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HUA HONG SEMI(1347)
Analysis：
For the quarter ending June 30 2022, Hua Hong Semiconductor (1347) recorded an all-time-high revenue of US$620.8 million, up 79.4% year over year and 4.4% above the prior quarter. Net profit attributable to shareholders of the parent company was US$83.9 million, 90.4% above 2Q 2021 and 18.5% below 1Q 2022, primarily due to foreign exchange losses in 2Q 2022. Gross margin was 33.6%, 8.8 percentage points above 2Q 2021 and 6.7 percentage points over 1Q 2022. In order to continue solidifying the Company’s position as a specialty technology provider and seize opportunities in emerging markets, such as automotive electronics and new energy, it will persist in high quality development of its specialty technologies and keep focusing on furthering technology development work in non-volatile memory, power discrete, analog & power management IC, logic & RF, and other specialty technology platforms, providing superior product solutions to its global customers. (I do not hold the above stock)
Strategy：
Buy-in Price: $25.80, Target Price: $28.00, Cut Loss Price: $24.40
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CONCH ENVIRO(587)
Analysis：
Anhui Conch Environment（00587） revenue was derived from industrial hazardous waste treatment services and industrial solid waste treatment services. Company recorded a revenue of RMB1698million, representing a year-on-year increase of 48.44%. Profit before taxation amounted to RMB698million, representing a year-on-year increase of 21.52%. Profit for the year amounted to RMB647million, representing a year-on-year increase of 15.88%. Net profit attributable to equity shareholders amounted to RMB579 million, representing a year-on-year increase of 23.37%. During the reporting period, company recorded a gross profit of RMB1015 million, representing a year-on-year increase of 35.40%; consolidated gross profit margin was 59.77%, representing a year-on-year of 5.76 percentage points. Anhui Conch Environment secured a total of 99 environmental protection projects in 22p provinces, municipalities and autonomous regions nationwide, which include 44 general hazardous waste projects, 24 fly ash washing projects, 8 oil sludge treatment projects and 23 industrial solid waste projects, with an annual treatment capacity of approximately 10.51 million tonnes of solid and hazardous waste. In terms of macro policies, China is actively promoting the green transformation of the economy, and company has also achieved the target of contracted capacity of industrial solid and hazardous waste in the“2019-2023” development plan ahead of schedule, and is in the process of formulating a new five-year development plan for “2024-2028”, aiming to achieve the ambitious target of 30 million tonnes/year of solid and hazardous waste treatment by 2028 to further consolidate its leading position in the industry. In addition, Conch Cement (00914) the single largest shareholder of the company is contemplating a possible acquisition of additional shares of the Anhui Conch Environment conducted in the open market at prevailing market prices, that is expected to bring more positive support to the share price of Anhui Conch Environmental.
Strategy：
Buy-in Price: $6.68, Target Price: $7.28, Cut Loss Price: $6.33
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Xtep International (1368.HK) - 1H2022 Positive profit alert in line with consensus
1H2022 Positive profit alert in line with consensus Xtep announced the operation data of 2Q2022. Xtep core brand products retail sell-through (including offline and online channels) grew by mid-teens (30 % – 35 % growth in 1Q2022), retail discount level at 25% – 30% (25% discount at 1Q2022). For the six months ended 30 June 2022, core brand products retail sell-through (including offline and online channels) grew by 20 % – 25 %, and inventory turnover was around 4.5 months (about 4 months in 1H2021, 1Q2022), estimated to be related to the impact of the COVID. Xtep also expected to record a significant increase of not less than 35% in its unaudited consolidated profit attributable to shareholders for 1H2022 as compared to that for the corresponding period in 2021, which is also in line with market consensus. Such increase was primarily due to a not less than 35% growth in consolidated revenue mainly attributable to: (1) remarkable sales fair orders resulting from encouraging retail performance of the core Xtep brand and Xtep Kids` business driven by their breakthrough in product innovation, retail channel upgrade and increased brand awareness; and (2) an impressive YoY revenue growth of over 100% for Saucony under the professional sports segment owing to its strong retail sales particularly in its e-commerce business. Adverse impact of COVID on the economy is fading in June, 618 sales growth 64% The adverse impact of the latest round of COVID outbreaks on the economy is fading, and the resumption of work and production in key cities, core brand products sales are expected to gradually improve. In fact, according to the 618 Shopping Festival sales data in 2022, Xtep recorded a 64% YoY online sales growth to RMB650mn, while the online sales of the core Xtep brand surged 61% to RMB590mn and those of Xtep Kids swelled 103% to RMB75mn. Saucony's even rocketed 135%, the most among all international sports shoe brands during the Festival. Company valuationIn 2Q2022, Xtep's core brand products retail sales growth slowed down due to the impact of the resurgence in pandemic. However, Xtep continues to cooperate with international brand distributors and launched a new store in Tangshan Rongda Shopping Mall with Pou Sheng in July. With the expansion of quality channels, which may help the sales growth of core brand and offset the impact of the COVID in the first half of the year. We adjust our FY2022E EPS forecast to RMB0.43 (down slightly compare with March 2022 report), with TP at HKD13.01, represents of 26.2x P/E (equivalent to the average P/E ratio of the past 2 years plus 1 standard deviation). We downgrade our investment rating to “Neutral”. Risk factors1) Resurgence in COVID in mainland; 2) Weak domestic growth and consumer spending in sportsware; 3) Intensified competition in the industry; and 4) Slower-than-expected in new brands development. Financial
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| Recommendation on 15-8-2022 | | Recommendation | Neutral | | Price on Recommendation Date | $ 12.800 | | Suggested purchase price | N/A | | Target Price | $ 13.010 |
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