Intelligent Hong Kong Stock Analysis | The Fed's "dovish" stance leads to a rise followed by a fall, sparking heated discussions

[Market Analysis]

Due to the lack of continuous inflow of funds in A-shares, the trend weakened again, and the Hong Kong stock market also fell by 0.29% at the close.

When testifying on Capitol Hill, Jerome Powell emphasized signs of a cooling job market, but there are risks in cutting interest rates too early or too late. It is evident that Powell's current focus is on the timing of interest rate cuts. This stance is clearly dovish, with the Nasdaq and S&P 500 in the U.S. continuing to hit new highs.

The Hong Kong stock market surged in the morning. The CPI in June rose by 0.2% year-on-year and fell by 0.2% month-on-month. The core CPI, excluding food and energy prices, rose by 0.6% year-on-year, the same as the previous month, continuing to rise moderately. Due to fluctuations in international commodity prices and insufficient demand in some domestic industrial markets, the national PPI showed a slight decrease month-on-month, with the year-on-year decline continuing to narrow. This indicates that demand remains weak.

The topic of autonomous driving mentioned yesterday is very hot in the market today. In 2021, Baidu's autonomous driving ride-hailing service "Apollo Go" began exploring commercialization, with Wuhan being the first city where Apollo Go has been commercialized. Currently, Apollo Go has become a hot topic among Wuhan residents. On May 15th, Chen Zhuo, General Manager of Baidu's Autonomous Driving Business Unit, stated at Baidu's "Apollo Day 2024" open day that Apollo Go is very close to the breakeven point, with the goal of achieving breakeven in Wuhan by the end of 2024 and entering a profitable period by 2025. Although this business has little impact on revenue, it shows the potential of Baidu's business to the market, as other cities will follow suit. In addition to Beijing, today Shanghai has opened up the application scope of intelligent connected vehicles in new urban areas in an orderly manner, carrying out large-scale applications of intelligent taxis, intelligent buses, and other scenarios.

However, there are still some hidden dangers with "Apollo Go". On the Wuhan citizens' message board on Changjiang Net, there have been a total of 324 messages related to "Apollo Go". Multiple messages on the board show that during the operation of Apollo Go Robotaxi on the road, there have been instances of vehicles stopping at green lights, running into the middle of intersections at red lights, getting stuck during turns, and causing traffic congestion, which has had a certain impact on citizens' travel.

In response to these incidents, the Wuhan Economic Development Zone Management Committee stated: "It is confirmed that the vehicles involved are autonomous driving test vehicles and are still in the testing phase. The Development Zone Traffic Brigade will regularly communicate with the company's leaders to address and reflect on issues, ensuring road safety. These are all technical issues that we believe can be continuously improved. The key issue is that if a large number of such unmanned taxi operations appear, it will pose a serious challenge to companies like Didi and affect employment. Therefore, further rollout will be relatively cautious." Baidu (09888) surged by over 10 points today, mainly due to high popularity and enjoying a premium, so it is not advisable to chase after it. The beneficiary mentioned yesterday, NIO (01316), rose by 5.74% again.

Tesla rose by another 3.71% overnight, marking a ten-day consecutive increase, with the second-quarter delivery data exceeding expectations being a key factor. With the popularity of Baidu's Apollo Go Robotaxi in China, it is expected to stimulate Tesla's Robotaxi, with the latest developments expected to be announced in early August Tesla's strong performance continues to drive the new energy vehicle sector.

It is obvious that the new energy vehicle sector has entered a fierce elimination round. The stock prices of new carmakers are mostly stagnant, with the strongest being the leading BYD Company Limited (01211), which remains resilient despite Buffett's reduction in holdings. A highlight of BYD is its overseas expansion. On July 8th local time, BYD signed an agreement with the Turkish government to invest in building a factory in Turkey. Turkish President Erdogan and BYD Chairman Wang Chuanfu attended the signing ceremony. BYD will invest $1 billion (approximately RMB 7.273 billion) to establish a production factory with an annual capacity of 150,000 vehicles in Turkey, along with a research and development center. The factory is scheduled to start production by the end of 2026. BYD's new energy vehicles have already spread to over 400 cities in 88 countries and regions, with investments in building factories in Brazil, Hungary, Thailand, and other overseas regions. By "going global with factories" to seize key global automotive markets, BYD's car exports will receive strong growth momentum.

Another standout is Great Wall Motor Company Limited (02333), which stands out due to the company's precise positioning. It has taken a differentiated path, dominating the SUV off-road market segment. The Tank brand has consecutively led China's SUV off-road sales for 42 months, becoming the leader in China's SUV off-road market. In the first half of the year, Tank's total sales of all models reached 116,038 units, a year-on-year increase of 99%. In terms of technology, the exclusive Hi4-T technology enables "smooth driving in all conditions, ultimate experience in all scenarios, meeting the strongest off-road demands." In terms of branding, the Tank series brand matrix is strong, starting from Tank 300, to Tank 400, Tank 500, Tank 700 using Hi4-T technology, continuously iterating. Especially, the Tank 700 Hi4-T, the only domestically equipped with 3.0T+Hi4-T technology, has become the new flagship luxury off-road vehicle, and high-end series are expected to be continuously introduced in the future. In terms of growth, in addition to the domestic market, there is huge potential for incremental growth overseas. The Tank brand has been exported to more than 30 countries and regions, with the business proportion continuously increasing, further opening up growth space.

Yesterday, the photovoltaic industry was mentioned. As of now, in the disclosed performance forecasts, 8 photovoltaic companies have reported a first-half loss limit exceeding 1 billion yuan, with LONGi Green Energy Technology Co., Ltd. (601012.SH) expecting a loss limit of 5.5 billion yuan. In the same period last year, the company's net profit was 9.178 billion yuan. The photovoltaic crystalline silicon industry chain is roughly divided into four main links: polysilicon - silicon wafers - cells - modules. From the disclosed performance forecast, almost none of the four links have been spared. Currently, the main links of the crystalline silicon industry chain are still in the destocking stage, with expectations of easing supply-side pressure, but significant price increases have not yet appeared. In the near future, prices will return to between cash costs and manufacturing costs. As capacity continues to be cleared, prices will return to manufacturing costs. Yesterday, Flat Glass Group Co., Ltd. (06865) mentioned rose by nearly 2 points Farmer's Springs (09633) used its own funds to acquire and increase its holdings in the company's H shares, with the total amount of the increase not exceeding HKD 2 billion, and the stock rose by 4.44% today.

[Sector Focus]

The PCB manufacturing industry is located in the middle of the industrial chain, with semi-cured sheets, copper-clad laminates (CCL), copper foil, copper balls, etching solution, copper plating solution, etc. in the upstream. The downstream applications of the PCB industry are extensive, including communication equipment, network equipment, consumer electronics, servers, industrial control medical, automotive electronics, high-speed rail aviation and aerospace, etc. The PCB manufacturing industry is influenced by fluctuations in upstream raw material costs and changes in downstream industry demand due to its middle position, and it is relatively cyclical.

Entering 2024Q1, downstream demand for consumer electronics, home appliances, etc. has improved, and demand for AI and automotive electronics remains high. The overall prosperity of the PCB industry has shown signs of recovery, further driving up the operating rate of copper-clad laminates, presenting a trend of not being weak in the off-season. At the same time, there has been a significant increase in upstream raw material prices, and multiple copper-clad laminate companies have begun to raise product prices. With the trend of demand recovery and price increases, the copper-clad laminate industry is expected to further recover this year.

In the PCB sector, A-share copper-clad laminate companies such as Shengyi Electronics (688183.SH), consumer electronics companies like Pengding Holdings (002938.SZ), automotive board companies like Jingwang Electronics (603228.SH) and Shiyun Circuit (603920.SH), and communication board company Shennan Circuit (002916.SZ) have collectively disclosed performance exceeding expectations.

Main stocks in Hong Kong: Jiantao Multilayer Board (01888), Jiantao Group (00148).

[Stock Analysis]

Ganfeng Lithium (01772): Financial asset decline leads to loss in performance, stock price has reflected pessimistic expectations

The company announced that it is expected to incur a net loss of RMB 760 million to 1.25 billion in the first half of the year, compared to a profit of RMB 5.85 billion in the same period last year. It is reported that the company incurred a net loss of RMB 439 million in Q1, and it is estimated that the net loss in Q2 will be between RMB 321 million and 811 million. It is worth noting that the company's estimated non-recurring net loss for the first half of the year is RMB 100 million to 200 million, while the non-recurring net profit in the same period last year was about RMB 4.113 billion.

Analysis: The lower-than-expected performance is mainly due to the significant decline in the stock price of Pilbara Mining, a financial asset held by the company. At the same time, the continuous decline in lithium salt and lithium battery product prices due to the downturn in the lithium industry cycle. In fact, lithium chemical sales volume in the first half of the year still achieved year-on-year growth. The stock price has already reflected pessimistic expectations.

Currently, the company owns lithium resources in Argentina, lithium spodumene resources in Australia, Mali, Ireland, as well as lithium clay resources in Mexico, with a total equity resource of 48.08 million tons of LCE (lithium carbonate equivalent), second only to SQM, ranking second in the world. Mali Lithium is a joint venture established by Leo Lithium and Ganfeng International to develop the Goulamina lithium spodumene mine in southern Mali, Africa. The mine has 211 million tons of lithium ore, with a speculated total lithium oxide of 2.89 million tons, equivalent to approximately 7.14 million tons of lithium carbonate equivalent Ganfeng Lithium has twice increased its capital by a total of USD 203 million (about CNY 1.5 billion) to acquire 60% equity of Mali Lithium. Including this acquisition, it is expected to spend CNY 4 billion to obtain 100% ownership of this spodumene mine project.

This year, Ganfeng Lithium has also strengthened its cooperation with Australian lithium producer Pilbara; it plans to subscribe for additional shares of Argentine mining exploration company PGCO for no more than USD 70 million; and signed a major contract with Pilbara, increasing the supply of spodumene to Ganfeng Lithium from the previous 160,000 tons per year to 310,000 tons per year over the next three years. The company's lithium carbonate production has reached 100,000 tons, plus the lithium battery segment, totaling around 120,000 to 140,000 tons. There is also expected significant growth in 2024.

The company's semi-solid-state batteries have already been mass-produced this year, and the Chongqing factory will release 10GW capacity in 2025. With the improvement in MtMarion costs and the commissioning of the Goulamina project in Mali, the company's self-owned resource production is expected to further increase, and profits are expected to improve to a certain extent on a quarter-over-quarter basis.

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