Equity Analyst

Xin Yu, CFA

Equity Bottom-Up

<ul>
<li>China’s construction engineering industry declined more than expected in 2022</li>
<li>The industry may reach the inflection point by the end of 2023 or 1H24</li>
<li>Sany Heavy is expected to recover earlier than its peers</li>
</ul>


China’s construction engineering industry declined more than expected in 2022
The industry may reach the inflection point by the end of 2023 or 1H24
Sany Heavy is expected to recover earlier than its peers


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 analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine for holding position as of December 30th.</li>
<li>We estimate the weekly inflows to be US$457.7 million, led by financials, consumer staples, utilities sectors, and offset by industrials, materials.</li>
<li>We highlight flows for Ping An Insurance, Yibin Wuliangye, CATL. </li>
</ul>


We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine for holding position as of December 30th.
We estimate the weekly inflows to be US$457.7 million, led by financials, consumer staples, utilities sectors, and offset by industrials, materials.
We highlight flows for Ping An Insurance, Yibin Wuliangye, CATL. 


Northbound Flows (Dec 30th): Ping An, Wuliangye, CATL

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Shenzhen Mindray Bio-Medical Electronics / Event-Driven

<ul>
<li>Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.</li>
<li>Overall, net inflow over the past week was ~US$0.83bn, split between Shanghai (+US$1.16bn) and Shenzhen (-US$0.32bn).</li>
<li>The largest inflows were into <a href="https://www.smartkarma.com/entities/kweichow-moutai-co-ltd-a" target="_blank" data-smartkarma-citation="entities:1553:1" rel="noopener">Kweichow Moutai (600519 CH)</a> and <a href="https://www.smartkarma.com/entities/shenzhen-mindray-bio-medic-a" target="_blank" data-smartkarma-citation="entities:28017:1" rel="noopener">Shenzhen Mindray Bio-Medical (300760 CH)</a>. The largest outflows were in <a href="https://www.smartkarma.com/entities/yunnan-chuangxin-new-material" target="_blank" data-smartkarma-citation="entities:27135:1" rel="noopener">Yunnan Energy New Material (002812 CH)</a> and <a href="https://www.smartkarma.com/entities/byd-co-ltd" target="_blank" data-smartkarma-citation="entities:26048:1" rel="noopener">BYD (002594 CH)</a>.</li>
</ul>


Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
Overall, net inflow over the past week was ~US$0.83bn, split between Shanghai (+US$1.16bn) and Shenzhen (-US$0.32bn).
The largest inflows were into Kweichow Moutai (600519 CH) and Shenzhen Mindray Bio-Medical (300760 CH). The largest outflows were in Yunnan Energy New Material (002812 CH) and BYD (002594 CH).


Shanghai/​​​​​​​​​​​​​​​​​​​​​​Shenzhen Northbound Connect: Weekly Moves (25 November 2022)

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>SANY’s 3Q22 net profit declined 61% YoY to RMB963mn, with earnings largely contributed by finance income and other gains.</li><li>The lack of gross margin recovery along with the increased distribution expense and R&amp;D spending are the key factors that dragged the earnings.</li><li>We slash our 2022E/23E/24E earnings forecast by 52%/38%/36% (37%-44% below consensus), largely a result of lower sales volume and higher expense assumptions.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

SANY’s 3Q22 net profit declined 61% YoY to RMB963mn, with earnings largely contributed by finance income and other gains.The lack of gross margin recovery along with the increased distribution expense and R&amp;D spending are the key factors that dragged the earnings.We slash our 2022E/23E/24E earnings forecast by 52%/38%/36% (37%-44% below consensus), largely a result of lower sales volume and higher expense assumptions.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

SANY Heavy Industry – A (600031 CH) – Another Weak Quarter; Still Challenging

HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>Industry excavator sales grew 5.5% in Sep and wheel loader edged up 0.7%. This marked the first month where both saw YoY growth since mid-2021, signaling a steady recovery.</li>
<li>The recovery is driven by overseas as domestic continued to decline. Usage of special purpose bond proceeds should boost demand from infrastructure but demand from property market will stay lacklustre. </li>
<li>We only find <a href="https://www.smartkarma.com/entities/sany-heavy-equipment-intl" target="_blank" data-smartkarma-citation="entities:11104:1" rel="noopener">Sany Heavy Equipment Intl (631 HK)</a> interesting. For <a href="https://www.smartkarma.com/entities/lonking-holdings-ltd" target="_blank" data-smartkarma-citation="entities:3944:1" rel="noopener">Lonking (3339 HK)</a>, <a href="https://www.smartkarma.com/entities/zoomlion-heavy-industry-h" target="_blank" data-smartkarma-citation="entities:7817:1" rel="noopener">Zoomlion Heavy (1157 HK)</a> and <a href="https://www.smartkarma.com/entities/sany-heavy-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:20183:1" rel="noopener">Sany Heavy (600031 CH)</a>, market expectations for 2H22 is too high. </li>
</ul>


Industry excavator sales grew 5.5% in Sep and wheel loader edged up 0.7%. This marked the first month where both saw YoY growth since mid-2021, signaling a steady recovery.
The recovery is driven by overseas as domestic continued to decline. Usage of special purpose bond proceeds should boost demand from infrastructure but demand from property market will stay lacklustre. 
We only find Sany Heavy Equipment Intl (631 HK) interesting. For Lonking (3339 HK), Zoomlion Heavy (1157 HK) and Sany Heavy (600031 CH), market expectations for 2H22 is too high. 


China Construction Machinery: Light at the End of the Tunnel, Finally

China

SANY Heavy Industry Co., Ltd manufactures and markets construction and engineering machinery and related parts. The Company produces and sells concrete pumps, concrete pump vehicles, road rollers, pavers, and other related products. Sany Heavy Industry markets its products worldwide.

Price Gauge
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Sany Heavy Industry (600031 CH)

Sany Heavy: Buy

China’s construction engineering industry declined more than expected in 2022. The industry may reach the inflection point by end of 2023 or 1H24.

Xin Yu, CFA

Northbound Flows (Dec 30th): Ping An, Wuliangye, CATL

We analyzed the Shanghai/Shenzhen Connect Scheme for last week and highlight flows for Ping An Insurance, Wuliangye, CATL.

Ke Yan, CFA, FRM

Shanghai/Shenzhen Northbound Connect: Weekly Moves (25 November 2022)

Overall, net inflow over the past week in the HK -Shanghai-Shenzhen Northbound Connect facilities was ~US$0.83bn, split between Shanghai...

David Blennerhassett

SANY Heavy Industry – A (600031 CH) – Another Weak Quarter; Still Challenging

We slash our 2022E/23E/24E earnings forecast by 52%/38%/36% (37%-44% below consensus), largely a result of lower sales volume and higher expense...

CMB International

China Construction Machinery: Light at the End of the Tunnel, Finally

Industry sales of excavator and wheel loader have turned positve in Sep, after a lengthened depressed period since mid-2021. However, 2H22 earnings...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Sany Heavy: Buy

China’s construction engineering industry declined more than expected in 2022. The industry may reach the inflection point by end of 2023 or 1H24.

Xin Yu, CFA

Northbound Flows (Dec 30th): Ping An, Wuliangye, CATL

We analyzed the Shanghai/Shenzhen Connect Scheme for last week and highlight flows for Ping An Insurance, Wuliangye, CATL.

Ke Yan, CFA, FRM

Shanghai/​​​​​​​​​​​​​​​​​​​​​​Shenzhen Northbound Connect: Weekly Moves (25 November 2022)

Overall, net inflow over the past week in the HK -Shanghai-Shenzhen Northbound Connect facilities was ~US$0.83bn, split between Shanghai...

David Blennerhassett

SANY Heavy Industry – A (600031 CH) – Another Weak Quarter; Still Challenging

We slash our 2022E/23E/24E earnings forecast by 52%/38%/36% (37%-44% below consensus), largely a result of lower sales volume and higher expense...

CMB International

China Construction Machinery: Light at the End of the Tunnel, Finally

Industry sales of excavator and wheel loader have turned positve in Sep, after a lengthened depressed period since mid-2021. However, 2H22 earnings...

Osbert Tang, CFA

Shanghai/Shenzhen Northbound Connect: Weekly Moves (25 November 2022)