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Market Summary

Core Content

The document provides a summary of the Hong Kong stock market performance and key sector and company news for the first quarter of 2022 (1Q22). It highlights the mixed market sentiment, with gains in the tech sector and the coal industry, while some companies face headwinds due to regulatory and economic factors. Additionally, it includes specific updates on several listed companies, including their financial results and strategic developments.

Market Overview

• Tech Sector: Hong Kong tech stocks rose, contributing to the overall market gain.
• Coal Sector: The China coal sector saw a surge due to better-than-expected 1Q22 results.
  • China Shenhua (1088 HK): Net profit increased by 67% YoY.
  • China Coal (1898 HK): Net profit rose by 93% YoY.
• Hang Seng Index: Advanced 329 points to 20,276 points, with a daily turnover of HKD105.7 billion.
• Company Results: Several companies are set to release their 1Q22 results, including ABC (1288 HK), BOC (3988 HK), CCB (939 HK), CRG (390 HK), and COSCO series.

Sector News: China Airline Industry

The Chinese airline sector is currently facing four major challenges:

1. Domestic Flight Uncertainty: Increased last-minute cancellations due to mass testing in Shanghai and a new outbreak in Beijing.
2. Weak International Flights: International passenger capacity remains at low single-digit levels of 2019, with no expected rebound unless inbound quarantine measures are eased.
3. RMB Currency Trend: A weaker RMB negatively impacts airline companies due to their high exposure to USD-denominated debt.
4. High Oil Prices: Brent crude oil prices exceed USD100 per barrel, increasing operational costs for airlines that have not hedged against oil price fluctuations.

Company News

BYD Co. (1211 HK)

• 1Q22 Results: Revenue reached RMB66.8 billion (+63% YoY), net profit RMB808 million (+240% YoY), aligning with previous profit alerts.
• Operating Cash Flow: Generated RMB12 billion (+83x YoY), driven by strong new energy vehicle sales.
• Gross Profit Margin: At 10.7% (-0.8ppt YoY), impacted by rising battery material costs.
• Price Adjustments: Raised vehicle prices by RMB3k to RMB6k in March to offset cost pressures.

CNOOC (0108 HK)

• 1Q22 Results: Beat expectations with unaudited oil and gas sales revenue up 70.4% YoY to RMB82.3 billion and net profit surged 132% YoY to RMB34.3 billion.
• Drivers of Growth: Higher international oil prices and increased sales volume.
• Oil and Gas Prices: Average realized oil price rose 65% YoY to USD97.46 per barrel; average realized gas price increased 24.4% YoY to USD8.35 per tcb.
• New Discoveries: Made 4 new discoveries and drilled 13 successful appraisal wells.
• Special Dividend: Declared a special dividend of HKD1.18 per share, implying a dividend yield of over 10%.

United Labs (3933 HK)

• Clinical Trial Approval: Received approval from the China NMPA for its insulin degludec and insulin aspart injection clinical trial, becoming the second Chinese company to apply.
• Product Development: Biapenem for injection (0.3g) passed GQCE.
• Product Description: Insulin degludec and insulin aspart injection is a new-generation ultra-long-acting combination of basal and mealtime insulin analogues.

Sands China (1928 HK)

• 1Q22 Financial Performance: Recorded a widened EBITDA loss and net loss, missing consensus forecasts.
  • Total Net Revenue: USD547 million (-29% YoY).
  • EBITDA Loss: USD11 million (vs. USD100 million EBITDA gain in 1Q21).
  • Net Loss: USD336 million (vs. USD213 million net loss in 1Q21).
• Factors Affecting Performance: Rise in COVID-19 cases, related restrictions, and low visitation levels compared to 2019.
• Management Outlook:
  1. Expect recovery in 2023E, possibly by end-2022E, depending on easing travel restrictions.
  2. Optimistic about strong consumer spending during unrestricted travel periods.
  3. Anticipates approval of gaming law by August, with completion expected before end-2022E.

Disclaimer

• The document is for general information and not an investment recommendation.
• No verification of the information is performed, and accuracy or completeness is not guaranteed.
• MIB (HK) may have financial interests in the companies mentioned and may provide investment banking services.
• The content is not intended to be a solicitation to buy or sell securities.
• Users are advised to consult their financial advisors for personalized investment advice.