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7 May, 2020 (Thursday)

            
C TRANSMISSION(658)
Analysis¡G
China High Speed Transmission Equipment Group (658) is principally engaged in research, design, development, manufacture and distribution of a broad range of mechanical transmission equipment that are used in wind power and a wide range of industrial applications. The Group has a range of products including 750kW, 1.5MW, 2MW, 3MW and 5MW wind power transmission equipment which have been provided to domestic and overseas customers in bulk. The product technology has reached an internationally advanced technical level and is well recognised by customers in general. In addition to the provision of diversified large wind power gear boxes to customers, the Group has also successfully developed and accumulated 6MW and 7MW wind power gear box with a technological level comparable to its international peers, thus enabling it to have the capability and technology to produce those products. (I do not hold the above stock)
Strategy¡G
Buy-in Price: $5.05, Target Price: $5.65, Cut Loss Price: $4.80


SUNNY OPTICAL(2382)
Analysis¡G
Sunny Optical Technology is a manufacturer of optical parts and related products in China. The company is also a major supplier of many top Chinese smartphone brands. In FY19, the company reported a revenue of 37.8 billion yuan, a YoY increase of 46%, and gross profit of 77.5 Billion yuan, increased by about 57.8% YoY. As affected by the epidemic, the company`s Q1 sales were not as satisfying, the shipments of mobile phone lenses and modules even fell by more than 10% MoM in February this year. However, the management has predicted that revenue could increase by 10 to 15% in FY20 if the COVID 19 pandemic could be under control. The global pandemic situation is still unclear, and china`s smartphone sales in the first quarter even fell by 18%, but surprisingly still performed better than the market expectations. In recent months, the sales of major domestic mobile phone brands have gradually recovered. Among them, Xiaomi`s first-quarter shipments have yet risen by 6.1%. Compared with other industry leaders, the impact of global consumption slowdown would have less effect on the company. While the current domestic epidemic has been controlled mainly in China, we should expect the domestic demand in China to be strong in the second half of 2020. With the smartphone`s camera upgrade has also become a trend among phone producers and 5G upgrade demand in China. We could expect the company revenue to pick back up soon.
Strategy¡G
Buy-in Price: $110, Target Price: $123, Cut Loss Price: $104



Report Review of April. 2020

Sectors:

Air & Automobiles (Zhang Jing),

Automobile & Air (ZhangJing)

This month I released 4 updated reports of SIA (600009.CH), Tianneng Power (819.HK), Yongda (3669.HK), and Weichai (2338.HK), which got success by their unique Competitive edge. Among them, we highly recommend Tianneng Power and Yongda.Tianneng Power's 2019 revenue and net profit increased by 17% and 42%, respectively. Basic EPS were RMB1.49. The proposed final dividend was HKD0.39 per share. The dividend payout ratio reached 23%. In 2019, the Company's market share in the domestic lead-acid battery of light electric vehicle has exceeded 44%, more than 3 ppts higher than in 2018. In H1, due to some changes in the industry policies, customers` wait-and-see attitude led to a drop in the demand for the lead-acid battery. With further integration in the industry, the demand recovered in H2, resulting in a better sales situation than in H1. Battery sales revenue increased by about 25% hoh and the net profit doubled to RMB1.14 billion hoh. The full-year profit contribution was RMB1.71 billion. With the increasing requirements of environmental protection in domestic, the concentration of the lead-acid battery industry will continue to improve. As the leading enterprise, Tianneng Power's "cash cow" ¡X lead-acid battery business will remain stable. The Company plans to spin off the subsidiaries and list on the Sci-Tech innovation board in Shanghai. We believe that current valuation near a decade low, which does not reflect the company's leading position in domestic lead-acid battery market and expectation of stable growth. For valuation we cut our target price to HK$8.51 to reflect the possible challenge of the Company, maintain a Buy rating.

The revenue of Yongda Automobiles was RMB62.71 billion in 2019, up 13.4% yoy; the profit attributable to shareholders stood at RMB1.473 billion, up 17.6% yoy, with the EPS of RMB0.8. In 2019, the sales volume of the premium cars in China increased against the trend. Benefiting from the prosperity in the premium cars market and channel expansion, the Company's overall sales volume of new cars was up 11.6% yoy to 197,400, with the sales volume of the premium cars up 15.5% yoy to 128,600, faster than the industry average of 9.7%.

By the end of 2019, the number of dealerships increased to 208, with a net increase of 14. Among them, there was 119 luxury brands, which had a net increase of 8. The number of those who had got licenses was 12. Within the year, there was 13 new self-built dealerships and 6 by mergers and acquisitions, including luxury brands as Porsche/Mercedes-Benz/Lexus/Volvo/Lincoln/Aston Martin as well as the new energy brands like Tesla/WM/Xpeng/Byton. The outbreak affected the sales in the first quarter, but now, as things get better, the Company is rapidly recovering orders and store visitors, and is expected to return to normal levels in the past in April. In view of the favourable factors such as the newly acquired stores, the increased license plate quota in Shanghai and the support policies of the automobile manufacturers, the management still maintains the original operational objectives.

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