HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>
<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> logged a 40.1% growth in reported profit and a 36.5% increase in new orders in 3Q22, both represent excellent sequential momentum.</li>
<li>A 0.5pp 3Q22 gross margin expansion demonstrated order execution and cost control strengths. We also forecast end-FY22 backlog at 1.8x FY22F revenue, well securing outlook.  </li>
<li>DEC is set to see accelerated growth momentum from rising power storage, particularly pumped storage, demand in the medium term. Yet, it only trades on cheap 8.1x FY23F PER.</li>
</ul>



Dongfang Electric (1072 HK) logged a 40.1% growth in reported profit and a 36.5% increase in new orders in 3Q22, both represent excellent sequential momentum.
A 0.5pp 3Q22 gross margin expansion demonstrated order execution and cost control strengths. We also forecast end-FY22 backlog at 1.8x FY22F revenue, well securing outlook.  
DEC is set to see accelerated growth momentum from rising power storage, particularly pumped storage, demand in the medium term. Yet, it only trades on cheap 8.1x FY23F PER.


Dongfang Electric (1072 HK): Surge in 3Q22 Profit and Acceleration of New Orders

<ul>
<li>Strong new orders in 2H22 and FY23 are the drivers for <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> after it posted a 31.6% earnings growth and new orders of Rmb36.7bn in 1H22.</li>
<li>Demand outlook for its major products including coal-fired, gas turbine, renewable, pumped storage and hydrogen energy are all very encouraging. </li>
<li>We estimate order backlog will equal to 1.6x FY22F revenue by year-end. Despite solid outperformance, DEC is still cheap at 12.6x and 9.8x PERs for FY22 and FY23.</li>
</ul>


Strong new orders in 2H22 and FY23 are the drivers for Dongfang Electric (1072 HK) after it posted a 31.6% earnings growth and new orders of Rmb36.7bn in 1H22.
Demand outlook for its major products including coal-fired, gas turbine, renewable, pumped storage and hydrogen energy are all very encouraging. 
We estimate order backlog will equal to 1.6x FY22F revenue by year-end. Despite solid outperformance, DEC is still cheap at 12.6x and 9.8x PERs for FY22 and FY23.


Dongfang Electric (1072 HK): At Full Throttle

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Lanzhou Zhuangyuan Pasture / Event-Driven

<ul>
<li>On the 25 April, PRC dairy farmer <a href="https://www.smartkarma.com/entities/lanzhou-zhuangyuan-pasture-co-ltd" target="_blank" data-smartkarma-citation="entities:10174:1" rel="noopener">Lanzhou Zhuangyuan Pasture (1533 HK)</a> announced a Conditional Cash Offer for all its H-shares at $10.89/share. </li>
<li>This two-step voluntary cash offer incorporated a Scheme-like vote and a 90% tendering condition. </li>
<li>Shareholders voted for the transaction on the 29 June. The tendering condition has now been satisfied. The last day of trading is on the 1 August.  </li>
</ul>


On the 25 April, PRC dairy farmer Lanzhou Zhuangyuan Pasture (1533 HK) announced a Conditional Cash Offer for all its H-shares at $10.89/share. 
This two-step voluntary cash offer incorporated a Scheme-like vote and a 90% tendering condition. 
Shareholders voted for the transaction on the 29 June. The tendering condition has now been satisfied. The last day of trading is on the 1 August.  


Zhuangyuan Pasture (1533 HK): Offer Now Unconditional

<ul>
<li>Back on the 25 April, PRC dairy farmer <a href="https://www.smartkarma.com/entities/lanzhou-zhuangyuan-pasture-co-ltd" target="_blank" data-smartkarma-citation="entities:10174:1" rel="noopener">Lanzhou Zhuangyuan Pasture (1533 HK)</a> announced a Conditional Cash Offer for all its H-shares at $10.89/share. The Offer Doc is now out.</li>
<li>This two-step voluntary cash offer involves a Scheme-like vote and a 90% tendering condition. The EGM will be held on the 29 June. </li>
<li>This transaction could potentially be wrapped up late-July. The FY21 dividend should also be added to the Offer terms.</li>
</ul>


Back on the 25 April, PRC dairy farmer Lanzhou Zhuangyuan Pasture (1533 HK) announced a Conditional Cash Offer for all its H-shares at $10.89/share. The Offer Doc is now out.
This two-step voluntary cash offer involves a Scheme-like vote and a 90% tendering condition. The EGM will be held on the 29 June. 
This transaction could potentially be wrapped up late-July. The FY21 dividend should also be added to the Offer terms.


Zhuangyuan Pasture (1533 HK): 29th June EGM For H-Share Offer

<ul>
<li>PRC dairy farmer <a href="https://www.smartkarma.com/entities/lanzhou-zhuangyuan-pasture-co-ltd" target="_blank" data-smartkarma-citation="entities:10174:1" rel="noopener">Lanzhou Zhuangyuan Pasture (1533 HK)</a> has announced a Conditional Cash Offer for all H-shares at $10.89/share.</li>
<li>The Offer is being done via a Voluntary Cash Offer, therefore an onerous 90% tendering condition is present.</li>
<li>This transaction could potentially be wrapped up late-July. The FY21 dividend may also be added to terms. </li>
</ul>


PRC dairy farmer Lanzhou Zhuangyuan Pasture (1533 HK) has announced a Conditional Cash Offer for all H-shares at $10.89/share.
The Offer is being done via a Voluntary Cash Offer, therefore an onerous 90% tendering condition is present.
This transaction could potentially be wrapped up late-July. The FY21 dividend may also be added to terms. 


Zhuangyuan Pasture (1533 HK): H-Share Offer Via Buyback

China

Harbin Electric Company Limited is primarily engaged in the manufacturing and sales of power-generation equipment. Its core activities include manufacturing complete sets of large-scale thermal, hydro, and nuclear power generation equipment, providing turnkey engineering for power plant projects, and developing marine propulsion systems and electric drive units. The company was founded in October 1994 and is headquartered in Harbin, China.

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Harbin Electric (1133 HK)

Dongfang Electric (1072 HK): Surge in 3Q22 Profit and Acceleration of New Orders

DEC has impressive 3Q22 profit and accelerated new order momentum. It is set to ride on China's policy to build a "technologically strong country"...

Osbert Tang, CFA

Dongfang Electric (1072 HK): At Full Throttle

Outlook of coal-fired, gas turbine, renewable, pumped storage and hydrogen energy segments all points to strong order momentum after a moderate...

Osbert Tang, CFA

Zhuangyuan Pasture (1533 HK): Offer Now Unconditional

The gross spread has narrowed to 0.5%. The Offer is now unconditional in all respects. This is not a super liquid arb situation. If not in, I'd be...

David Blennerhassett

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52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Dongfang Electric (1072 HK): Surge in 3Q22 Profit and Acceleration of New Orders

DEC has impressive 3Q22 profit and accelerated new order momentum. It is set to ride on China's policy to build a "technologically strong country"...

Osbert Tang, CFA

Dongfang Electric (1072 HK): At Full Throttle

Outlook of coal-fired, gas turbine, renewable, pumped storage and hydrogen energy segments all points to strong order momentum after a moderate...

Osbert Tang, CFA

Zhuangyuan Pasture (1533 HK): Offer Now Unconditional

The gross spread has narrowed to 0.5%. The Offer is now unconditional in all respects. This is not a super liquid arb situation. If not in, I'd be...

David Blennerhassett

Zhuangyuan Pasture (1533 HK): 29th June EGM For H-Share Offer

Currently trading at gross/annualised spread of 8.6%/52.8%, incl. the final divi. That looks attractive. Although recent deal structures have...

David Blennerhassett

Zhuangyuan Pasture (1533 HK): H-Share Offer Via Buyback

Assuming late July payment, and inclusive of the FY21 dividend of RMB0.047/share, then I suggest buying up to ~HK$10.50/share or a gross/annualised...

David Blennerhassett