20220113-招银国际-CMBI_Research_Focus_List__Our_best_high_conviction_ideas_24页_2mb

CMBI Research Focus List Summary

Core Content

CMBI has compiled a list of high conviction investment ideas, focusing on both long and short-term opportunities across various sectors. The report highlights key companies, their ratings, financial metrics, and the rationale behind their inclusion in the focus list.

Main Points

Long Ideas

• Zhejiang Dingli (603338 CH)

  • Sector: Capital Goods
  • Rating: BUY
  • TP: RMB87.0 (13% upside)
  • Analyst: Wayne Fung
  • Investment Thesis: Beneficiary of strong downstream capex, with global presence, cost competitiveness, and strong management execution.
  • Key Drivers: Spin-off of equipment leasing unit, decrease in steel price, stabilization of freight cost.
  • Valuation: Based on 44x 2021E P/E, with a 30x FY22E P/E multiple.
  • Performance: Revenue and net profit growth expected, with 40.9x P/E for FY21E.

• SANY Heavy (600031 CH)

  • Sector: Capital Goods
  • Rating: BUY
  • TP: RMB30 (25% upside)
  • Analyst: Wayne Fung
  • Investment Thesis: Largest excavator manufacturer in China, with strong R&D, marketing, and intelligent production.
  • Key Drivers: Sequential improvement in construction machinery demand, decline in steel price, and stabilization of gross margin.
  • Valuation: Based on 14x 2022E P/E, with a 20% premium to the sector's average.
  • Performance: Revenue and net income growth, with 13.8x P/E for FY21E.

• SF Holding (002352 CH)

  • Sector: Express Delivery
  • Rating: BUY
  • TP: RMB100 (52% upside)
  • Analyst: Wayne Fung
  • Investment Thesis: Industry recovery after government intervention, shift from price war to service quality.
  • Key Drivers: ASP increase, M&A for market share gain, and expansion into integrated logistics.
  • Valuation: Based on 61x 2022E P/E, with a 30x FY22E P/E multiple.
  • Performance: Revenue and net income growth, with 82.5x P/E for FY21E.

• Xtep (1368 HK)

  • Sector: Consumer Disc.
  • Rating: BUY
  • TP: HK$15.41 (19% upside)
  • Analyst: Walter Woo
  • Investment Thesis: Key player in domestic fashion, with multi-brand expansion and premiumization.
  • Key Drivers: Strong retail sales, expansion into tier 1 cities, and relaunch of K-swiss.
  • Valuation: Based on 30x FY22E P/E, with a 24x P/E multiple.
  • Performance: Adj. net profit CAGR of 41% during FY20-23E.

• Li Ning (2331 HK)

  • Sector: Consumer Disc.
  • Rating: BUY
  • TP: HK$102.84 (29% upside)
  • Analyst: Walter Woo
  • Investment Thesis: Leading sportswear brand in China, with premiumization and e-commerce growth.
  • Key Drivers: Robust 2H21E retail sales, improved GP margins, and operational efficiency.
  • Valuation: Based on 50x FY22E P/E, with a 38x P/E multiple.
  • Performance: Adj. net profit CAGR of 43% during FY20-23E.

• CTGDF (601888 CH)

  • Sector: Consumer Staples
  • Rating: BUY
  • TP: RMB350.0 (69% upside)
  • Analyst: Joseph Wong
  • Investment Thesis: Major beneficiary of domestic travel recovery, with strong market share and policy tailwinds.
  • Key Drivers: Rental renegotiation, tax concession, and mix upgrade.
  • Valuation: Based on 43.0x end-22E P/E, with a 1sd premium over 3-year average.
  • Performance: Revenue and net income growth, with 30.9x P/E for FY22E.

• CR Beer (291 HK)

  • Sector: Consumer Staples
  • Rating: BUY
  • TP: HK$88.0 (51% upside)
  • Analyst: Joseph Wong
  • Investment Thesis: High-quality name with strong premiumization and mix upgrade.
  • Key Drivers: Sub-premium price hike, higher premium mix, and improved EBIT margins.
  • Valuation: Based on 29.8x end-22E P/E, with a 1sd premium over 3-year average.
  • Performance: Revenue and net profit growth, with 39.7x P/E for FY21E.

• Mengniu (2319 HK)

  • Sector: Consumer Staples
  • Rating: BUY
  • TP: HK$58.0 (21% upside)
  • Analyst: Joseph Wong
  • Investment Thesis: Strong cost control and mix upgrade, with structural growth potential.
  • Key Drivers: Raw milk price normalization, expansion into Southeast Asia, and high-end product launches.
  • Valuation: Based on 29.8x end-22E P/E, with a benchmark to Yili's 29.0x.
  • Performance: Revenue and net profit growth, with 38.3x P/E for FY21E.

Short Ideas

• SANY International (631 HK)

  • Sector: Capital Goods
  • Rating: BUY
  • Analyst: Wayne Fung
  • Rationale: Expected more upside in infrastructure-related machinery names.

• Haier (6690 HK)

  • Sector: Consumer Disc.
  • Rating: BUY
  • Analyst: Walter Woo
  • Rationale: Cautious about 1Q22E performance due to slowdown in Dec sales, but still positive on FY22E.

• Smoore (6969 HK)

  • Sector: Consumer Staples
  • Rating: BUY
  • Analyst: Joseph Wong
  • Rationale: Industry now expects new national standard to be released in 3Q22 (previously 1Q22).

Key Information

• Performance of Long Ideas: In the last report (16 Dec), 17 long ideas were highlighted. The basket underperformed the MSCI China index by 5.2ppt, delivering a -2.7% return (vs MSCI China 2.4%).
• Outperformers: CR Land, PSBC, PICC P&C, Haier, and Xiaomi delivered 5% or more returns, with 6 of the 17 ideas outperforming the benchmark.
• Catalysts for Recovery: The report anticipates sequential improvement in machinery demand, ASP increases, mix upgrades, and policy-driven industry recovery.
• Valuation Drivers: Target prices are based on P/E and P/B multiples, with a focus on future earnings growth and improved margins.
• Market Conditions: The report highlights the impact of the pandemic on sales and the expectation of recovery in 4Q21E and 2022E.

Summary of Financials

Conclusion

CMBI's focus list includes a range of companies with strong growth potential across sectors such as Capital Goods, Express Delivery, Consumer Staples, and others. The report highlights the importance of margin expansion, mix upgrades, and policy-driven recovery in the performance of these stocks. Target prices are based on P/E and P/B multiples, reflecting the analysts' confidence in future earnings and the structural growth trajectory of these companies.