Daily Brief China: Tencent, Knowledge Atlas Technology, Huolinhe Opencut Coal Ind Corp Ltd., Shandong Himile Mechanical Science & Technology, Gemilai Holdings, Hangzhou CIEC Group, Shenzhen Megmeet Electrical and more

• Domestic games +17% YoY, not the feared decline. Spring Festival deferrals released as expected; deferred revenue grew RMB23bn — the 3Q revenue set-up is intact.
• Capex RMB52.8bn (+176% YoY) was the one real miss; FCF turned -RMB13.8bn. Excluding AI infrastructure prepayments, FCF was +RMB37.6bn — the cash engine holds.
• Maintain BULLISH view with unchanged TP of HK$670 — SOTP at 20x games&marketing earnings, 4.0–4.5x fintech and cloud revenue; net cash erosion offset by marketing and cloud estimate upgrades.

• MS-China adds 33 names and deletes 32, effective 1 Sep 2026. The ADDs include 31 A-shares and 2 HK stocks, the DELETEs 25 and 7.
• Our ADD Hit rate was 15 of 16 announced (94%), with 1 false positive in 16 calls. DELETE Hit rate was 9 of 12 (75%).
• All announced 33 ADDs enter the bridge after a +20.3% average run. We won’t chase gap-ups.

• CSI 300 represents the 300 largest stocks by market cap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500 names.
• In this insight, we take a look at the potential ADDs and DELs leading the rankings for the semiannual index rebal event in December 2026.
• Currently, we see 30 ADDs/DELs for the CSI 300 index and 50 ADDs/DELs for the CSI 500 index.

• CSI 1000 represents the next 1000 largest stocks by market cap and liquidity from the Shanghai and Shenzhen Exchanges after CSI 800.
• In this insight, we take a look at the potential ADDs and DELs leading the rankings for the semiannual index rebal event in December 2026.
• We continue to see 100 ADDs/DELs for the CSI 1000 index. Roughly 78% of the reference period is now complete.

• Under the current e-commerce “price comparison” mechanism, coupled with the peak of traffic dividends, there is still uncertainty as to whether domestic coffee machine brands can maintain long-term growth.
• Compared with fast-moving consumer goods, coffee machines, as durable goods, have a low frequency of repeat purchases by consumers. This may lead to declining performance growth of Gemilai.
• Given the expected about 40% profit CAGR over the next three years, the market may offer a valuation higher than traditional home appliance stocks such as Midea (e.g. 20-25x P/E).

• Hangzhou CIEC Group is a leading state-owned commodity trading service provider in China, with significant market shares in ferrous metals, iron ore, and rubber trading. The company operates a diversified business model across more than 290 commodities and has an extensive global network.
• The company filed for a Hong Kong IPO in February 2026, seeking to raise capital for strengthening working capital and enhancing its global presence. However, the prospectus lapsed in August 2026, indicating the listing did not proceed as planned. The company remains unlisted, and as such, detailed recent financial data and a public market valuation are unavailable.
• Key strengths include its strong state-owned background, which provides access to capital and stable relationships, and its established ‘One Body, Two Wings’ strategy focusing on trading synergized with supply chain services. However, it operates in a highly competitive, low-margin industry and is exposed to significant risks from commodity price volatility and the cyclical nature of the Chinese economy.

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• Hangzhou CIEC Group is a commodity trading service provider and trader in China, distributing over 294 physical commodities. The company aims to strengthen working capital, raise business profile, and enhance.
• Hangzhou CIEC Group was the fifth largest commodity trading service provider in China by trading volume and sales revenue in 2025, with a 21.3% trading volume CAGR.
• Revenue was 270,479,007 RMB’000 in 2025, and gross profit decreased by 9.4% to RMB1,721.5 million in 2025.

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• The architectural shift to 800V High Voltage Direct Current (HVDC) sidecar power systems (PowerSidecar) for megawatt-scale AI racks represents a massive value inflection, allowing qualified suppliers to command system-level average selling prices (ASPs) of up to $210,000 per rack compared to legacy $10,000 server power shelves.
• Megmeet is the only mainland Chinese power supply provider officially qualified in NVIDIA’s MGX 800V DC Intermediate Bus Converter (IBC) and Power Distribution Board (PDB) reference designs, placing them in direct competition with global tier-1s like Delta Electronics and Lite-On.
• Historically negative operating cash flows of -577.8 million RMB (FY24) and -139.3 million RMB (FY25) highlight severe working capital constraints; the pending $750 million H-share listing is a structural necessity to fund critical “China+1” manufacturing expansions in Rayong, Thailand, and Manaus, Brazil, to bypass geopolitical tariffs and meet strict localization mandates.