Daily Brief China: Z.AI, Zhongji InnoLight, MiniMax, COSCO SHIPPING Energy Transportation, Contemporary Amperex Technology (CATL), Laopu Gold, DFI Retail Group, Anhui Sinomag Technology and more

• Z.AI (2513 HK) listed in January and is a member of the Hang Seng TECH Index (HSTECH INDEX) and Hang Seng Internet & Information Technology Index (HSIII).
• Following placements in July and September, Hang Seng is likely to conduct an ad-hoc rebalance in October to reflect the higher shares outstanding and free float for Z.AI (2513 HK).
• Buying from passive trackers will absorb some of the float and could help stem the fall following the 74% drop in the stock price in the last 3 months.

• With free float not meeting the thresholds, Zhongji InnoLight (3308 HK) missed Fast Entry to all major local and global indexes at the time of listing.
• We forecast local and global index inclusions for Zhongji InnoLight (3308 HK) in a 3-week period starting end November that will require passives to buy US$1bn of stock.
• The passive buying is around 20% of H-share float and is partly responsible for Zhongji InnoLight (3308 HK) trading at a 13% premium to Zhongji Innolight (300308 CH). 

• We noted Space Bunny Alpha, a stealth model which is likely MiniMax’s M3.1-Flash, and compared its available benchmarking with Chinese and US models.
• We analysed the sequence of model launches and placements at MiniMax and its competitor Zhipu, and the release cadence of Chinese labs.
• We think the M3.1 launch is imminent and could be followed by a placement, and we review how the stock traded in past launches for MiniMax and its comparable.

• With spot VLCC rates at U$1.26m/day, the market has significantly underestimated the net profit for COSCO SHIPPING Energy Transportation (1138 HK) in 2H26. 
• The upcoming 3Q26 results announcement by end-Oct is likely to be a blowout, providing a positive surprise and leading to meaningful earnings upgrades. 
• At 24.5% FY26F ROE, its 12-month forward P/B of 1.64x is not stretched. Also, its decline in gearing from 77.4% in FY24 to 16% in FY27F justifies a higher P/B.   

• WEEKLY tactical global macro recap/analysis for several markets and stocks we track, grouped by sector.
• We apply our quantitative models to each instrument’s trend, to determine which stocks/markets are just starting a trend, are in the middle of it, or are about to end it.
• Most overbought:  Nikkei 225, Hanwha Solutions (009830 KS), Tokyo Electron (8035 JP), Advantest Corp (6857 JP) Most oversold: NIFTY, CATL (300750 CH), GLD, Zijin Mining, Nippon Steel Corporation (5401 JP)

• Share price has been punished, as there have been plenty pre-IPO investors who took profit, although operating numbers are actually doing quite well. 
• Laopu Gold (6181 HK) is different from Chow Tai Fook Jewellery (1929 HK), as the former is more of a global luxury house than a goldsmith.
• At 7x PER and a 10% dividend yield, combined with the calming down of the sellers’ volume, Laopu Gold (6181 HK) may actually offer a value. 

• DFI Retail Group (DFI SP) has completed a pivotal operational turnaround, swinging from a net loss of USD 244.5m in FY2024 to a net profit of USD 234.7m in FY2025, underpinned by gross margin expansion to 36.46% and disciplined cost rationalization across core formats.
• Cash flow generation remains exceptionally robust, with FY2025 operating cash flows of USD 1,099.2m and free cash flows of USD 986.1m supporting an attractive dividend yield of 4.52% and significant multi-year dividend growth.
• While high-margin Health & Beauty (Mannings, Guardian) and Convenience (7-Eleven) store formats continue to drive core earnings resilience, top-line grocery expansion faces ongoing macroeconomic headwinds, including cross-border consumption shifts in Hong Kong and intense regional competition.

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• The IDM model enables Sinomags to deeply participate in the exploration of customer application scenarios, promote technology validation, and define products, which forms a supply chain barrier.
• Technological comprehensiveness enables Sinomags to flexibly provide product solutions based on different downstream demands, rather than being limited to a single technology route.Profitability is driven by scale effect/increasing gross margin.
• Comfortable P/E could be 30-40x, between the global mature leaders and the high-growth new stocks in HK market, reflecting Sinomags’ positioning as “having outstanding growth potential but relatively small scale”