Today’s Focus

1. China Merchants Bank International: A-shares and Hong Kong stocks rose due to LPR cut, Internet giant’s quarterly report is the focus of this week

2. Guotai Junan: The media and Internet industry policies have been consolidated, and it is recommended to actively pay attention to the repair of Internet valuations

3. CITIC Securities: The stimulus policy for auto consumption will be implemented, and it is recommended to overweight the auto sector at the current time

4. Zhongyuan Securities: The recovery momentum in May strengthened, and the relaxation of real estate increased

5. UBS: Upgrading Xiaomi Group to “Buy”, lowering the target price to HK$14.6

6. Bank of America: Maintain Xpeng Motors-W “Buy” rating, downgrade target price to HK$155

7. Founder Securities: Maintain Hua Hong Semiconductor’s “strongly recommended” rating with a target price of HK$67.78

8. BOCOM International: Maintain NetEase-S “Buy” rating with a target price of HK$189

9. Haitong International: Maintain “Outperform” rating on HKEX, target price of HK$403.6

10. Credit Suisse: “Outperform” rating on BYD shares with a target price of HK$368

11. Soochow Securities: Maintain Geely Auto’s “Buy” rating, with strong long-term competitiveness

12. HSBC: Maintain “Buy” rating on Fosun Pharma, downgrade target price to HK$50

Selected Research Viewpoints

1. Macro market

• China Merchants Bank International: A-shares and Hong Kong stocks rose due to LPR cut, Internet giant’s quarterly report is the focus of this week

China Merchants Bank International Development and Research Report pointed out that last week (May 16-20), the US stock market continued to fall, but emerging markets rebounded as the dollar fell. Domestic/Hong Kong stocks rose as the People’s Bank of China cut benchmark lending rates. Fundamentals and sentiment in Hong Kong showed some signs of improvement, as HSI EPS forecasts appeared to be stabilizing gradually, while short selling ratio and HSI Volatility Index (VHSI) declined.

Looking ahead to this week, the focus remains on the first-quarter earnings and guidance of Internet giants such as Alibaba, Baidu, Kuaishou, and NetEase. It is expected that Chinese real estate stocks may outperform on the back of policy support (a nationwide cut in first-home loan interest rates and a five-year LPR cut) and a month-on-month improvement in resumption of work and production.

2. Industry sectors

• Guotai Junan: The media and Internet industry policies have been consolidated, and it is recommended to actively pay attention to the repair of Internet valuations

Guotai Junan issued a research report that the bank believes that the overall media Internet industry policy has emerged at the end, and the top leaders continued to speak out within two months to support the standardized and healthy development of the platform economy. Various support measures have been gradually implemented. It believes that the current overall media Internet industry The policy bottom is relatively solid, and the valuation performance is outstanding. With the gradual release of subsequent substantive policies, it is expected to continue to catalyze the stock price of the overall sector upward.

The bank recommends actively paying attention to the repair of Internet valuations, and recommending targets: $Tencent Holdings( 00700.HK)$ , $ Kuishou-W(01024.HK)$ , $Bilibili-SW(09626.HK)$ , $Read Wen Group (00772.HK)$ , etc., it is recommended to pay attention to: $NetEase-S(09999.HK)$ , etc. I am optimistic that the prosperity of the game sector is expected to be improved after the re-issue of the version number. Recommended targets: Sanqi Interactive Entertainment, Perfect World, Yaoji Technology, Xinxin Company, China Mobile Games, etc. It is recommended to pay attention to: Gigabit, Baotong Technology, etc.; and recommended The video leader is $Mango Supermedia (300413.SZ)$ .

• CITIC Securities: The stimulus policy for auto consumption will be implemented, and it is recommended to overweight the auto sector at the current time

According to the research report of CITIC Securities, the National Standing Committee proposed to reduce the purchase tax of some passenger cars by 60 billion yuan in stages and a number of other policies that will benefit the recovery and development of the auto industry. The bank believes that the purchase tax reduction is one of the most effective policies to drive car sales. The policy strength exceeds market expectations and is expected to drive 1-2 million new demand for passenger cars. The worst time for the auto industry has passed, and it is expected to continue to improve marginally in the future. We are optimistic about the overall recovery and long-term development of the auto industry. At the current time, it is recommended to overweight the auto sector.

The policy stimulus of the regular session of the State Council exceeded expectations, and the reduction and exemption of purchase tax is expected to have a significant boosting effect on automobile sales. We are optimistic about the overall recovery and development of the automobile sector. This policy will obviously benefit car companies with high sales flexibility and good profit margins, especially car companies with traditional fuel vehicles as their profit core: $Great Wall Motor (02333.HK)$ (Pickup trucks benefit most from policies such as cars going to the countryside) , $Geely Automobile (00175.HK)$ , $GAC Group (02238.HK)$ , Changan Automobile, SAIC Group, etc.

• Zhongyuan Securities: The recovery momentum in May strengthened, and the relaxation of real estate increased

Centaline Securities stated that the relaxation of the real estate sector has been strengthened: on May 20, the central bank further lowered the 5-year LPR by 15 BPs to 4.45%. Superimposed on the previous policy of the regulatory authorities to “adjust the lower limit of the interest rate of the first residential commercial individual housing loan”, there will be more room for the downside of the mortgage interest rate. At present, the credit shrinkage in the real estate sector is relatively significant, and the second-hand market transactions continue to decline. It is expected that after the resumption of production and work, the effectiveness of the new real estate policy will gradually show, driving the rebound of real estate investment, forming a pattern in which the second quarter will be the bottom of the whole year.

Third, individual stocks

• UBS: Raise $Xiaomi Group-W(01810.HK)$ rating to “Buy”, lower target price to HK$14.6

UBS issued a report, expecting Xiaomi’s stock price to be nearing the bottom, decided to upgrade its rating from “Neutral” to “Buy”, and lowered the target price from HK$15 to HK$14.6, equivalent to 16.5 times the average price-earnings ratio forecast from 2022 to 2023 . The bank pointed out that Xiaomi’s stock price has fallen 38% this year, which is believed to have reflected the slowdown in global consumer demand, 5G cost pressure and the loss of Xiaomi’s smartphone market share. Given its current valuation, coupled with positive indicators from the bank’s consumer smartphone survey, Xiaomi’s risk-reward is attractive. The bank pointed to key catalysts including Shanghai’s progress in reopening and easing pressure on supply chains.

• BofA Securities: Maintain $Xpeng Motors-W(09868.HK)$ “Buy” rating, downgrade target price to HK$155

Bank of America Securities released a research report saying that Xpeng Motors’ first-quarter results were in line with expectations, with revenue of 7.5 billion yuan, a year-on-year increase of 153%, but a quarter-on-quarter decline of 13%. As for the auto gross profit margin, it was 10.4%, up from 10.1% in the same period last year, but down from 10.9% in the previous quarter. The quarter-to-quarter decline was mainly due to an improvement in the product mix, which was offset by cuts in subsidies for new energy vehicles and higher battery costs. The bank said that Xpeng expects its gross profit margin in the second quarter to be affected by rising battery costs, but since orders for new prices began to ship in the third quarter, gross profit margins in the second half of the year are expected to continue to improve.

Bank of America Securities lowered its sales forecast for Xpeng Motors this year by 2%. The target price of the shares was lowered from HK$178 to HK$155. The rating was maintained at “Buy”.

• Founder Securities: Maintain $HUAHONG SEMICONDUCTOR (01347.HK)$ “STRONGLY RECOMMEND” rating, target price of HK$67.78

Founder Securities released a research report saying that it maintains Hua Hong Semiconductor’s “strongly recommended” rating. It is expected that the revenue in 2022-24 will be US$25.3/2.96/3.28 billion, and the net profit attributable to the parent is US$3.6/4.1/510 million. According to the DCF valuation method Calculated, the target price is 8.63 US dollars, converted according to the exchange rate, the target price is 67.78 Hong Kong dollars. The company’s 22Q1 revenue was US$590 million, which was a higher-than-expected increase compared to the revenue guidance of US$560 million. It is expected that the 22Q2 revenue will be US$615 million, a month-on-month +3.4%.

• BOCOM International: Maintain $NetEase-S(09999.HK)$ “Buy” rating with target price of HK$189

Bank of Communications International released a research report saying that it maintained a “buy” rating on NetEase-S with a target price of HK$189. The company held a 2022 game launch conference on May 20, and announced more than 50 new games (36 domestic and 15 overseas), mainly including new expansions, new skins, IP linkage, new game launch plans, etc., and new overseas games. With abundant reserves, it is expected that the proportion of overseas revenue will increase to 14% by the end of the year, and it is optimistic about its production capacity and long-term operation capacity.

According to the report, the company’s domestic flagship games maintain stable content updates and gameplay innovation, and industry-leading production capabilities and operational capabilities build core competitiveness. 24 games have announced new expansion plans, which will be launched one after another from May to the summer, with continuous innovation in game versions, scenes, characters, and gameplay. In addition, the layout of overseas games is positioned for global distribution, and the launch of new games will be accelerated in the second half of the year. Among the 15 new developments in overseas games announced, a total of 9 new games are to be launched. Both PC and mobile games are to be launched. Expand new categories such as strategy and sandbox.

• Haitong International: Maintain HKEX (00388.HK)$ “Outperform” rating, target price of HK$403.6

Haitong International released a research report stating that it maintains the “outperform” rating of the Hong Kong Stock Exchange and expects to achieve a total operating income of HK$207/224/24.5 billion in 2022-24E (-1%/+8%/+9% year-on-year); Net profit attributable to shareholders is HK$123/129/13.6 billion (-2%/+5%/+6% year-on-year), and the target price is HK$403.6, corresponding to 41.6 times 2022 EPE. The Hong Kong Stock Exchange released the results for the first quarter of 2022: revenue and other gains were HK$4.690 billion (-21% year-on-year), and net profit attributable to the parent was HK$2.668 billion (-31% year-on-year). The bank expects that the decline in performance is mainly related to factors such as continued market volatility.

• Credit Suisse: “Outperform” rating on BYD (01211.HK)$ , target price HK$368

Credit Suisse issued a research report stating that it rated BYD shares as “outperform the market” with a target price of HK$368. The company’s battery technology has been upgraded to CTB, which further integrates the battery into the body, and the top cover of the battery pack forms the floor of the body. This fusion simplifies body structure and production processes, resulting in lower costs, improved safety and greater vehicle space.

According to the report, as BYD’s first product using CTB technology, the “Seal” large sedan is priced from 212,800 to 289,800 yuan, and will directly compete with Tesla Model 3, Xiaopeng P7, and Feiyue C01. BYD said that the first-day order for the “Seal” reached 22,637 units, and the management guided monthly sales of about 20,000 units. Given the strong profitability of the Han EV sedan’s gross profit margin of over 30%, “Seal” is expected to make a positive contribution to BYD’s product mix and profit margin.

• Soochow Securities: Maintain $Geely Auto (00175.HK)$ “Buy” rating, strong long-term competitiveness

Soochow Securities released a research report saying that it maintains Geely Auto’s “buy” rating. It is expected that the total revenue in 2022-24 will be 1379/168.0/198.2 billion yuan, and the net profit attributable to the parent company will be 66/92/12.9 billion yuan, corresponding to an EPS of 0.66 /0.92/1.29 yuan, the corresponding PE is 17/12/9 times, and the average valuation of five comparable companies in A shares is 41/26/18 times. Relying on the parent company Geely Holding, through multiple acquisitions and integrations, a huge automotive ecological industry chain covering upstream and downstream brands has been built, helping the company to have a strong long-term competitiveness. The bank believes the company should enjoy a higher valuation given the continued accumulation of technology and strong product cycles.

• HSBC: Downgrade $ Fosun Pharma (02196.HK) $ target price to HK $ 50, maintain “Buy” rating

HSBC Research released a research report saying that the revenue forecast of Fosun Pharma in 2022 and 2023 was raised by 4%, and it was more optimistic about the growth of the pharmaceutical and device industries. The sales growth of new drugs and medical beauty industries was stronger than expected. – Net profit forecast for 2023 is lowered by 12%-17% to take into account the depreciation of Fosun Financial’s assets due to falling share prices and gross margin pressure from sales of COVID-19 products with lower gross margins. The bank lowered the target price of Fosun Pharma’s H shares from HK$70 to HK$50 and maintained a “buy” rating.

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