Zhitong Hong Kong Stock Analysis | Fully Promoting Autonomous and Controllable AI Advertising Business Surge

[Market Analysis]

Under the interference of small essays, the debt resolution at the National People's Congress was originally seen as a positive, but it was hard hit by foreign capital, resulting in disappointing outcomes. Hong Kong stocks today fell 1.43% due to inertia; however, A-shares performed relatively normally, with several major indices showing an increase.

If we must discuss the logic behind the market crash, it can only be understood as the current strength of the U.S. stock market, with funds returning to invest in U.S. stocks. Since there were no surprises here, they withdrew first. The benefits of debt resolution are tangible; for instance, companies involved in environmental protection, such as Dongjiang Environmental (00895), are facing serious issues with overdue payments, and the government has directly paid out funds. Can this be considered a substantial benefit? Today, it rose over 4%. China Cinda (01359), which has a pile of urban investment bonds to resolve, is naturally also a beneficiary, although it is still falling today; it will eventually correct itself.

Of course, the market's concerns about the Federal Reserve's subsequent policies are indeed a constraint. During the U.S. presidential campaign, Trump stated that he should have a say in monetary policy, which sparked controversy. As one of the major financial backers behind Trump's victory in the U.S. election, Tesla CEO Elon Musk expressed support for the idea of "allowing the president to intervene in Federal Reserve policy." This may not necessarily be aimed at us; it is likely a warning to Wall Street behind the Democratic Party not to overreach and to avoid chaos.

Regardless, the external environment is uncontrollable, and we can only focus on ourselves. The National Development and Reform Commission pointed out in an article in the Economic Daily that it is necessary to build a domestic circulation dominated by domestic demand. We must fight the key core technology battle and accelerate the resolution of critical "bottleneck" technologies in important fields. The domestic GPU unicorn Moore Threads is about to start its IPO counseling. The theme of self-sufficiency will only accelerate, with Hua Hong Semiconductor (01347) and SMIC (00981) rising over 7% and 3%, respectively. In the software sector, there are mainly China Software International (00354), Kingsoft (03888), and Kingdee International (00268). Meanwhile, the Xinchuang sector is also accelerating; ZTE Corporation (00763), which has not performed for a long time, also moved today, being one of the most influential companies after Huawei, especially in exploring the 5G-A innovation direction, which still has many areas worth exploring, and it surged over 10% today.

Dealer leader Zhongsheng Holdings (00881) announced that the trading of its shares and bonds will be temporarily suspended at 1:00 PM on November 11, 2024. Before the suspension, it had surged over 21%. Last time, it was mentioned that a blogger on Weibo stated that Zhongsheng Group fully embraces new energy, securing authorization for 50 (some say 48) "Huawei Smart Selection Cars." It is uncertain whether this suspension is related. From a fundamental perspective, according to data from the China Automobile Dealers Association, the cumulative transaction volume of used cars in the first nine months of this year increased by 5.37% year-on-year, while the transaction volume of used new energy vehicles increased by 54% year-on-year. CCTV Finance predicts that the transaction volume of used new energy vehicles is expected to exceed one million for the first time this year. The used car market is developing quite rapidly and is expected to become a new profit point. If Zhongsheng Holdings (00881) indeed secures the authorization for Huawei's Seres, it is expected that other dealers will also ride the fast track of new energy sales. Meidong Automobile (01268) and Yongda Automobile (03669) rose over 12% and 9%, respectively Ministry of Commerce: There has been some progress in the discussions regarding the EU's anti-subsidy case against Chinese electric vehicles, with both parties agreeing to continue consultations via video or other means. China Association of Automobile Manufacturers: October automobile sales increased by 7% year-on-year, with a 2.7% increase in the first ten months. The overall sentiment in automobile stocks has improved today, with companies like Leapmotor (09863) and Great Wall Motors (02333) performing well among bottom-performing stocks.

Xidi Zhijia (Hunan) Co., Ltd. has submitted its prospectus, aiming for a listing on the main board of the Hong Kong Stock Exchange under Chapter 18C. After completing the C+ round of financing in February 2024, Xidi Zhijia's post-investment valuation will exceed 9 billion yuan. As of the company's initial submission date, Sequoia China holds 10.61%, New Horizon Capital holds 9.67%, and Legend Holdings (03396) holds 3.49%. The similar stock, Black Sesame Intelligence (02533), rose by 6.64% today.

The overseas mapping sector is also quite vigorous. Driven by significantly better-than-expected Q3 performance and AI empowerment expectations, the stock price of AppLovin surged by 72% to $290 in the last two trading days last week, with its market value briefly surpassing $100 billion. The stock has seen a cumulative increase of 627% year-to-date, far exceeding Nvidia's 206% increase during the same period. AppLovin aims for an annual growth rate of up to 30%, partly due to its AI-driven AXON 2.0 advertising engine, which has improved performance and increased advertiser spending. The Hong Kong stock, HuiLiang Technology (01860), is somewhat similar; the company has heavily invested in building a machine learning-based intelligent bidding system since the second half of 2021. In May 2023, it launched the Target ROAS intelligent bidding feature, followed by the Target CPE feature in July this year to optimize in-app event delivery effectiveness. Since its launch, the intelligent bidding system has continuously increased its revenue contribution to the group, with the system contributing over 60% of Mintegral's revenue in the first half of 2024. On the Android side, Mintegral has maintained the third position in the global all-category scale ranking for three consecutive years, only behind advertising giants Google and Meta, while its strength ranking has jumped to third place. On the iOS side, Mintegral also performed well, ranking sixth in the global all-category strength ranking and second in the global gaming category scale ranking. Today, it surged over 64%. The previously mentioned Yidu Tech (02158) and Fourth Paradigm (06682) also performed strongly, rising over 29% and 14%, respectively.

In the direction of mergers and acquisitions, new varieties continue to emerge. Yangtze Optical Fibre and Cable (06869): plans to acquire 28.6983 million shares of Pentium Laser for 299 million yuan. Both Pentium Laser and Cutlite hold leading market shares and laser equipment technology levels, which can achieve complementary advantages in product and technology development with the company's related business, strengthening the leading position of both the company and the target company. On one hand, the target company can help the company expand its laser business into overseas markets and strengthen brand building; on the other hand, the company's international business layout can also help the target company further expand into overseas markets. There was a significant surge today, but it retreated towards the end of the market Another company, Red Star Macalline (01528), on September 23, 2024, its second shareholder, Red Star Holdings, initiated a debt restructuring. On September 25, 2024, Red Star Holdings announced that to smoothly promote the restructuring work, the administrator plans to publicly recruit investors for the restructuring of Red Star Holdings. Today, it surged by 17.78%, and this stock also has the theme of debt reduction.

In the lithium battery sector, it was mentioned last time that there have been many advancements in solid-state batteries, and the low-altitude economy is also a significant catalyst for this. On November 11, news reported that domestic commodity futures closed, with lithium carbonate futures main contracts rising over 4%. Tianqi Lithium (09696) and Ganfeng Lithium (01772) both rose over 6%.

The overseas cement industry is gaining attention, with strong demand in the overseas cement market, such as in Ethiopia. West China Cement (02233) expects to launch multiple key projects in areas like Addis Ababa, Amhara, and Oromia. According to reports, Ethiopia's Minister of Trade and Regional Integration, Kasahun Gofe, announced that the previous cement trade arrangements by the ministry will cease on November 8, 2024. He explained that cement manufacturers now have the right to choose their distributors and retailers to provide products to consumers at reasonable prices. Since 2022, the ministry has required cement plants to sell their products to designated wholesalers at fixed prices to stabilize soaring cement costs. Given the current strong demand and excellent cost-performance ratio, the overall overseas cement profits of West China Cement are expected to continue to rise in November, with a surge of over 10% today.

The consumer electronics sector mentioned last Friday, Sunny Optical (02382), rose over 4% today. Reports indicate that Xiaomi (01810) sold nearly 170,000 units daily of its 15 series within four days of launch. Today, Xiaomi (01810) rose again by 3.53%, showing a very stable trend.

Today, there are rumors that Ant Group is planning to restart its IPO, but there is currently no official news or response. Related stocks in the A-share market have shown fluctuations, with Alibaba (09988) experiencing a late surge today, and attention is on subsequent changes in news.

【Sector Focus】

In August of this year, the robotics company 1X Technologies, backed by OpenAI, officially launched its humanoid robot prototype NEO Beta (referred to as NEO), designed specifically for home use.

Recently, this robot unlocked a new scenario—the kitchen, where NEO had a home cooking showdown with internet celebrity chef Nick DiGiovanni, competing to make the perfect medium-rare steak. The company stated on its official website that NEO is a humanoid robot with a wide range of capabilities. They excel in industrial tasks such as safety, logistics, manufacturing, operating machinery, and handling complex tasks. In the long term, the company hopes NEO can take care of household chores.

CEO and founder Bernt Børnich expressed the hope that NEO can complete tasks that humans dislike, such as cleaning and organizing daily clutter, and can follow commands to be customized according to user preferences and lifestyles.

According to 1X's demonstration video, the household tasks NEO can currently perform are very simple, including: passing items, making coffee, and organizing objects According to official information, 1X will deploy a limited number of NEOs in selected households to collect data that is crucial for research and development. After testing in various scenarios and environments, NEO will be mass-produced in a factory in Norway.

With advancements in technology, robots are becoming increasingly sophisticated, and the future of robots entering households is promising. Currently, industrial robots are expected to take the lead, with major stocks in Hong Kong including UBTECH (09880) and INNOVATION (02121).

【Stock Picking】

UBTECH (09880): The humanoid robot market has unlimited potential, and the progress of car manufacturers introducing humanoid robots is accelerating.

Recently, Tesla CEO Elon Musk predicted that by 2040, the number of humanoid robots could exceed that of humans, with at least 10 billion humanoid robots in the world, potentially costing less than cars. According to a report released at the first China Humanoid Robot Industry Conference, the market size for humanoid robots in China is expected to reach 2.76 billion yuan by 2024, with limitless potential in the future.

Commentary: The company has launched the first commercial large humanoid robot, Walker, and is one of the few companies globally capable of mass-producing different torque servo drives. On April 2, Baidu and UBTECH announced a strategic cooperation, where UBTECH's humanoid robot Walker S will connect to Baidu's Wenxin large model for task scheduling application development through the Baidu Smart Cloud Qianfan AppBuilder platform, enhancing the execution capabilities of humanoid robots. In terms of functional progress, UBTECH has entered Nio's factory for practical training, having begun the action of affixing car labels, indicating that the robot's functional progress exceeds expectations. Recently, UBTECH officially launched the new generation industrial humanoid robot Walker S1, which has entered practical training in automotive factories. Currently, UBTECH Walker S1 has begun executing handling tasks in BYD's factory and has achieved the world's first collaborative operation between humanoid robots and unmanned logistics vehicles, unmanned forklifts, industrial mobile robots, and intelligent manufacturing management systems, aiding in the realization of unmanned and large-scale commercial implementation in indoor and outdoor logistics scenarios. The company is already in contact with several new energy vehicle manufacturers, and more industrial manufacturing clients are expected in 2024. The disclosure of the partnership with Nio indicates that the progress of car manufacturers introducing humanoid robots is accelerating. Combining relevant domestic and international cases, such as Optimus with Tesla, Figure01 with BMW, and XPeng's PX5, the certainty of humanoid robots landing on automotive production lines is high. In terms of financing, an announcement was made that the placement matter was completed on October 29, 2024. A total of 5.06 million placement shares were issued, accounting for approximately 1.62% of the expanded H shares after the placement and approximately 1.19% of the total issued shares after the placement. The shares were successfully placed at a price of HKD 86.18 per H share to no less than six subscribers. With funding issues resolved, subsequent business activities are expected to accelerate.

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