Equity Research in HK and Mainland China

Li Tang

Thematic (Sector/Industry)

Ministry of Finance released the NEV subsidy program for 2021, cutting them by 20% compared to the 2020 level for private purchases Xinhua reported. The subsidy for NEVs designated for public sector use, including buses, taxi, logistics, postal vehicles and public fleets, will be cut by 10% in 2021 from the 2020 level, coming into effect on 1 January 2021. The subsidies are dependent on a range of indicators including driving range and battery density.
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China has bet big on NEVs as a strategically important industry, the government has five essential policy support tools for NEVs include reduced taxes, direct subsidies to manufacturers, consumer subsidies, mandated government procurements.
We are still positive on NEV makers (<a href="https://www.smartkarma.com/entities/li-auto-inc" target="_blank" rel="noopener">Li Auto Inc. (LI US)</a> , <a href="https://www.smartkarma.com/entities/nio-inc" target="_blank" data-smartkarma-citation="entities:27399:1" rel="noopener">NIO Inc (NIO US)</a> and <a href="https://www.smartkarma.com/entities/xpeng-motors" target="_blank" data-smartkarma-citation="entities:29217:1" rel="noopener">Xpeng Motors (XPEV US)</a>) and NEV charging infrastructure (<a href="https://www.smartkarma.com/entities/china-titans-energy-technology-group-co" target="_blank" data-smartkarma-citation="entities:3953:1" rel="noopener">China Titans Energy Technology Group Co (2188 HK)</a> ,  <a href="https://www.smartkarma.com/entities/ten-pao-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27241:1" rel="noopener">Ten Pao Group Holdings Ltd (1979 HK)</a> as both segments stand to gain from an improvement in NEV sales after NEV sales lagged the recovery in traditional auto sales, and with local governments providing various support measures.
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Ministry of Finance released the NEV subsidy program for 2021, cutting them by 20% compared to the 2020 level for private purchases Xinhua reported. The subsidy for NEVs designated for public sector use, including buses, taxi, logistics, postal vehicles and public fleets, will be cut by 10% in 2021 from the 2020 level, coming into effect on 1 January 2021. The subsidies are dependent on a range of indicators including driving range and battery density.

China has bet big on NEVs as a strategically important industry, the government has five essential policy support tools for NEVs include reduced taxes, direct subsidies to manufacturers, consumer subsidies, mandated government procurements.
We are still positive on NEV makers (Li Auto Inc. (LI US) , NIO Inc (NIO US) and Xpeng Motors (XPEV US)) and NEV charging infrastructure (China Titans Energy Technology Group Co (2188 HK) ,  Ten Pao Group Holdings Ltd (1979 HK) as both segments stand to gain from an improvement in NEV sales after NEV sales lagged the recovery in traditional auto sales, and with local governments providing various support measures.


China Will Reduce Its Subsidies for Regular New Energy Vehicles by 20% in 2021

China full-year NEVs sales will reach 1.25m units this year, according to China Association of Auto Manufacturers (CAAM) which would bring cumulative sales to 5.06mn units, surpassing the 2016 target of 5mn units by 2020.CAAM forecasts are usually close to the market. China's NEV sales was 1.206 million units last year, representing a year-on-year drop of 4%.
CAAM also pointed out as part of the country's rural revitalisation strategy that central government is studying a new policy to promote the use of new energy vehicles (NEVs) in rural areas in 2021.Overall, autos have been the beneficiary of much policy action including the upgrade of VI emissions standards, supportive NEV policies, and trucks sales due to construction activity picking up, with profits increasing 6.6% in January-October.
We are positive on NEV makers (<a href="https://www.smartkarma.com/entities/li-auto-inc" target="_blank" rel="noopener">Li Auto Inc. (LI US)</a>, <a href="https://www.smartkarma.com/entities/nio-inc" target="_blank" rel="noopener">NIO Inc (NIO US)</a> and <a href="https://www.smartkarma.com/entities/xpeng-motors" target="_blank" data-smartkarma-citation="entities:29217:1" rel="noopener">Xpeng Motors (XPEV US)</a> and NEV charging infrastructure <a href="https://www.smartkarma.com/entities/china-titans-energy-technology-group-co" target="_blank" rel="noopener">China Titans Energy Technology Group Co (2188 HK)</a>, <a href="https://www.smartkarma.com/entities/ten-pao-group-holdings-ltd" target="_blank" rel="noopener">Ten Pao Group Holdings Ltd (1979 HK)</a>.We believe both sectors stand to gain from an improvement in NEV sales after NEV sales lagged the recovery in traditional auto sales, and with local governments providing various support measures.

China full-year NEVs sales will reach 1.25m units this year, according to China Association of Auto Manufacturers (CAAM) which would bring cumulative sales to 5.06mn units, surpassing the 2016 target of 5mn units by 2020.CAAM forecasts are usually close to the market. China's NEV sales was 1.206 million units last year, representing a year-on-year drop of 4%.
CAAM also pointed out as part of the country's rural revitalisation strategy that central government is studying a new policy to promote the use of new energy vehicles (NEVs) in rural areas in 2021.Overall, autos have been the beneficiary of much policy action including the upgrade of VI emissions standards, supportive NEV policies, and trucks sales due to construction activity picking up, with profits increasing 6.6% in January-October.
We are positive on NEV makers (Li Auto Inc. (LI US), NIO Inc (NIO US) and Xpeng Motors (XPEV US) and NEV charging infrastructure China Titans Energy Technology Group Co (2188 HK), Ten Pao Group Holdings Ltd (1979 HK).We believe both sectors stand to gain from an improvement in NEV sales after NEV sales lagged the recovery in traditional auto sales, and with local governments providing various support measures.

China Expects to Surpass 2020 NEV Sales Target

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

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The latest gathering of China’s National People’s Congress has produced some reassuring news for the domestic infrastructure sector. In our view, we should see a similar level of fixed-asset investment, or FAI, growth (8%-9%) in 2017, and the public-private partnership, or PPP, project financing method will play an increasingly instrumental role in infrastructure development. The National Development and Reform Commission, the nation’s top economic development planning agency, is targeting about 8% year-on-year FAI growth, with a heavy emphasis on transportation infrastructure development in both inland regions and prosperous coastal provinces. The implied growth target in 2017 is in line with our assumption and reinforces our view that infrastructure firms with heavy PPP exposure (<a href="https://www.smartkarma.com/entities/265" target="_blank" data-smartkarma-citation="entities:265:1">China Communications Construction Co Ltd (1800 HK)</a>, or CCCC, and <a href="https://www.smartkarma.com/entities/265" target="_blank" data-smartkarma-citation="entities:265:1">China Communications Construction Co Ltd (1800 HK)</a>, or CSCI) are among the top beneficiaries in the latest transportation driven spending push. Our fair value estimates for no-moat CCCC and narrow-moat CSCI are unchanged at HKD 11.5 per share and HKD 14 per share, respectively, and we will revisit our valuations upon the release of annual results in late March.Analyst: John Hu

The latest gathering of China’s National People’s Congress has produced some reassuring news for the domestic infrastructure sector. In our view, we should see a similar level of fixed-asset investment, or FAI, growth (8%-9%) in 2017, and the public-private partnership, or PPP, project financing method will play an increasingly instrumental role in infrastructure development. The National Development and Reform Commission, the nation’s top economic development planning agency, is targeting about 8% year-on-year FAI growth, with a heavy emphasis on transportation infrastructure development in both inland regions and prosperous coastal provinces. The implied growth target in 2017 is in line with our assumption and reinforces our view that infrastructure firms with heavy PPP exposure (China Communications Construction Co Ltd (1800 HK), or CCCC, and China Communications Construction Co Ltd (1800 HK), or CSCI) are among the top beneficiaries in the latest transportation driven spending push. Our fair value estimates for no-moat CCCC and narrow-moat CSCI are unchanged at HKD 11.5 per share and HKD 14 per share, respectively, and we will revisit our valuations upon the release of annual results in late March.Analyst: John Hu

The Latest Government FAI Target Warrants Stable Growth Prospects for Infrastructure Sector

Founder, Supreme Peoples Court Monitor

Susan Finder

Founder

Supreme Peoples Court Monitor

About a year and a half ago, many of the major business media (<a href="https://www.ft.com/content/f4edabe4-d36e-11e4-a792-00144feab7de" target="_blank">Financial Times</a>, <a href="http://blogs.wsj.com/chinarealtime/2015/12/17/awash-in-duds-chinas-bad-banks-are-looking-good/" target="_blank">Wall Street Journal</a>, and <a href="http://blogs.wsj.com/chinarealtime/2015/12/17/awash-in-duds-chinas-bad-banks-are-looking-good/" target="_blank">Bloomberg</a>) reported on the sale of Chinese distressed assets on Taobao and other Chinese online platforms.  This note provides a quick look at what a search of Taobao turns up.From this <a href="https://zc-paimai.taobao.com/zc/npl.htm?spm=a219w.7976194.237368.4.jgJsfL" target="_blank">page</a> (asset exchange, distressed assets):<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/021/514/original/Screen%20Shot%202017-02-25%20at%209.00.13%20AM.png?1487984504" class="editor-image img-responsive" data-smartkarma-image-id="21514"></figure>the diligent person can review the type of assets being auctioned: real estate, creditors rights, intellectual property rights, and then further drill down on the…

About a year and a half ago, many of the major business media (Financial Times, Wall Street Journal, and Bloomberg) reported on the sale of Chinese distressed assets on Taobao and other Chinese online platforms.  This note provides a quick look at what a search of Taobao turns up.From this page (asset exchange, distressed assets):the diligent person can review the type of assets being auctioned: real estate, creditors rights, intellectual property rights, and then further drill down on the…

Unbeknownst to the flying public, the Chinese aviation industry is facing labor disputes, particularly from their  pilots, according to a recent Chinese <a href="http://mp.weixin.qq.com/s?__biz=MzA5NTMwMDgzMA==&amp;mid=2655481692&amp;idx=1&amp;sn=4392dc43b94c7826d6e3ee7313c9bfc4&amp;chksm=8bf2b2edbc853bfb9a3212686e55ee20e7036a0c210af5525bbd54ff1de90038b70498cff5f8&amp;mpshare=1&amp;scene=5&amp;srcid=01206ao9dvXq9enFqEyKSwMj#rd" target="_blank">law firm report</a>.  The shortage of pilots in China has been well-reported in the press, in sources ranging from the<a href="https://www.ft.com/content/d7117f1e-d963-11e5-a72f-1e7744c66818" target="_blank"> Financial Times</a> to <a href="http://www.chinadailyasia.com/asiaweekly/2016-04/29/content_15425326.html" target="_blank">China Daily</a>. That has led to job-hopping among Chinese pilots and a large increase in disputes between pilots and the airlines, including at least one foreign pilot hired by a Chinese airline. Pilots are highly…

Unbeknownst to the flying public, the Chinese aviation industry is facing labor disputes, particularly from their  pilots, according to a recent Chinese law firm report.  The shortage of pilots in China has been well-reported in the press, in sources ranging from the Financial Times to China Daily. That has led to job-hopping among Chinese pilots and a large increase in disputes between pilots and the airlines, including at least one foreign pilot hired by a Chinese airline. Pilots are highly…

China

Qingdao TGOOD Electric Co Ltd designs and manufactures electrical transformers and provides related technical services.  The Company also provides system solutions for the electrical transformer substations.

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Qingdao TGOOD Electric A (300001 CH)

China Will Reduce Its Subsidies for Regular New Energy Vehicles by 20% in 2021

China Cuts Nev Subsidy in 2021,looking ahead from a policy perspective, removing local subsidies after 2022 should lead to greater consolidation in...

Li Tang

China Expects to Surpass 2020 NEV Sales Target

China's NEV market is expected to grow fast in next year thanks to government policies and other factors.We continue to be positive on the...

Li Tang

The Latest Government FAI Target Warrants Stable Growth Prospects for Infrastructure Sector

The latest gathering of China’s National People’s Congress has produced some reassuring news for the domestic infrastructure sector. In our view,...

Morningstar, Inc.

China Distressed Assets on Taobao

About a year and a half ago, many of the major business media (Financial Times, Wall Street Journal, and Bloomberg) reported on the sale of Chinese...

Susan Finder

Labor Disputes at the Chinese Airlines

Unbeknownst to the flying public, the Chinese aviation industry is facing labor disputes, particularly from their pilots, according to a recent...

Susan Finder

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