. Hydrogen revenue...

Osbert Tang, CFA

A-H Premium Weekly (Dec 12th): MCC, China Merchants Securities, Chongqing Rural Commercial Bank

We analyzed A-H premium changes in the past week and highlight A-H premium changes for MCC, China Merchants Securities, Chongqing Rural Commercial...

Ke Yan, CFA, FRM

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

CIMC Enric announced that it will buy back no more than 30m shares, equivalent to 1.5% of the total outstanding shares. The total consideration...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Dongfang Electric (1072 HK): We See an Opportunity

​The collapse in share price is excessive, and concerns about margins and orders are overplayed. Its estimated order backlog stood at 3x FY23F...

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): Growth Outlook Secured by Encouraging Orderbook

CIMC Enric's earnings growth will stay encouraging and this is supported by healthy orders on hand and good new orders momentum. Hydrogen revenue...

Osbert Tang, CFA

A-H Premium Weekly (Dec 12th): MCC, China Merchants Securities, Chongqing Rural Commercial Bank

We analyzed A-H premium changes in the past week and highlight A-H premium changes for MCC, China Merchants Securities, Chongqing Rural Commercial...

Ke Yan, CFA, FRM

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

CIMC Enric announced that it will buy back no more than 30m shares, equivalent to 1.5% of the total outstanding shares. The total consideration...

Osbert Tang, CFA

The collapse in share price is excessive, and concerns about margins and orders are overplayed. Its estimated order backlog stood at 3x FY23F...