January Conviction Calls: Comprehensive Analysis of Key Greater China Stocks

Broker Name: UOB Kay Hian

Date of Report: 3 January 2025

Introduction

The Hang Seng Index (HSI) and MSCI China Index witnessed a strong performance in December, closing the year with gains of 17.7% and 15.7%, respectively. Investors were buoyed by positive signals from the December Economic Work Conference, which reaffirmed policy support for 2025. As we step into the new year, UOB Kay Hian’s January Conviction Calls provide a detailed analysis of key stocks to watch in Greater China. Below is an in-depth analysis of each company covered in their report, including their performance, outlook, and recommendations.

CATL (Ticker: 300750 CH) – BUY

CATL is poised to benefit from the global surge in electric vehicle (EV) adoption, with an expected compound annual growth rate (CAGR) of 20% for global EV sales from 2023 to 2030. The company is launching cutting-edge battery products and stands to gain from declining lithium carbonate prices. CATL’s growth is further supported by strong monthly EV battery shipments and impressive Q4 2024 results.

The stock is currently trading at 19x 2025 forecasted price-to-earnings (PE) ratio, below its three-year historical mean of 27x. The target price has been revised to RMB 350.00, reflecting a valuation of 26x 2025F PE, justified by a lower weighted average cost of capital (WACC) of 11% in the 10-year discounted cash flow (DCF) analysis.

Key Catalysts: Growth in monthly EV battery shipments and robust Q4 2024 results.

Crystal International (Ticker: 2232 HK) – BUY

Crystal International aims for record-high revenue in 2024, driven by solid order growth across its five product categories. The company is well-positioned for wallet share gains from key customers through vertical integration, strong R&D capabilities, and enhanced automation. Forecasts show revenue growth of 13.3% in 2024 and net profit growth of 23.9% backed by efficient operations and stringent cost controls.

The stock is expected to benefit from inclusion in the Stock Connect program during February 2025 and potential special dividends for 2024. The target price is HK\$5.12, based on a 9.2x 2024F PE ratio.

Key Catalysts: Stronger order growth in 2025 and inclusion in Stock Connect.

China State Construction Engineering Corporation (CSCEC, Ticker: 601668 CH) – BUY

CSCEC is set to benefit from accelerated infrastructure investment growth in January 2025, supported by local government special bonds and recent policy changes to improve fund utilization efficiency. While property sales slightly underperformed, CSCEC’s diversified operations and supportive fiscal policies provide a solid foundation for growth.

The target price remains at RMB 6.61, derived from a sum-of-the-parts (SOTP) valuation model.

Key Catalysts: Strong fiscal and property policies expected in upcoming NPC & CPPCC meetings.

Desay SV (Ticker: 002920 CH) – BUY

Desay SV is capitalizing on the rapid adoption of intelligent vehicle technologies in China. Its strong product pipeline, including third- and fourth-generation smart cockpit domain controllers, advanced driver-assistance systems (ADAS), and cross-domain solutions, positions the company as a key player in the industry. Partnerships with major automakers like BYD, Geely, and XPeng further bolster its prospects.

Desay SV’s target price is RMB 190.00, based on a 40x 2025F PE ratio, aligning with its historical average.

Key Catalysts: Signing of new contracts with OEMs and strong Q4 2024 results.

Hansoh Pharma (Ticker: 3692 HK) – BUY

Hansoh Pharma’s innovative drug portfolio continues to expand, with over 30 products in clinical trials. Its Ameile drug is expected to generate RMB 6 billion in revenue by 2026, while its collaboration with MSD for HS-10535 could yield milestone payments of up to US\$1.9 billion. Revenue from innovative drugs is projected to account for 80% of total revenue by 2025.

The target price is HK\$29.00, supported by a sum-of-the-parts valuation.

Key Catalysts: Strong revenue growth in 2024 and continuous R&D efforts.

JD Logistics (Ticker: 2618 HK) – BUY

JD Logistics is positioned as a leader in China’s integrated supply chain services. The company is expected to post strong Q4 2024 results, driven by the 11.11 sales promotion period and collaboration with Alibaba. Analysts forecast a core net profit of RMB 7.42 billion for 2024, a significant improvement from RMB 1.99 billion in 2023.

Its target price is HK\$22.00, based on a discounted cash flow (DCF) valuation.

Key Catalysts: Continued collaboration with Alibaba and steady financial performance in 2025.

China Mengniu Dairy (Ticker: 2319 HK) – BUY

Mengniu Dairy is set to benefit from a recovery in liquid milk sales, supported by improved operational efficiency and a planned increase in dividend payout ratios. The company is targeting a 30-50 basis point improvement in operating margins in the second half of 2024.

The DCF-based target price is HK\$23.50, implying a 17.8x 2024F PE ratio.

Key Catalysts: Balanced raw milk supply and improved channel inventory status.

Miniso (Ticker: MNSO US) – BUY

Miniso’s overseas markets are scaling up, leading to better cost controls and same-store sales growth. The company is also enhancing Yonghui’s operational efficiency, further boosting profitability. Revenue and net profit growth are expected to accelerate in 2025.

The DCF-based target price is US\$29.30, implying a 23.5x 2024F PE ratio.

Key Catalysts: Accelerated overseas revenue growth and enhanced efficiency of Yonghui.

Plover Bay Technologies (Ticker: 1523 HK) – BUY

Plover Bay achieved robust growth in 2024, with net profit exceeding US\$30.9 million by October. The company is set to benefit from strong demand in the maritime and public safety sectors and stable raw material costs. Analysts forecast a 25% year-on-year revenue growth for 2024.

The target price is HK\$6.10, with the company trading at attractive PE multiples of 13.5x and 11.3x for 2025-26.

Key Catalysts: Collaborations with Starlink and higher-than-expected dividend payouts.

Sands China (Ticker: 1928 HK) – BUY

Sands China’s gaming revenue recovery is expected to accelerate in Q1 2025, supported by property renovations and upgraded room inventory. The company also plans to resume dividend payouts in 2025.

The target price is HK\$28.60, based on a 12.0x 2025F EV/EBITDA ratio.

Key Catalysts: Accelerated gaming revenue recovery and property upgrades.

Tencent (Ticker: 700 HK) – BUY

Tencent’s gaming segment is benefiting from the success of evergreen titles and newly launched games like Delta Force. The company is also enhancing its Weixin ad ecosystem, which boosted advertising revenue by 60% year-on-year in Q3 2024. With a promising pipeline of new game launches, Tencent is well-positioned for growth in 2025.

The target price is HK\$570.00, implying a 22x 2025F PE ratio.

Key Catalysts: Improving advertising performance and new game launches in 2025.

Trip.com (Ticker: 9961 HK) – BUY

Trip.com is capitalizing on strong international and outbound travel demand. Revenue for Q4 2024 is projected to grow 17-22% year-on-year, driven by robust international tourism. The company expects outbound tourism to achieve 2-3x growth in 2025, outpacing the industry average.

The SOTP-based target price is HK\$640.00, implying a 26.4x 2025F PE ratio.

Key Catalysts: Expansion into lower-tier cities and implementation of travel bubbles.

Sinopharm (Ticker: 1099 HK) – SELL

Sinopharm reported weaker-than-expected results in 2024, with revenue declining by 0.8% year-on-year. Policy uncertainties, such as group purchasing programs and anti-corruption campaigns, continue to weigh on the company’s outlook. Revenue growth is projected at a modest 0.6% for 2024.

The target price is HK\$18.00, based on a 6.6x 2025F PE ratio.

Key Catalysts: Policy uncertainties and weak growth visibility.

Weimob (Ticker: 2013 HK) – SELL

Weimob’s subscription solutions segment saw a 31% decline in revenue year-on-year in the first half of 2024. Despite potential benefits from Tencent’s Weixin platform, growth challenges persist. The company is currently trading at 2.6x 2025F EV sales, below its historical mean.

The target price is HK\$1.50, based on 2x P/S valuation.

Key Catalysts: Growth in WeChat mini-programme and e-commerce live streaming.

Conclusion

UOB Kay Hian’s January Conviction Calls highlight a mix of opportunities and challenges in the Greater China market. From CATL’s dominance in the EV sector to Tencent’s gaming and advertising growth, investors have a range of options to consider. At the same time, stocks like Sinopharm and Weimob face significant headwinds, making them less attractive. As market conditions evolve, these recommendations provide a robust starting point for navigating the dynamic investment landscape in 2025.