Intelligent Hong Kong Stock Analysis | Strong financial reports support Hang Seng Index's steady rise, Star Flash concept emerges strongly

[Market Analysis]

Today, the A-share market continued to pull bank stocks, leading to continued market bleeding. Coupled with the poor performance of many large blue-chip stocks, sentiment was further dampened. On the other hand, in the Hong Kong stock market, many stocks reported good financial results, coupled with expectations of a rate cut by the Federal Reserve, the Hang Seng Index closed up by 1.44%.

On Wednesday morning local time in the United States, the release of non-farm payroll data was delayed by over half an hour from the scheduled time. The revision indicated that non-farm employment in the year ending in March may be revised down by 818,000 people, equivalent to a monthly decrease of about 68,000 people. This is the largest downward revision since 2009. It indicates that the slowdown in the U.S. labor market started much earlier than initially expected, sounding an alarm as the unemployment rate rose for the fourth consecutive month due to a slowdown in hiring. Combining other indicators such as initial jobless claims and job vacancies, the slowdown signal becomes clearer. Interestingly, before the data was released, Mizuho Financial Group and BNP Paribas directly obtained the numbers by calling the department, according to an insider. Nomura Holdings' economic research team did the same.

Looking ahead to early Thursday (22nd) Beijing time, the Federal Reserve released the minutes of the June Federal Open Market Committee (FOMC) policy meeting. The minutes stated that most Fed officials believe that if inflation continues to slow and the labor market weakens further, they should cut interest rates in September. From various perspectives, the signal for a rate cut in September is quite clear, and the U.S. stock market continues to maintain its upward momentum.

At a routine press conference on the 22nd, the Ministry of Commerce stated that as of noon today, the Ministry of Commerce's platform for trading in old cars for new ones has received over 680,000 applications for car scrappage subsidies. In the past month alone, there have been approximately 340,000 new subsidy applications. The policy of scrapping old cars and replacing them with new ones has led to a rapid increase in the recycling of scrapped cars. From January to July, the national number of scrapped cars recovered was 3.509 million, a year-on-year increase of 37.4%. Among them, in May, June, and July, the year-on-year increases were 55.6%, 72.9%, and 93.7%, respectively.

This indicates that the policy has achieved the expected effect. The China Association of Automobile Manufacturers (CAAM) predicts that in August, the narrow passenger vehicle retail market will be around 1.84 million units, a decrease of 4.4% year-on-year, an increase of 7.0% from the previous month. The retail of new energy vehicles is expected to be around 980,000 units, a year-on-year increase of 36.6% and a month-on-month increase of 11.6%, with a penetration rate expected to rise to 53.2%. Today, automobile stocks rose across the board, especially new energy vehicle manufacturers such as Li Auto (02015), XPeng (09868), and Nio (09866), all with gains of around 2%.

Yesterday, it was mentioned that the performance of consumer electronics was generally good. Today, AAC Technologies (02018) also reported a decent interim report, with revenue of 11.25 billion RMB, a year-on-year increase of 22.0%; gross profit of 2.418 billion RMB, a year-on-year increase of 86.4%; attributable net profit to owners of the company was 537 million RMB, a year-on-year increase of 257.3%; basic earnings per share were 0.46 RMB. During the period, the gross profit margin was 21.5%, an increase of 7.4 percentage points year-on-year. The significant improvement in gross profit margin was mainly due to the recovery in the mobile phone market, product mix improvements from businesses such as acoustics, optics, and precision structural components, continuous efficiency improvements from lean operations, and contributions from Premium Sound Solutions (PSS) Recent trends continue to rise for a reason.

What's even stronger is Xiaomi (01810), with revenue of 88.9 billion, a year-on-year increase of 32%, and adjusted net profit of 6.2 billion, a year-on-year increase of 20.1%. Profits exceeded expectations by around 2 billion. Xiaomi's mobile phone business has stabilized its customer base, with the company's automotive business gross margin reaching 15.4% this quarter, far exceeding market expectations. Regarding the fact that Xiaomi loses over 60,000 RMB for each SU7 sold, Wang Hua, the General Manager of Xiaomi's Public Relations Department, pointed out on Weibo that the scale of Xiaomi's automotive business is small at present, and the input costs are relatively high, requiring time to absorb these costs. He believes that the future losses of Xiaomi's automotive business will further narrow. If the automotive business scales up and becomes profitable, Xiaomi's valuation will also increase.

On August 18, the Container Shipping Index (Europe) futures celebrated its one-year anniversary since listing. Since the listing of futures, although shipping prices have fluctuated greatly, the overall operation of this product has been stable, with a close linkage between futures and spot prices, and the functions of futures gradually becoming apparent. In the current period of continuous turmoil in the Middle East, the tight shipping capacity is an indisputable fact, and many foreign trade enterprises participating in futures for risk hedging is a very wise move. Overall, the performance of shipping-related companies is quite impressive, with generous dividends. Hai Feng International (01308) saw a 13.01% year-on-year increase in net profit in the first half of the year and will distribute an interim dividend of 0.72 Hong Kong dollars per share for the six months ending June 30, 2024, on September 20, 2024. It rose by over 5% today; Overseas Orient International (00316) reported a revenue of 4.646 billion USD, up 2.3% year-on-year. It will pay an interim dividend of 63 cents per share. The highlight is the timely delivery of new vessels, providing more space to redesign routes and launch new service projects to meet customer demands. It rose by 5.61% today.

China General Nuclear Power Corporation (01816): The mid-year operating income was approximately 39.377 billion RMB, a year-on-year increase of 0.3%. Net profit attributable to the company's shareholders was approximately 7.109 billion RMB, a year-on-year increase of 2.2%. It may not seem eye-catching, but the market values such stable varieties, with expectations being key. On August 19, following the review by the State Council's executive meeting, it approved nuclear power projects in Zhaoyuan, Shandong, Lufeng, Guangdong, San'ao, Zhejiang, and other places. The company's Zhaoyuan Units 1 and 2, Lufeng Units 1 and 2, San'ao Units 3 and 4, and other 6 new units have officially landed. As of now, China General Nuclear Power has 28 operating nuclear units and 16 under construction domestically, with a total installed capacity of 51,162.2 MW in operation and under construction. With so many orders in hand, it naturally attracts attention. It rose by over 5% today.

[Sector Focus]

NearLink is China's native new generation short-range wireless connection technology, with significant technical advantages such as a 60% reduction in power consumption, 6 times faster data transmission speed, a 1/30 reduction in latency, and a 10 times increase in the number of connections. It has lower latency, more stable connection, and anti-interference capabilities, suitable for various scenarios such as consumer electronics, smart homes, smart cars, industrial intelligence, etc. NearLink has two types, SLE and SLB, corresponding to Bluetooth and WIFI, respectively. Currently, SLE-related products are very mature, and the replacement of Bluetooth is imminent. Behind this is the demand for domestically controllable technology, and more importantly, Bluetooth can no longer meet people's demands for short-distance communication, while NearLink can, with longer transmission distance, greater bandwidth, higher and more stable frame rates The lower limit of StarFlash far exceeds the upper limit of Bluetooth, and in the future, we will see a whole new range of electronic products.

From the perspective of replacing Bluetooth, the annual value of the Bluetooth chip market is 500 billion, while the value of Bluetooth modules may exceed a trillion, and the value of related products driven by extension may be over trillions. And these will become the market for StarFlash in the future.

Currently, the main application scenarios are concentrated in the home appliance sector, with related stocks in the Hong Kong market: Haier Smart Home (06690), TEL Electronics (01070), Skyworth Group (00751), Hisense Home Appliances (00921).

[Stock Analysis]

Haitian International (01882): Injection molding machine exports increased by 14.1% year-on-year in the first 5 months, overseas business proportion continues to rise

According to statistics from the General Administration of Customs of China, in the first five months up to May 2024, the export value of injection molding machines was RMB 5.2893 billion, a year-on-year increase of 14.1%. In the first five months up to May 2024, the export of plastic products increased by 12.1% year-on-year. The Chinese injection molding machine market accounts for nearly 30% of the global market size, with Chinese enterprises on the supply side providing over half of the global supply. In 2023, 39.4% of the company's revenue came from overseas exports, making it one of the main beneficiaries of this trend. The Board of Directors meeting will be held on Monday, August 26, 2024, to approve the publication of the company's interim performance for the six months ended June 30, 2024, and to consider the distribution of interim dividends (if any).

Analysis: Haitian International's competitor, Lijin Technology's injection molding machine division, grew by 40.7% in the six months ended March 31, 2024. The demand cycle for injection molding machines is usually 3-4 years. The strong performance of Lijin Technology's injection molding machine division indicates a recovery in demand for the entire industry after the low point of the cycle. It is expected that Haitian International's injection molding machine sales will also see a significant recovery next year. Haitian's orders in May still achieved a significant growth of over 40%, and orders in the first five months of this year also increased by over 30%, reflecting the company's strong growth momentum.

Citi pointed out that in the past 20 years of Haitian International's performance, sales growth in overseas business exceeded that of Chinese business in 14 years. The current revenue contribution ratio by region is 60% for China and 40% for overseas. It is expected that due to the company's continuous market share gains overseas, the proportion of overseas sales in the next two to three years can increase to over half.

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