In today’s briefing:
- CSI300 Index Rebalance Preview: 7 Changes a Side as Market Trades in a Range
- Xiaomi (1810 HK): 4Q24 Preview, All Businesses Healthy, But Vehicle Overvalued
- Alibaba Group’s AI Power Move—Can It Outpace DeepSeek and OpenAI?
- SITC International (1308 HK): Another Strong Year, with Excellent Yield
- Seeking Value and Safety in HK/China: SHKP 16 HK
- Xiaomi Aims to Take Its EV Sales Overseas by 2027
- Pre-IPO Huge Dental Limited – The Business and the Concerns Behind
- Lucror Analytics – Morning Views Asia
- Asia Real Estate Tracker (10-Mar-2025): Warburg Pincus teams with SK Group for Korean senior living.
- HK-Listed Apparel & Footwear Screener: March 2025 / Analysing JNBY, Leverstyle, And More
CSI300 Index Rebalance Preview: 7 Changes a Side as Market Trades in a Range
- There could be 7 changes at the June rebalance with the Information Technology sector gaining 3 index spots and the Materials sector losing 3 spots.
- We estimate one-way turnover of 1.45% at the rebalance leading to a round-trip trade of CNY 28.1bn (US$3.9bn). There are 6 stocks with over 2x ADV to trade.
- There have been redemptions in mainland China ETFs over the last couple of months and that leads to a lower impact on the stocks compared to the last rebalance.
Xiaomi (1810 HK): 4Q24 Preview, All Businesses Healthy, But Vehicle Overvalued
- We believe all business, including smartphone and vehicle, will grow strongly in 4Q24 and 2025.
- We expect EPS will increase by 15% YoY in 4Q24 and 41% in 2025.
- However, we believe the market overvalues the newly launched vehicle business.
Alibaba Group’s AI Power Move—Can It Outpace DeepSeek and OpenAI?
- Alibaba Group Holding has made a significant move in the AI space with the release of its latest artificial intelligence model, QwQ-32B, as it seeks to establish itself as China’s leading AI developer, challenging DeepSeek.
- The model, which excels in mathematical reasoning, coding, and problem-solving, demonstrates capabilities comparable to both DeepSeek’s R1 and OpenAI’s latest technology.
- However, a key differentiator is its size, as QwQ-32B operates with only 32 billion parameters compared to DeepSeek R1’s 671 billion.
SITC International (1308 HK): Another Strong Year, with Excellent Yield
- SITC International (1308 HK)‘s 93.5% profit growth in FY24 is at the top-end of the positive profit alert. A final DPS of HK$1.4 put it on a 7.3% dividend yield.
- The FY25 long-term contract rate is expected to rise 10%, with volume growing at least 5% and lower costs. The consensus forecast of a 23.1% earnings decline is too conservative.
- Having an ROE of 32% for FY25F, its 12-month forward P/B of 2.46x (vs. average of 2.59x) with net cash equals 5.4% of market capitalisation are inexpensive.
Seeking Value and Safety in HK/China: SHKP 16 HK
- MSCI China has rallied 19% YTD, outperforming DM and EM by 18% and 14% respectively. We think it makes sense to look at China and Hong Kong again
- Part of the rally is driven by AI optimism. In terms of fund flow, we are seeing increasing south-bound fund flow to HK equity market at a fast pace
- We think Sun Hung Kai Properties, which is a proxy for Hong Kong, may benefit and play the catch up game on the back of very attractive valuation
Xiaomi Aims to Take Its EV Sales Overseas by 2027
- Xiaomi Corp. aims to expand its electric vehicle sales outside China by 2027, while accelerating the international rollout of its other consumer electronics, company president William Lu said at the Mobile World Congress (MWC) in Barcelona on Monday.
- During the event, Xiaomi unveiled its high-end Xiaomi 15 Ultra smartphone series to the global market, priced at 1,499 euros. The company also showcased its premium electric sedan, the SU7 Ultra, and the Xiaomi SU7, though these vehicles have yet to be launched outside China.
- “After MWC, I plan to visit several European countries with the goal of officially introducing Xiaomi cars overseas by 2027,” Lu said on the sidelines of the event. He revealed that Xiaomi will begin offering its home appliance products in international markets next year.
Pre-IPO Huge Dental Limited – The Business and the Concerns Behind
- Since HUGE ranks in the first tier among domestic brands, the import substitution would be the main logic to continue driving the performance growth based on its strong cost effectiveness.
- If HUGE wants to achieve success in non-advantageous areas in the future, reducing price to compete for more market share could be an essential means. VBP is also a challenge.
- Comparable companies include Sinocera Functional Material, Yantai Zhenghai Bio-Tech, Angelalign, Modern Dental Group, Topchoice Medical. We think valuation of HUGE could be higher than peers due to higher profitability.
Lucror Analytics – Morning Views Asia
- In today’s Morning Views publication we comment on developments of the following high yield issuers: Longfor Group, Melco Resorts, Sands China, Tata Motors
In the US, February nonfarm payrolls increased to 151 k (160 k e / 125 k revised p), albeit the figure came in slightly below estimates. Moreover, the January number was revised downwards to 125 k (143 k p), with the two-month revision at negative 2 k (+100 k p). The unemployment rate edged up to 4.1% (4.0% e / 4.0% p). The average hourly earnings rose 0.3% m-o-m (0.3% e / 0.4% revised p) and 4.0% y-o-y (4.1% e / 3.9% revised p).
Fed Chairman Jerome Powell has reiterated that the US central bank is in no rush to reduce rates. He said: “Despite elevated levels of uncertainty, the US economy continues to be in a good place”, adding that “sentiment readings have not been a good predictor of consumption growth in recent years”.
Asia Real Estate Tracker (10-Mar-2025): Warburg Pincus teams with SK Group for Korean senior living.
- Warburg Pincus and SK Group have joined forces to launch a new senior living venture in Korea.
- KKR, APG, Gaw, and Alyssa will be participating in discussions about residential trends on MTD TV Forum.
- Alyssa has extended its partnership with Dai-Ichi Life for the management of 669 Japanese apartments.
HK-Listed Apparel & Footwear Screener: March 2025 / Analysing JNBY, Leverstyle, And More
- We provide result updates for JNBY Design Ltd (3306 HK) and Lever Style (1346 HK). Separately, Crystal International (2232 HK) was added to the HSCI (eligible for trading on Stock Connect).
- We introduce Bosideng International Holdings (3998 HK) on our screen. With a 5-year average ROCE of 17%, net cash, and a 7% dividend yield, the stock is worth a look.
- Our top picks include JNBY Design Ltd (3306 HK) and Pacific Textiles (1382 HK), with a favorable mention of Nameson Holdings (1982 HK) due to its attractive dividend yield.
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