Zhitong Hong Kong Stock Analysis | Market Value Management Stimulates Sunset Industries, Low-altitude Economy Benefits Reemerge

[Anatomy of the Market]

A recently mentioned "law" remains valid: as long as U.S. stocks perform poorly, Hong Kong stocks have a chance to breathe. On Monday, Hong Kong stocks once again outperformed U.S. and A-shares, oscillating upward throughout the day. The closing rose by 0.77%.

Last week, I believed that the Trump dividend had almost been exhausted, making it difficult for U.S. stocks to hold at high levels. Last Friday, the three major U.S. stock indices experienced significant declines again. This situation is quite normal, as this election itself is quite divisive; the two camps will not eliminate their contradictions just because the election is over, but rather they will intensify.

As a former president, Biden naturally wants to leave behind his political legacy and cannot just exit quietly. According to a report on November 17, U.S. officials stated on the 17th that Biden has allowed Ukraine to use U.S.-provided long-range missiles to strike deep targets within Russia. The reason is that the Ukrainian army launched a raid on the Russian Kursk region this summer, and the Russian military has deployed nearly 50,000 troops to that area. The U.S. does not want to see Ukrainians lose Kursk, a "potential bargaining chip," and hopes the Ukrainian army can hold Kursk for as long as possible. As long as Ukraine can hold out before Trump takes office on January 20, it will become quite tricky for Trump to quickly resolve the conflict in Eastern Ukraine.

In this Russia-Ukraine conflict, the U.S. has reaped benefits in Europe, and the military-industrial complex has profited immensely; this is Biden's achievement. However, Biden's actions are also quite risky, and the consequences should not be underestimated. On September 12, Putin stated that lifting restrictions on Ukraine's use of Western weapons would significantly change the nature of the conflict, meaning that the U.S. and its allies would be directly involved in the conflict with Russia and would face an "appropriate response" from Russia.

Last weekend, the search for Trump's chief economic policy maker fell into chaos. Competitors were fiercely vying for support, assistants were scrambling to find alternative candidates, and the elected president Trump was furious about this behind-the-scenes struggle spilling into the public eye. The list of candidates for Treasury Secretary has expanded to include former Federal Reserve Governor Kevin Warsh, Apollo Global Management CEO Marc Rowan, Tennessee Senator Bill Hagerty, and former U.S. Trade Representative Robert Lighthizer from the Trump administration. Among them, Musk voiced support for Lutnick, while Lighthizer gained support from tariff think tanks. The backers are not to be trifled with, and the situation is a complete mess.

On Monday, according to media reports citing EPFR data, U.S. stock ETFs and mutual funds attracted nearly $56 billion in funds in the week ending last Wednesday, marking the second-largest weekly inflow since 2008. These funds have attracted inflows for seven consecutive months, the longest duration since 2021. This data is not problematic; it is all about taking advantage of the Trump administration's dividends, but once the wool is sheared, the funds are likely to withdraw. If one truly believes that they will continue to stand guard at high levels, they are being deceived.

At this juncture, there are also positive developments domestically. On the evening of November 15, the China Securities Regulatory Commission released "Guidelines for the Supervision of Listed Companies No. 10 - Market Value Management," which consists of 15 articles aimed at further guiding listed companies to focus on their investment value and effectively enhance investor returns. The guidelines clarify the definition of market value management and the responsibilities and obligations of relevant parties, and they make specific requirements for major index constituent companies and long-term companies trading below net asset value Listed companies are required to manage their market value in accordance with the law, pay close attention to investor protection and returns, actively use tools such as mergers and acquisitions, and also mention that companies with long-term price-to-book ratios below 1 should formulate value enhancement plans, while major index constituent companies should establish market value management systems.

The purpose of this policy is to guide companies to enhance their own value through share buybacks, capital operations, dividends, and other means, with valuations returning to 1XPB. The main focus is on stocks with price-to-book ratios below 1, particularly in traditional and sunset industries, such as large steel, infrastructure, and banking. Today, stocks in these categories have generally risen, with Chongqing Iron and Steel (01053) up over 10%, China Railway Construction (01186) up over 7%; bank stocks like Zhengzhou Bank (06196), Minsheng Bank (01988), and China Everbright Bank (06818) are all up more than 4%. As for Red Star Macalline (01528), its PB is 0.33, which is indeed quite low, and the key is that it is also associated with merger and acquisition themes, leading to a significant increase of 34% today, while the corresponding A-share Macalline (601828.SH) has directly hit the limit up. The two markets are forming a linkage effect.

In the automotive sector, the 22nd Guangzhou Auto Show will be held from November 15 to 24. This international auto show will feature 78 global premieres, including 6 from multinational companies; a total of 1,171 vehicles will be exhibited, with 512 being new energy vehicles. With the implementation of policies such as trade-in for new cars, it is expected that car manufacturers will see another surge in sales before the end of the year. Today, Dongfeng Group (00489), GAC Group (02238), and Geely Automobile (00175) rose over 14%, 6%, and 4% respectively. As for Geely Automobile, it was previously mentioned that its third-quarter report was strong and it has undergone internal integration, but its stock price has actually fallen, which is a matter of future perception; those who have made substantial profits have taken profits, while those who are optimistic have bought on dips today.

On November 15, 2024, the Ministry of Finance and the State Administration of Taxation issued a notice on adjusting export tax rebate policies. The export tax rebate rates for some refined oil products, photovoltaic products, batteries, and certain non-metallic mineral products will be reduced from 13% to 9%, effective from December 1, 2024. Many interpret this policy as negative, but in fact, the introduction of the policy is not a bad thing; it represents a contraction on the supply side from another level. Under the export tax rebate policy, Chinese companies have been undercutting each other, selling below cost and giving benefits to overseas buyers. This harms their own interests and benefits others, leading to a justification for low-price dumping. The policy correction is quite timely; the export tax rebate is now declining, and in the future, the method of tax subsidies may shift from subsidizing overseas consumers to subsidizing domestic consumers, which is a positive for the industry, especially for leading enterprises.

From a fundamental perspective, the losses in the photovoltaic industry continue to expand, and the scale of losses caused by this industry fluctuation far exceeds the previous three industry fluctuations. In particular, prices in various segments of the photovoltaic industry have fallen by more than 60% compared to the peak in 2023. In such a harsh environment, the introduction of policies often indicates that the industry has entered a bottoming phase. Companies like Flat Glass (06865) and GCL-Poly Energy (03800) should be seen as opportunities On November 15th, the National Intellectual Property Administration disclosed that Huawei has publicly released a patent for silicon-based anode materials, titled "Silicon-based Anode Materials and Their Preparation Methods, Batteries, and Terminals." This patent primarily addresses the issue of low cycling performance of silicon-based materials due to excessive expansion effects, improving the cycling stability of the anode. Industry leaders such as CATL, Changan Automobile, GAC Group, and Chery continue to increase investments in solid-state batteries. Related stocks Ganfeng Lithium (01772) and Tianqi Lithium (09696) can be continuously monitored.

According to reports, the Reserve Bank of India plans to launch cloud services in 2025. According to a report by International Data Corporation (IDC), the booming cloud services market in India is estimated to reach USD 8.3 billion in 2023 and is expected to grow to USD 24.2 billion by 2028. Huilyang Technology (01860) reported better-than-expected results: the profit attributable to equity shareholders for the first three quarters was USD 19.164 million, a year-on-year increase of 37.5%. Notably, its programmatic advertising platform Mintegral continues to hit new highs, achieving revenue of USD 403 million, a year-on-year increase of 57.6% and a quarter-on-quarter growth of 25.7%, with acceleration in both year-on-year and quarter-on-quarter growth compared to Q2 2024. Today, it surged by 15.63%.

On November 18th, Lei Jun stated on Weibo that Xiaomi (01810) has delivered over 100,000 units of the SU7, achieving its annual target ahead of schedule. It will strive for a new target: an annual delivery of 130,000 units. Haichang Ocean Park (02255) temporarily suspended trading at 1:56 PM. Before the suspension, it fell by 28.91%, closing at HKD 0.455.

【Sector Focus】

At today's 2024 International Electric Aviation (Kunshan) Forum, Sun Weiguo, Director of the General Aviation Business Department and Drone Working Committee of the China Air Transport Association, revealed that the Central Air Traffic Control Committee will soon launch eVTOL pilot projects in six cities. According to media reports, the six pilot cities are preliminarily determined to be Hefei, Hangzhou, Shenzhen, Suzhou, Chengdu, and Chongqing. The pilot documents have relevant plans for routes and areas, authorizing some local governments for airspace below 600 meters, which means that relevant local governments will have to take on more management responsibilities.

Local planning for low-altitude airspace is in full swing. For example, Shenzhen proposed in early November to add over 8,000 new 5G-A base stations, focusing on strengthening network coverage below 600 meters, gradually forming a communication network system that integrates air, space, ground, and sea, primarily based on 5G-A networks, supplemented by satellite networks and civil aviation dedicated networks, to fully support the landing of innovative application scenarios in the low-altitude economy. The "Nanjing Low-altitude Flight Service Guarantee System Construction Action Plan (2024-2026)" released in July proposed to strive to designate airspace of over 1,500 square kilometers by 2026, expanding the flyable airspace from below 120 meters to below 600 meters.

Main stocks in the low-altitude economy in Hong Kong: GAC Group (02238), AVIC Industry (02357), XPeng-W (09868).

【Stock Picking】

Flat Glass (06865): Profitability is expected to stabilize and rebound, with accelerated release of new production capacity both domestically and internationally. Recently, the company disclosed the "Announcement on the Implementation of the Repurchase and Cancellation of Part of the Restricted Stock Incentive Plan for A-shares in 2020 by Fuyao Glass Group Co., Ltd." (Announcement No.: 2024-098), which involves the repurchase and cancellation of 120,000 shares of restricted stock.

Comment: The company's scale continues to lead, with new production capacity being rapidly released both domestically and internationally. The company's Anhui Phase IV project and Nantong project are expected to be successively ignited within the year, with a total daily melting capacity of 9,600 tons. Among them, the first 1,200-ton line in Fengyang was ignited at the end of March, and it is expected that the company's capacity will reach 30,200 tons per day in 2024. The company anticipates that capacity in Vietnam and Indonesia will be successively ignited by 2026. Additionally, the company plans to invest in a photovoltaic cover glass project in Indonesia with an annual production capacity of 1 million tons to meet the demand for photovoltaic glass in different countries and regions. As of the end of H1 2024, the company's total capacity was 23,000 tons per day, of which 2,600 tons per day have been cold repaired. Furthermore, the domestic Anhui and Nantong projects, as well as overseas projects, are all progressing normally.

Looking ahead to Q4 2024, with the arrival of the traditional peak season in October and November and the acceleration of industry cold repairs, the supply and demand pressure in the photovoltaic glass industry is expected to ease, and the company's profitability is likely to stabilize and rebound. The company has adopted two major strategies on the raw material side: first, using large kilns with a daily melting capacity of 1,600 tons to reduce the production costs and energy consumption per ton of photovoltaic glass; second, reducing raw material costs through measures such as purchasing quartz sand mines and using direct-supply natural gas. With the recent stabilization of soda ash prices, the company's costs and operational situation may become more stable in the near future. In the fierce competition of the photovoltaic glass industry, Fuyao's cost advantage remains the first key to future success.

【Disclaimer】This VIP information product is for communication and discussion purposes only and does not constitute any investment advice. Unauthorized reproduction is strictly prohibited. For more quality information and data products, please log in to the【智通财经】APP for inquiries.