Intelligent Hong Kong Stock Analysis | Fiscal efforts stabilize bullish sentiment, commercial aerospace welcomes catalyst

[Market Analysis]

After breaking through key levels yesterday, the two markets did not show panic, which is relatively good, especially considering the continuous decline of the Nasdaq and S&P in the US. However, the trend of rising and falling also highlights the lack of initiative to attack.

Yesterday's analysis mentioned the issue of exchange rates. Let's start with the conclusion: "Knowing the reasons behind it, one can understand the unnatural strength, the weak response of the stock market, and the key is to look at sustainability." Looking at the results: today, the RMB exchange rate has returned to the latest 7.26, retracting most of the gains. This interpretation is quite accurate. Simply put, this round of exchange rate strength is based on the strengthening of the Japanese yen, and it is also an expectation. The market is betting that the Bank of Japan will raise interest rates at its decision next Wednesday. This in itself is questionable and requires the answer to be revealed. As global arbitrage capital, if the yen becomes more expensive, the RMB naturally appears cheaper, that's the logic. Therefore, capital is not willing to bet easily on this uncertainty.

Since this path is uncertain, the morning's rise today is due to the new fiscal stimulus policy mentioned in yesterday's sector focus. Yesterday, it was mentioned that the National Development and Reform Commission and the Ministry of Finance issued the "Several Measures to Support Large-scale Equipment Renewal and Trade-in of Consumer Goods", and today, the SASAC is further pushing: Central enterprises are expected to arrange a total investment of over 3 trillion yuan for large-scale equipment renewal and transformation in the next five years. This effort is much greater. Therefore, the bullish forces have found an outlet for expression.

The main beneficiaries of this policy stimulus are mainly trucks and buses, with a significant increase in policy intensity compared to the implementation details released on April 24. Optimistic about the incremental demand brought by the policy upgrade, such as scrapping National III and below diesel trucks + purchasing low-emission trucks, with a subsidy of 80,000 yuan per vehicle; only purchasing, a subsidy of 35,000 yuan per vehicle; only scrapping, a subsidy of 30,000 yuan per vehicle. According to CITIC Securities research report: For trucks, the domestic stock of National III and below diesel trucks is about 150,000-200,000 vehicles, with a high expected replacement rate, and even without scrapping, only purchasing can also be subsidized by 35,000 yuan, covering 10%-20% of the price, and it is expected to boost sales of 200,000 trucks throughout the year.

As for buses, the estimated stock of new energy buses over 8 years old in China is 150,000-200,000 vehicles, mainly expected to be replaced by batteries, and is expected to boost demand for 25-30GWh of batteries throughout the year. It is clear that China National Heavy Duty Truck (03808), Weichai Power (02338), are the most benefited varieties, with increases of 18.06% and 12.86% respectively.

The subsidy for scrapping tractors (above 20 horsepower) has been increased from 1,000 yuan per unit to 1,500 yuan. The subsidy standard for scrapping and purchasing combine harvesters and seeders has been increased by 50% on the existing basis. For cotton pickers, the subsidy for scrapping and purchasing each unit has been increased from 30,000 yuan to 60,000 yuan. In addition, each region can include up to six new types of agricultural machinery in the subsidy plan. YTO Group (00038) also rose sharply by 11.71%.

In terms of passenger cars, the impact is not significant, with subsidies for scrapping National III and below fuel passenger cars or new energy passenger cars registered before April 30, 2018, and purchasing new energy passenger cars receiving a subsidy of 20,000 yuan (previously 10,000 yuan), and purchasing 2.0L and below fuel passenger cars receiving a subsidy of 15,000 yuan (previously 7,000 yuan). The key for individual car purchases lies in purchasing power and competitiveness In relative terms, BYD Company Limited (01211) has also entered the field of new energy buses. For each new energy bus that meets the standard, an average subsidy of 60,000 yuan is provided for updates. Another company, Xiaomi Corporation (01810), according to Chairman Lei Jun's Weibo, has delivered over 30,000 units of the Xiaomi SU7 within 3 months of its launch, setting an industry record. It is expected that the deliveries in July will exceed 10,000 units. The production capacity has been increased, with the target of delivering 100,000 units for the whole year expected to be achieved by November. Additionally, they acquired an industrial land in Beijing's Yizhuang New City for 842 million yuan. It must be said that Chairman Lei is very pragmatic and efficient.

In the home appliance sector, the subsidy intensity exceeds expectations. The subsidy standard is 15% of the selling price, with an additional 5% subsidy for products meeting the level 1 + water efficiency standards, far exceeding the expected 10% subsidy at the beginning of the year. Categories worth noting include white goods such as refrigerators, air conditioners, and washing machines, as well as black goods like televisions and computers, and water heaters are included, with the first time that range hoods and stoves are eligible for subsidies. As a result, A-share kitchen appliance companies are quite active, with Marsman Technology Co., Ltd. (300894.SZ) hitting the 20% daily limit. In the Hong Kong stock market, home appliance companies that significantly benefited from the previous round, such as Hisense Home Appliances Group Co., Ltd. (00921) and Haier Smart Home Co., Ltd. (06690), are also performing well today, with both stocks rising by over 6 percentage points. These two were also mentioned in the sector focus yesterday. In addition, Wind Energy Technology Co., Ltd. (02208), which has been mentioned for several days in a row, surged by 8.40% today, becoming one of the most eye-catching stocks in the recent market.

The inaugural launch ceremony of the "Qianfan Constellation" satellite constellation will be held in Taiyuan on August 5th, with the first batch of satellites set to be launched into orbit with "one rocket and 18 stars", heralding the shining of the Chinese version of "Starlink" in the sky. The "Three-Year Action Plan for the Integrated Development of the Yangtze River Delta (2024-2026)" has been released, with 20 key tasks including the collaborative construction of a world-class industrial cluster in the Yangtze River Delta, many of which may benefit the national defense and military industry, including: supporting the development of low-altitude economy, developing general aviation, accelerating the layout of low-altitude industrial infrastructure construction, product research and development, and manufacturing; accelerating the development of the G60 Science and Technology Innovation Corridor and the integration of science and technology industries, and accelerating the construction of the G60 satellite internet industry cluster, among others. For more details, please refer to individual stock analysis.

Today also saw two major decliners: 1. Global New Material International Corporation (06616) announced on July 25th that the company and the buyer of shares agreed to acquire the global surface solutions business of Merck KGaA for a total consideration of 665 million euros. With a market value of less than 5 billion Hong Kong dollars, it has to spend a huge amount to make the acquisition, and it is unclear where this money will come from. The stock fell by over 13 percentage points today.

1. Dongfang Selection Holdings Limited (01797) announced that Dong Yuhui and Hui Tongxing have officially "taken off" on their own. On July 25th, Dong Yuhui (buyer), Beijing New Oriental Xuncheng Network Technology Co., Ltd. (seller), and Hui Tongxing (Beijing) Technology Co., Ltd. (target company) entered into a sale agreement, under which the seller agreed to sell, and the buyer agreed to acquire 100% equity of the target company for RMB 76.5855 million.

This outcome is actually understandable, as the groundwork had already been laid. Dongfang Selection had made attempts to dispose of Dong Yuhui, but it never gained traction, returning to the awkward position of competing with other internet celebrities. It remains to be seen whether Yu Minhong can transform the company, such as by focusing on the supply chain. Now that the "cash cow" is missing, starting from scratch is likely to be difficult, and the capital market has voted with its feet, with the stock falling by over 22 percentage points today [Sector Focus]

The Guangdong Province Game Industry Association announced on July 5th that in order to help online game companies solve the problem of product testing, it has officially launched the testing filing work for publishing online game apps in the province.

According to the new regulations, online game publishing units in Guangdong Province can apply for testing filing simultaneously when submitting the version number declaration materials. Non-local games need to first obtain an acceptance notice from the National Press and Publication Administration before applying for testing filing with the provincial press and publication bureau. After successful filing, the game can be tested on the App platform in Guangdong Province, with a testing period of up to one month, strictly adhering to the requirements such as limiting the number of test users and prohibiting in-app purchases. This measure marks Guangdong as the first region in the country to allow unlicensed games to undergo testing filing and go online. With Guangdong's game output accounting for about 80% of the national total, this forward-looking policy pilot is expected to further accelerate the launch of new products and drive industry recovery.

The timing of this announcement clearly indicates a positive change in policy towards the gaming industry, which will greatly promote the development of the industry, as game development is a race against time, and saving time means saving money.

Main stocks: XD Inc. (02400), Zulong Entertainment (09990), Tencent (00700), NetEase (09999).

[Stock Analysis]

AVIC Aircraft (02357): Continuous catalysis in commercial aerospace with core competitiveness in several major sectors

Beijing issued the "Beijing Accelerating Commercial Aerospace Innovation and Development Action Plan (2024-2028)", proposing to build a billion-dollar commercial aerospace industry cluster with the "Southern Arrow Northern Star", forming low-cost and highly reliable star-arrow product development capabilities and large-scale star constellation construction and operation capabilities by 2028, and completing the construction of an integrated celestial navigation and remote sensing giant star system by 2034, encouraging rockets, satellites, and data services to enter the international market.

Analysis: Commercial aerospace is very hot in the A-share market, and AVIC Aircraft is seizing the opportunity. The company's controlling subsidiaries, AVIC International, Hongdu Aviation, AVIC Optoelectronics, and AVIC Avionics, four A-share listed companies, have formed core competitiveness in various businesses along the aviation industry chain. AVIC Aircraft deeply participates in the low-altitude economy, driving the development of the low-altitude economy through its subsidiaries. The company's controlling subsidiary, AVIC International, is the largest in scale, highest in output value, and most comprehensive in product series in the domestic helicopter manufacturing industry.

The company's helicopter products are more compatible with the civil market, covering a full range of helicopters from ultra-light, light, medium, to large. Globally, there is a significant imbalance in the ratio of trainer aircraft to combat aircraft in China, with still considerable room for improvement. From 2022 to the present, the company has been continuously advancing important asset restructuring projects. Its subsidiary, AVIC Electronics, absorbed and merged AVIC Mechatronics through stock exchange, and was subsequently renamed "AVIC Avionics".

In addition, another subsidiary, AVIC International, completed the acquisition of 100% equity of Hafei and Changfei. In the next 20 years, China's commercial aircraft fleet is expected to add 9,284 new aircraft, and the commercial operation of the C919 is expected to accelerate the mass production of domestic large aircraft. The company's subsidiary, AVIC Planning, is expected to fully benefit from the infrastructure construction in China's civil aviation and general aviation sectors in the future On the low-altitude front, the company has formulated the High-speed Electric Vertical Take-off and Landing (H-eV-T-OL) technology scheme in June 2023, which has been approved by internal and external experts. According to the overall project schedule, the first flight of the prototype verification aircraft is expected to be completed by mid-2024.

Furthermore, on January 19, 2024, the first batch of the new generation primary trainer aircraft, Lingyan AG100, independently developed by Aviation Industry Tongfei, rolled off the production line and was delivered in Deqing County, Zhejiang Province. This marks the official entry of this general aircraft into the market, opening a new journey of industrialization development. In the long term, the civil aviation space may outperform comparable companies in the industry, with the potential for accelerated development in the coming years. With the acceleration of low-altitude economic industrialization and policy support, the industry is expected to experience rapid growth.

[Disclaimer] This VIP information product is for communication and discussion purposes only and does not constitute any investment advice. Reproduction without authorization is strictly prohibited. For more high-quality information and data products, please log in to the Zhitong Finance APP for inquiries