Sectors:

Air & Automobiles (Zhang Jing),

TMT, Semiconductors, Consumer & Healthcare （Eric Li）

Automobile & Air (ZhangJing)

This month I released updated reports of Minth (425.HK).

Upon years of input and accumulation, Minth's battery housing business has made a great leap forward in both revenue and operational efficiency. Its 2022 revenue increased by more than 650% year-on-year to RMB2,044 million, and its segment margin further improved to 18.8%. During the Period, the Group won an order for battery housings of a major global platform vehicle model of Mercedes-Benz, and increased its battery housing business share in BMW. Meanwhile, it secured orders for battery housing of two platform models from Stellantis. Besides, as for the Group's NEV start-up customers, the Group also secured orders for battery housing from Lucid, XPeng and Li Auto. Moreover, in the business of composite material housing cover, the Group secured orders from GAC Motor and EVE Energy. With respect to intelligent products, the Group secured orders for illuminated emblems and illuminated grilles from clients such as Geely, Volkswagen and General Motors, and won an order for smart B pillar cover assembly from a Chinese OEM. It also successfully secured orders for intelligent tailgates from Nissan and XPeng.

Annualized new order intake reached a new high. The annualized revenue stood at RMB15.6 billion. The current order backlog rose by RMB49 billion to RMB199 billion from the end of the previous year. Based on the expectations of constantly strong growth of business such as the battery housing business, the Management set a goal of an increase of 20% in revenue in 2023.

We slightly decreased the expected earnings per share for 2023/2024 to 1.66/2.17（vs 1.81/2.19）, taking into account the pressure on the overall gross profit margin from new business during the ramp-up period and the new opportunities brought by the growth of the new energy market in North America to leading suppliers of parts such as Minth.

We believe that it is reasonable to give the Company a valuation of 15.3/11.6/10x P/E and 1.6/1.5/1.3x P/B for 2023/2024/2025, equivalent to target price of HK$ 28 and BUY rating.

TMT, Semiconductors, Consumer, Healthcare (Eric Li)

This month I released reports of Vinda International (03331.HK).

In 1HFY2023, total revenue of Vinda amounted to HK$10,070 million, representing an increase of 10.1% organically and of 4.0% (presented in Hong Kong Dollar). 1Q and 2Q revenues were HK$4,969 million and HK$5,101 million, a year-on-year increase of 15.5% and 5.5% respectively. 1H Net profit declined by 81.1% to HK$121 million. The net profit margin narrowed by 5.4 ppts to 1.2%. Basic EPS was 10.0 HK cents (1HFY2022: 53.0 HK cents), and an interim dividend of 10.0 HK cents (1HFY2022: 10.0 HK cents) per share.

Despite the gradual reduction of the pulp prices since the end of 2022, costs in the first half of the year were still impacted by the inventories with relatively high price, and on gross margin, which decreased by 6.9 ppts year-on-year to 25.1%. Gross profit was down by 18.5% to HK$2,527 million. EBITDA fell by 42.3% to HK$818 million while EBITDA margin was narrowed by 6.5 ppts to 8.1%. Total foreign exchange loss was HK$0.3 million (H1 2022: HK$22.4 million loss), of which HK$5.4 million loss came from operating activities (H1 2022: HK$26.2 million loss), and HK$5.1 million gain was due to financing activities (H1 2022: HK$3.8 million gain).

In terms of business segments, revenue from tissue segment amounted to HK$8,361 million in 1HFY2023, which delivered a year-on-year increase of 5.0% or an organic sales growth of 11.5%, representing 83% of Vinda's total revenue (1HFY2022: 82%). The gross margin of tissue segment was 23.8% during this Period (H1 2022: 31.6%). Vinda adhered to focus on premium categories, resulting in a double-digit growth of the premium tissue portfolio in mainland China as well as an increasing proportion of revenue. The impact from the high-cost wood pulp inventory and promotion had been relieved to an extent by the premium categories for its relatively higher profit margin.

Revenue from the personal care business decreased by 0.5% to HK$1,708 million in 1HFY2023, which was a 3.7% increase at constant exchange rates and represented 17% of the Vinda's total revenue (1HFY2022: 18%), revenue by category was HK$556 million for baby care, HK$400 million for feminine care and HK$752 million for incontinent care. Gross margin of the personal care segment was 31.2% (1HFY2022: 34.1%), of which baby care was 24.0%, feminine care was 46.7% and incontinent care was 28.2%.

Despite the gradual reduction of the pulp prices in the first half of the year, due to inventory cycle factors, the expected cost reduction trend will not be reflected until the second half of the year.

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