HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Shanghai Electric Group / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shanghai-electric-group-company-limited-d542164d-4d5a-4ce0-b33e-5fe6bc34722c" target="_blank" data-smartkarma-citation="entities:8777:1" rel="noopener">Shanghai Electric Group Company (2727 HK)</a> (SEC) has more than doubled since Oct, riding on the Fanuc Robots acquisition and speculation of a backdoor listing of SMEE.</li>
<li>The Fanuc acquisition is very earnings accretive. The SMEE backdoor listing, if happens, will allow SEC to enter the extremely strategic and lucrative EUV lithography machine sector.</li>
<li>SEC's 3Q24 result has some improvements, but with profitability and ROE still low, there will be more newsflow on asset optimisation and restructuring. </li>
</ul>



Shanghai Electric Group Company (2727 HK) (SEC) has more than doubled since Oct, riding on the Fanuc Robots acquisition and speculation of a backdoor listing of SMEE.
The Fanuc acquisition is very earnings accretive. The SMEE backdoor listing, if happens, will allow SEC to enter the extremely strategic and lucrative EUV lithography machine sector.
SEC's 3Q24 result has some improvements, but with profitability and ROE still low, there will be more newsflow on asset optimisation and restructuring. 


Shanghai Electric (2727 HK): What Is Driving It Crazy?

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

<ul>
<li>Hong Kong Long-Only portfolio launched on October 1st with objective to generate alpha in the Hong Kong market.</li>
<li>Stocks are chosen from single stock insights as well as sector and weekly publications.</li>
<li>Positions will be adjusted once a month and the cash position will vary based on market conditions.</li>
</ul>


Hong Kong Long-Only portfolio launched on October 1st with objective to generate alpha in the Hong Kong market.
Stocks are chosen from single stock insights as well as sector and weekly publications.
Positions will be adjusted once a month and the cash position will vary based on market conditions.


<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

Thematic (Sector/Industry)

<ul>
<li>President Trump issued an emergency order invoking emergency powers to ban imports of bulk-power system electrical equipment from China and other countries subject to US arms embargoes or sanctions.</li>
<li>The order will further constrain data center construction, which depends on power system build-out to support AI demand and expand the grid. </li>
<li>For the three major Hong Kong-listed power equipment manufacturers, the direct revenue impact of Trump's order is limited, as the US has not been a significant market for their products. </li>
</ul>


President Trump issued an emergency order invoking emergency powers to ban imports of bulk-power system electrical equipment from China and other countries subject to US arms embargoes or sanctions.
The order will further constrain data center construction, which depends on power system build-out to support AI demand and expand the grid. 
For the three major Hong Kong-listed power equipment manufacturers, the direct revenue impact of Trump's order is limited, as the US has not been a significant market for their products. 


CHINA POWER SYSTEMS: Trump "Tilting at Windmills".... Again

Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

Shenton Research

Shenton Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

Quantitative Analysis

<ul>
<li>We analyse the changes of A-H premium on 200 stocks over the last week. The average A-H premium was 92.3% as of Oct 9th.</li>
<li>The average A-H premium changed by 3.7ppt week-on-week, led by materials, industrials, utilities.</li>
<li>We highlight weekly changes in A-H premium for Innocare, Ganfenglithium, China East Air, Yofc.</li>
</ul>


We analyse the changes of A-H premium on 200 stocks over the last week. The average A-H premium was 92.3% as of Oct 9th.
The average A-H premium changed by 3.7ppt week-on-week, led by materials, industrials, utilities.
We highlight weekly changes in A-H premium for Innocare, Ganfenglithium, China East Air, Yofc.


A-H Premium Weekly (Oct 9th): Innocare, Ganfenglithium, China East Air, Yofc

China

Shanghai Electric Group Company Limited manufactures power generation equipment. The Company produces and sells thermal generator set, nuclear power units, wind power equipment, power transmission and distribution equipment, and other products. Shanghai Electric Group also manufactures environmental protection equipment.

Shanghai Electric Group Company (601727 CH)

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

Shanghai Electric Group Company (601727 CH)

Shanghai Electric (2727 HK): What Is Driving It Crazy?

SEC's stock surges on Fanuc Robots acquisition and potential backdoor listing of SMEE, allowing an entry into EUV lithography machine sector. Low...

Osbert Tang, CFA

HONG KONG ALPHA PORTFOLIO - Introduction

We have launched a Hong Kong portfolio with the aim to outperform HK indexes and generate alpha. Stocks are chosen from those highlighted in our...

David Mudd

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

CHINA POWER SYSTEMS: Trump "Tilting at Windmills".... Again

President Trump issued an emergency order invoking emergency powers to ban imports of bulk-power system electrical equipment from China and other...

David Mudd

A-H Premium Weekly (Oct 9th): Innocare, Ganfenglithium, China East Air, Yofc

We analyzed A-H premium changes in the past week and highlight A-H premium changes for Innocare, Ganfenglithium, China East Air, Yofc.

Ke Yan, CFA, FRM

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Shanghai Electric (2727 HK): What Is Driving It Crazy?

SEC's stock surges on Fanuc Robots acquisition and potential backdoor listing of SMEE, allowing an entry into EUV lithography machine sector. Low...

Osbert Tang, CFA

HONG KONG ALPHA PORTFOLIO - Introduction

We have launched a Hong Kong portfolio with the aim to outperform HK indexes and generate alpha. Stocks are chosen from those highlighted in our...

David Mudd

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

CHINA POWER SYSTEMS: Trump "Tilting at Windmills".... Again

President Trump issued an emergency order invoking emergency powers to ban imports of bulk-power system electrical equipment from China and other...

David Mudd

A-H Premium Weekly (Oct 9th): Innocare, Ganfenglithium, China East Air, Yofc

We analyzed A-H premium changes in the past week and highlight A-H premium changes for Innocare, Ganfenglithium, China East Air, Yofc.

Ke Yan, CFA, FRM

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