CMBI Research China & Hong Kong Stock Picks (August 2023)
Nongfu Spring, Jinxin Fertility Group, JOYY, Xiaomi, Weibo Corp, Cloud Music, China Life Insurance, ANTA Sports Products, Baidu, Atour Lifestyle Holdings, Samsonite International, Budweiser APAC, etc.
CMB International Capital Corporation is a wholly owned subsidiary of China Merchants Bank (SHA: 600036 / HKG: 3968 / OTCMKTS: CIHKY / OTCMKTS: CIHHF) - one of the largest banking groups and the largest privately-owned bank in China. They come out with (and post on their website) a steady stream of free research pieces - namely China and Hong Kong stock picks (see our front page for a full list of TAGS for our EM Stock Pick Tear Sheets).
An extensive number of Chinese stocks were covered during the month of August and covered in this post include:
Nongfu Spring, Zoomlion Heavy Industry, Jinxin Fertility Group, InnoCare Pharma, Greentown Service Group Co, Sany Heavy Industry, JOYY Inc, ZTO Express, GoerTek Inc, China Suntien Green Energy Corp, Xiaomi Corp, BYD Company, NIO Inc, Huitongda Network, Baozun, Inner Mongolia Yili Industrial Group Co, Binjiang Service Group, Pinduoduo, Biocytogen Pharmaceuticals Beijng Co Ltd, Onewo Inc, ZhongAn Online P & C Insurance Co, Xiabu Xiabu Catering or XBXB, CMGE Technology, Tsingtao Brewery, Jiangsu Hengli Hydraulic, SenseTime, Wingtech, Zhongji Innolight Co Ltd, China Tourism Group Duty Free, Shanghai Henlius Biotech, Hangzhou Tigermed Consulting, China Yongda Automobile Services Holding, Aac Technologies Holdings, Ping An Healthcare and Technology, Guangzhou Automobile Group, Weibo Corp, Cloud Music, China Life Insurance, Sunny Optical, YSB Inc, Intron Technology, Innovent Biologics, Jiumaojiu International Holdings, China Tower Corp Ltd, Meituan, ENN Energy Holdings, WuXi Biologics, ZTE, NetEase, Zhihu Inc, CSPC Pharmaceutical Group, Xtep, Poly Property Services Co Ltd, iQIYI, Smoore International, Glodon Co Ltd, ANTA Sports Products, Simcere Pharmaceutical Group, CR Power, Kuaishou Technology, RemeGen, Baidu, Tongcheng Travel Holdings, Zhejiang Jingsheng Mechanical & Electrical Co., CR Beer, FriendTimes Inc, XPeng, Atour Lifestyle Holdings, Kingdee International Software Group, Shanghai Kindly Medical Instruments Co Ltd, Zhejiang Dingli Machinery, Samsonite International SA, Bilibili, JD.com, China Lilang Ltd, Tencent, Alibaba, Tencent Music Entertainment Group, Mobvista, Huya Inc, China Feihe Ltd, Li Ning Co., Ltd, Far East Horizon, FIT Hon Teng, Horizon Construction Development, Li Auto, Yuexiu Transport Infrastructure, Q Technology (Group) Company, Budweiser APAC, Tongda Group Holdings Ltd, BeiGene, Kweichow Moutai, WuXi AppTec, YUM China, Greentown Management Holdings Company, Hutchmed, & China Three Gorges Renewables Group Co Ltd (CTGR Group)
They also come out with (and post on their website) a monthly list of 20+ high conviction stock ideas - namely Chinese stock picks (see our May, June and July posts summarizing those). These lists usually do not change too much from month to month BUT they did in August.
Stocks covered by the CMBI August list (including Additions and Deletions) and included in this post with updated stats and charts include:
Li Auto, Geely Automobile Holdings, Great Wall Motor, Sany Heavy Equipment International Holdings, Zhejiang Dingli Machinery, CR Power, CR Gas, Atour Lifestyle Holdings, Midea, YUM China, Vesync, CR Beer, Tsingtao Brewery, Prada SpA, Kweichow Moutai, Innovent Biologics, AK Medical, AIA Group, Tencent, Pinduoduo, NetEase, Alibaba, Kuaishou Technology, CR Land, BYD Electronic International Co Ltd, BOE Varitronix, Wingtech & Kingdee International Software Group
Many of our recent EM Fund Stock Picks & Country Commentaries posts have covered fund manager, etc. interviews about China (also see: China's Problems That Few People Talk About (And Investor Implications)) with some quick takeaways being:
Expect a maximum of 5% or 0-2% (or even less…) economic growth for the foreseeable future.
It will take several years to deflate the Chinese property bubble and expect more property developers to have problems.
Do not assume the tech crackdown has come to an end. Instead, expect it will continuously evolve - especially given geopolitical issues.
Expect more regulatory crackdowns involving other sectors e.g. our Monday posts have been covering ongoing crackdowns that have started in the health care sector and apparently now in the insurance sector.
Chinese stock valuations are said to be behaving like those of regulated utilities.
In other words, investors will need to be very selective when it comes to investing in Chinese stocks.
Getting back to this post: Note that when I click on CMBI’s website, I receive NO pop-up asking what sort of investor I am or my location; but there is this disclaimer at the end of each research report that readers need to be aware of:
This post will NOT be quoting directly from the research documents themselves (beyond giving the title to the linked research report - please keep the above disclosures in mind).
To make your life easier, this post includes:
A heading with the stock name.
A quick description of the stock pick with links to the IR page and stock quote(s) on Yahoo! Finance.
A link to any Wikipedia page (for what it might be worth…)
The title of the report linked to the file page on the CMBI website about the stock pick.
Forward or trailing P/E and dividend yields linked back to the Yahoo! Finance statistics page.
The latest long term technical chart linked back to Yahoo! Finance.
And as always, this post is provided for informational purposes only (and to make your life easier…). It does not constitute investment advice and/or a recommendation…
CMBI Research (August 2023)
Nongfu Spring
Nongfu Spring (HKG: 9633 / OTCMKTS: NNFSF) is China’s largest packaging water supplier, holding the number one spot for market share and is one of the top 20 beverage companies in China. Nongfu Spring ranks among the top three in the Chinese market for tea beverages, functional beverages and juice beverages.
Nongfu Spring (9633 HK) – 1H rev/np +23%/25%; a neat beat on tea beverage
Forward P/E: 39.37 / Forward Annual Dividend Yield: 1.80% (Yahoo! Finance)
Zoomlion Heavy Industry
Founded in 1992, Zoomlion Heavy Industry (HKG: 1157 / SHE: 000157 / FRA: 8CZ / OTCMKTS: ZLIOY / ZLIOF) is mainly engaged in developing and manufacturing major high-tech equipment in the areas of agricultural, building, energy, environmental, and transport engineering. Zoomlion is said to be China's largest and world's fifth largest construction machinery enterprise.
Zoomlion (1157 HK) – 2Q23 net profit +50% YoY in line with expectations
Forward P/E: 6.85 / Forward Annual Dividend Yield: 8.68% (Yahoo! Finance)
Jinxin Fertility Group
Since 1951, Jinxin Fertility Group (HKG: 1951 / FRA: 3NX / OTCMKTS: JXFGF) has developed into a leading assisted reproductive service organization in China and the United States, and continues to expand their network to provide more and more high-end services of higher value. The group includes five centers of assisted reproductive technology: Chengdu Xi Nan, Shenzhen Zhongshan, Wuhan Jinxin, HRC Fertility and Jinrui Medical Center.
The establishment of the Group dates back to 2003, when a team of senior and dedicated doctors and managers agreed to set up Jinjiang IVF Center in Chengdu, Sichuan Province to focus on assisted reproductive services and related treatments. Shenzhen zhongshan hospital was founded in May 2004 by a number of personal founders including Mr Zeng yong, one of our senior management members. Shenzhen Zhongshan Hospital provides assisted reproduction and other complementary medical services and assisted in the birth of the first baby in Shenzhen through IVE-ET technology and IVF combined with ICSI technology.
According to Frost Sullivan Report, their in-network assisted reproductive care facilities in China ranked third in the assisted reproductive services market in China in 2018, performing 20,958 cycles of external fertilization (" IVF "), with a market share of about 3.1%. According to the same index, the agency also ranked first among non-state assisted reproductive service institutions in China in 2018.
Through the acquisition of HRC Management, which manages HRC Medical, HRC Fertility has enhanced our ability to provide high-value assisted reproductive services to international patients, particularly those from China. HRC Fertility is a leading full-service assisted reproductive service in the United States with over 30 years of experience. In addition to the similar IVF services we provide in China, we also provide pre-implantation genetic screening (" PGS ") services and pre-implantation genetic diagnosis (" PGD ") services through third party clinics or institutions. HRC Fertility ranked first among all assisted reproductive service providers in the United States in terms of IVF treatment cycles for Chinese outbound assisted reproductive service patients traveling to the United States for treatment in 2017.
Forward P/E: 15.27 / Forward Annual Dividend Yield: N/A (Yahoo! Finance)
