HK/China Equity Long-Short

Osbert Tang, CFA

Equity Capital Markets

Sany Heavy Industry / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sany-heavy-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:20183:1" rel="noopener">Sany Heavy Industry (600031 CH)</a>'s IPO price range is set at HK$20.3-21.3, aiming at raising HK$11.9bn based on the mid-point IPO price.</li>
<li>Key strengths are excellent growth potential globally, a leading market position, excellent R&amp;D capability, and a solid financial track record.</li>
<li>Sany Heavy's fair valuation is a 5-10% discount to its A-share, in our view, implying an H-share price of HK$22.06-23.29, leaving limited upside from the IPO level.</li>
</ul>



Sany Heavy Industry (600031 CH)'s IPO price range is set at HK$20.3-21.3, aiming at raising HK$11.9bn based on the mid-point IPO price.
Key strengths are excellent growth potential globally, a leading market position, excellent R&amp;D capability, and a solid financial track record.
Sany Heavy's fair valuation is a 5-10% discount to its A-share, in our view, implying an H-share price of HK$22.06-23.29, leaving limited upside from the IPO level.


Sany Heavy Industry IPO: Valuation Assessment

Thematic (Sector/Industry)

<ul>
<li>For 1H25, the companies under our coverage will report a 16.8% earnings growth. Breaking down by quarter, 2Q25 growth will accelerate to 30.8%, from 14.1% in 1Q25. </li>
<li>The best growth rates are at <a href="https://www.smartkarma.com/entities/china-national-building-ma-h" target="_blank" data-smartkarma-citation="entities:184:1" rel="noopener">China National Building Material (3323 HK)</a>, <a href="https://www.smartkarma.com/entities/china-international-capital-corporation-ltd" target="_blank" data-smartkarma-citation="entities:1071:1" rel="noopener">CICC (3908 HK)</a>, <a href="https://www.smartkarma.com/entities/beijing-capital-international-airport-bcia" target="_blank" data-smartkarma-citation="entities:10626:1" rel="noopener">Beijing Capital Intl Airport (694 HK)</a>, <a href="https://www.smartkarma.com/entities/tongcheng-travel-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel (780 HK)</a>, and <a href="https://www.smartkarma.com/entities/sitc-international-holdings" target="_blank" data-smartkarma-citation="entities:15301:1" rel="noopener">SITC Intl (1308 HK)</a>. </li>
<li>The worst ones are <a href="https://www.smartkarma.com/entities/china-travel-international-investment-hong-kong" target="_blank" data-smartkarma-citation="entities:3879:1" rel="noopener">China Travel Intl (308 HK)</a>, <a href="https://www.smartkarma.com/entities/cosco-shipping-energy-tran-h" target="_blank" data-smartkarma-citation="entities:646:1" rel="noopener">Cosco Shipping Energy Transp (1138 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-tourism-group-duty-free" target="_blank" data-smartkarma-citation="entities:36229:1" rel="noopener">CTG Duty Free (1880 HK)</a>, and <a href="https://www.smartkarma.com/entities/pacific-basin-shipping-ltd" target="_blank" data-smartkarma-citation="entities:929:1" rel="noopener">Pacific Basin (2343 HK)</a>. </li>
</ul>


For 1H25, the companies under our coverage will report a 16.8% earnings growth. Breaking down by quarter, 2Q25 growth will accelerate to 30.8%, from 14.1% in 1Q25. 
The best growth rates are at China National Building Material (3323 HK), CICC (3908 HK), Beijing Capital Intl Airport (694 HK), Tongcheng Travel (780 HK), and SITC Intl (1308 HK). 
The worst ones are China Travel Intl (308 HK), Cosco Shipping Energy Transp (1138 HK), China Southern Airlines (1055 HK), CTG Duty Free (1880 HK), and Pacific Basin (2343 HK). 


China & HK Strategy: 1H25 Preview - Where Are the Upside and Downside Surprises?

Chief Executive Officer, Emmer Capital Partners Limited

Manishi Raychaudhuri

Chief Executive Officer

Emmer Capital Partners Limited

Emmer Capital Partners is an Asia Pacific focused financial advisory firm engaging in strategic financial asset allocation advice, bespoke thematic research and advising early-stage companies and connecting them to investors. Emmer Capital provides macro-economic and multi-asset investment strategy inputs to institutions, family offices, private wealth managers, private equity, and corporate boards directly and through independent research platforms. Emmer Capital also advises a wide range of startup companies on fund raising and business strategy. Emmer Capital's active engagement with the print and electronic media reaches a broad spectrum of investors across the globe.

Equity Bottom-Up

<ul>
<li>Since inception on May 15, our Model Portfolio (up 6.2%) underperformed the MSCI Asia-ex-Japan index (up 7.87%) due to underperforming stock picks in India, ASEAN and China consumer proxies.</li>
<li>The main themes: China's changing consumption and investment patterns, Korea's improving corporate governance, continuing global infrastructure investments and India's earnings disappointment. Korea, HK/China remain overweight; India is downgraded to Neutral.</li>
<li>We exclude Meituan, Titan, Infosys, Bharat Dynamics, Krafton. We include Laopu Gold, Lonking Holdings, China Hongqiao, AIA and Hyundai Engineering and Construction. We are now Neutral Industrials and Underweight Technology.</li>
</ul>


Since inception on May 15, our Model Portfolio (up 6.2%) underperformed the MSCI Asia-ex-Japan index (up 7.87%) due to underperforming stock picks in India, ASEAN and China consumer proxies.
The main themes: China's changing consumption and investment patterns, Korea's improving corporate governance, continuing global infrastructure investments and India's earnings disappointment. Korea, HK/China remain overweight; India is downgraded to Neutral.
We exclude Meituan, Titan, Infosys, Bharat Dynamics, Krafton. We include Laopu Gold, Lonking Holdings, China Hongqiao, AIA and Hyundai Engineering and Construction. We are now Neutral Industrials and Underweight Technology.


Asian Equity: Changes to Model Portfolio: Korea, HK/CN Overweight. India Neutral; ASEAN Underweight

<ul>
<li>There is a pick-up in heavy machinery sales in Jun, benefiting <a href="https://www.smartkarma.com/entities/lonking-holdings-ltd" target="_blank" data-smartkarma-citation="entities:3944:1" rel="noopener">Lonking Holdings (3339 HK)</a>, <a href="https://www.smartkarma.com/entities/sany-heavy-equipment-intl" target="_blank" data-smartkarma-citation="entities:11104:1" rel="noopener">Sany Heavy Equipment (631 HK)</a>, and <a href="https://www.smartkarma.com/entities/zoomlion-heavy-industry-h" target="_blank" data-smartkarma-citation="entities:7817:1" rel="noopener">Zoomlion Heavy Industry H (1157 HK)</a>. </li>
<li>Indications are for strong 1H25 earnings, with <a href="https://www.smartkarma.com/entities/guangxi-liugong-machinery-a" target="_blank" data-smartkarma-citation="entities:16809:1" rel="noopener">Guangxi Liugong A (000528 CH)</a> seeing 20-30% growth. 1Q25 results of the peers also pointed to solid interim profit.<a href="https://www.smartkarma.com/entities/sany-heavy-equipment-intl" target="_blank" data-smartkarma-citation="entities:11104:1" rel="noopener"></a>
</li>
<li>Despite an average of a 44.6% rally for the HK-listed companies in the sector, their FY25F PER of 10.4x is undemanding. The current consensus forecasts are too conservative. </li>
</ul>


There is a pick-up in heavy machinery sales in Jun, benefiting Lonking Holdings (3339 HK), Sany Heavy Equipment (631 HK), and Zoomlion Heavy Industry H (1157 HK). 
Indications are for strong 1H25 earnings, with Guangxi Liugong A (000528 CH) seeing 20-30% growth. 1Q25 results of the peers also pointed to solid interim profit.

Despite an average of a 44.6% rally for the HK-listed companies in the sector, their FY25F PER of 10.4x is undemanding. The current consensus forecasts are too conservative. 


China Heavy Machinery Sector: Anticipating More Upside

<ul>
<li>Trump's "reciprocal tariffs" have led to over 10% fall in the Hong Kong market, but there are some names that only came down by 3.2% on average.</li>
<li>Their characteristics are: 1.) domestically focused, 2.) net cash position, 3.) secure demand, 4.) consumption downgrade beneficiary, and 5.) good dividends.</li>
<li>These stocks are <a href="https://www.smartkarma.com/entities/xinhua-winshare-publishing-media-co-ltd" target="_blank" data-smartkarma-citation="entities:15072:1" rel="noopener">Xinhua Winshare (811 HK)</a>, <a href="https://www.smartkarma.com/entities/lonking-holdings-ltd" target="_blank" data-smartkarma-citation="entities:3944:1" rel="noopener">Lonking Holdings (3339 HK)</a>, <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>, <a href="https://www.smartkarma.com/entities/mixue-group" target="_blank" data-smartkarma-citation="entities:40623:1" rel="noopener">Mixue Group (2097 HK)</a>, and <a href="https://www.smartkarma.com/entities/china-east-education-holdings" target="_blank" data-smartkarma-citation="entities:27843:1" rel="noopener">China East Education (667 HK)</a>. </li>
</ul>


Trump's "reciprocal tariffs" have led to over 10% fall in the Hong Kong market, but there are some names that only came down by 3.2% on average.
Their characteristics are: 1.) domestically focused, 2.) net cash position, 3.) secure demand, 4.) consumption downgrade beneficiary, and 5.) good dividends.
These stocks are Xinhua Winshare (811 HK), Lonking Holdings (3339 HK), Kunlun Energy (135 HK), Mixue Group (2097 HK), and China East Education (667 HK). 


China & HK Strategy: Which Stocks Will Thrive?

China

Lonking Holdings Ltd. designs, manufactures and sells wheel loaders and infrastructure machinery in the People's Republic of China.

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Lonking Holdings (3339 HK)

Sany Heavy Industry IPO: Valuation Assessment

Sany Heavy's IPO price range is HK$20.3-21.3, with key strengths in global growth potential, market position, R&D capability, and financial track...

Osbert Tang, CFA

China & HK Strategy: 1H25 Preview - Where Are the Upside and Downside Surprises?

The companies under our coverage are expected to report 16.8% earnings growth for 1H25, with 2Q25 accelerating to 30.8%. Top performers include...

Osbert Tang, CFA

Asian Equity: Changes to Model Portfolio: Korea, HK/CN Overweight. India Neutral; ASEAN Underweight

Our Model Portfolio (+6.2%) underperformed MSCI AxJ (+7.87%) due to stock picks in India, ASEAN & Chinese consumers. We add to CN & KR industrials...

Manishi Raychaudhuri

China Heavy Machinery Sector: Anticipating More Upside

Lonking issued a positive profit alert, suggesting that its 1H25 net profit will reach between Rmb590m and Rmb665m, equaling a 29-45% YoY increase....

Osbert Tang, CFA

China & HK Strategy: Which Stocks Will Thrive?

The stocks with a domestic focus, cash position, secure demand, consumption benefits, and high dividends are more insulated: Xinhua Winshare,...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Sany Heavy Industry IPO: Valuation Assessment

​Sany Heavy's IPO price range is HK$20.3-21.3, with key strengths in global growth potential, market position, R&D capability, and financial track...

Osbert Tang, CFA

China & HK Strategy: 1H25 Preview - Where Are the Upside and Downside Surprises?

The companies under our coverage are expected to report 16.8% earnings growth for 1H25, with 2Q25 accelerating to 30.8%. Top performers include...

Osbert Tang, CFA

Asian Equity: Changes to Model Portfolio: Korea, HK/CN Overweight. India Neutral; ASEAN Underweight

​Our Model Portfolio (+6.2%) underperformed MSCI AxJ (+7.87%) due to stock picks in India, ASEAN & Chinese consumers. We add to CN & KR industrials...

Manishi Raychaudhuri

China Heavy Machinery Sector: Anticipating More Upside

Lonking issued a positive profit alert, suggesting that its 1H25 net profit will reach between Rmb590m and Rmb665m, equaling a 29-45% YoY increase....

Osbert Tang, CFA

China & HK Strategy: Which Stocks Will Thrive?

The stocks with a domestic focus, cash position, secure demand, consumption benefits, and high dividends are more insulated: Xinhua Winshare,...

Osbert Tang, CFA

Sany Heavy's IPO price range is HK$20.3-21.3, with key strengths in global growth potential, market position, R&D capability, and financial track...

Our Model Portfolio (+6.2%) underperformed MSCI AxJ (+7.87%) due to stock picks in India, ASEAN & Chinese consumers. We add to CN & KR industrials...