China Merchants Port, Inner Mongolia Yili Industrial Group, Miniso, Shandong Gold Mining, Shenzhen Mindray Bio-Medical Electronics, The United Laboratories International

🏢 China Merchants Port Holdings (144 HK) – Steady Growth with a Strong Dividend Outlook

Recommendation: BUY
Target Price: HK$15.21
Stop Loss: Not specified
Date of Recommendation: 2nd September 2024
Broker: UOB Kay Hian

Investment Thesis: China Merchants Port (CMP) delivered solid performance in 1H24, with core earnings showing moderate growth, buoyed by strong operational results from its consolidated entities. The company remains a leader in the global port and terminal industry, benefiting from its strategic investments and robust cash flow, which support a potential increase in dividend payouts.

Solid Core Earnings Growth: CMP’s 1H24 core net profit rose by 8.8% year-on-year to HK$3.52 billion, exceeding expectations and making up 53.8% of the full-year forecast. This growth was driven by the strong performance of its Shenzhen home base port and several overseas terminals, including those in Sri Lanka, Brazil, and Togo.
Impressive Throughput Growth: CMP’s gross container throughput increased by 7.9% year-on-year to 71.8 million TEUs in 1H24, outpacing the global average. The company’s Pearl River Delta and overseas portfolios saw significant growth, with the Brazil terminal showing remarkable performance due to strong organic growth in the region.
Healthy Balance Sheet and Dividend Prospects: CMP’s net gearing ratio improved to 18.7% by the end of 1H24, down from 20.1% at the end of 2023. The company’s strong operating cash flow has enabled it to increase its interim dividend for the first time in over a decade, reflecting its ample liquidity and management’s focus on shareholder returns.

Valuation:
CMP’s shares are trading at an attractive valuation with a target price of HK$15.21, reflecting the company’s robust earnings outlook and potential for higher dividend payouts.

Share Price Catalysts:

Continued strong throughput growth in key regions.
Potential for a higher dividend payout, supported by declining net gearing and strong cash flow.
Expansion into emerging markets, particularly in Southeast Asia, Africa, and South America.

🥛 Inner Mongolia Yili Industrial Group (600887 CH) – Positioned for Recovery with Channel Adjustments

Recommendation: BUY
Target Price: Rmb28.40
Stop Loss: Not specified
Date of Recommendation: 2nd September 2024
Broker: UOB Kay Hian

Investment Thesis: Inner Mongolia Yili Industrial Group, China’s largest dairy producer, faced challenges in 2Q24 due to ongoing channel adjustments. However, the company maintains a positive outlook for the second half of the year, supported by healthier channel inventories and stable milk prices.

Channel Adjustments and Recovery Outlook: Yili’s 2Q24 core earnings fell by 43% year-on-year, primarily due to channel adjustments aimed at clearing excess inventory. Despite this, the company is optimistic about achieving high single-digit revenue growth for the full year, driven by improved inventory levels and stable retail prices.
Gross Profit Margin Resilience: Despite the revenue decline, Yili’s gross profit margin improved by 1.1 percentage points year-on-year to 33.8% in 2Q24, benefiting from lower raw milk prices. The company expects margins to remain stable, supported by a balanced supply-demand dynamic and efficiency improvements.
Dividend Policy and Capital Expenditure: Yili plans to maintain a dividend payout ratio of over 70%, reflecting its commitment to returning value to shareholders. The company also expects a gradual reduction in capital expenditure in the coming years, signaling a more disciplined approach to growth.

Valuation:
Yili’s shares are trading at a favorable valuation, with a target price of Rmb28.40, which represents a 25.5% upside potential. The company’s recovery prospects and strong dividend policy make it an attractive investment.

Share Price Catalysts:

Successful completion of channel adjustments, leading to improved sales and profitability in 2H24.
Continued focus on efficiency improvements and cost management.
Potential for stronger-than-expected recovery in China’s dairy market.

🛍️ Miniso (9896 HK) – Expanding Globally with Strong Growth Potential

Recommendation: BUY
Target Price: US$29.30
Stop Loss: Not specified
Date of Recommendation: 2nd September 2024
Broker: UOB Kay Hian

Investment Thesis: Miniso, a global lifestyle retailer, continues to expand its footprint in overseas markets, delivering strong revenue growth despite rising operational expenses. The company’s focus on international markets, particularly in the US, positions it well for sustained growth.

Strong Revenue Growth: Miniso’s 2Q24 revenue grew by 24.1% year-on-year to Rmb4.04 billion, driven by a 35% increase in overseas market revenue. The company expects this momentum to continue, with projected revenue growth of 20-25% in 3Q24.
Expansion in the US Market: Miniso considers the US a key strategic market and plans to open 100 stores this year, with a long-term goal of reaching 500 stores by 2025. The company is also exploring the introduction of a franchise model in the US to accelerate growth.
Share Buyback and Valuation: Miniso has initiated a new HK$2 billion share buyback plan, reflecting management’s confidence in the company’s future prospects. The stock is currently trading at 13.3x 2024F PE, with a target price of US$29.30, representing a 79.5% upside potential.

Valuation:
Miniso’s valuation is compelling, with strong growth prospects supported by its aggressive expansion strategy and share buyback plan. The target price of US$29.30 offers significant upside potential.

Share Price Catalysts:

Continued strong performance in overseas markets, particularly in the US.
Successful execution of the share buyback program.
Expansion into new markets and the introduction of a franchise model.

💰 Shandong Gold Mining Co (1787 HK) – Poised for Margin Expansion Amidst Delayed Production

Recommendation: BUY
Target Price: HK$20.50
Stop Loss: Not specified
Date of Recommendation: 2nd September 2024
Broker: UOB Kay Hian

Investment Thesis: Shandong Gold Mining Co, one of China’s leading gold producers, faced production delays in 1H24, but the company remains well-positioned to benefit from a potential rally in gold prices, which could drive margin expansion in the coming quarters.

Delayed Production and Margin Impact: Shandong Gold’s 1H24 results were below expectations, with sales volume lagging behind production due to operational delays. However, the company expects margin expansion as production normalizes and gold prices potentially rise.
Gold Price Outlook: The company is set to benefit from a bullish outlook on gold prices, driven by macroeconomic uncertainties and increasing demand for safe-haven assets. This could lead to significant margin expansion in 2H24 and beyond.

Valuation:
Shandong Gold’s shares offer a favorable risk-reward profile, with a target price of HK$20.50. The company’s ability to capitalize on rising gold prices and improve production efficiency supports a positive outlook.

Share Price Catalysts:

Recovery in production levels, leading to higher sales volumes.
Potential rally in gold prices, driving margin expansion.
Strategic initiatives to enhance operational efficiency.

🏥 Shenzhen Mindray Bio-Medical Electronics (300760 CH) – Navigating Policy Uncertainties with Strong Growth

Recommendation: BUY
Target Price: Rmb295.00
Stop Loss: Not specified
Date of Recommendation: 2nd September 2024
Broker: UOB Kay Hian

Investment Thesis: Shenzhen Mindray Bio-Medical Electronics, a leading medical device manufacturer, continues to deliver resilient earnings growth despite facing policy uncertainties in China. The company’s strong product portfolio and international expansion efforts support a positive outlook.

Resilient Earnings Growth: Mindray reported strong earnings growth in 1H24, driven by robust demand for its medical devices both domestically and internationally. The company’s diversified product offerings and strong R&D capabilities position it well to navigate policy changes.
International Expansion: Mindray’s ongoing expansion into international markets provides a buffer against domestic policy uncertainties. The company is strategically increasing its presence in key regions, including Europe and the US.

Valuation:
Mindray’s shares are trading at an attractive valuation, with a target price of Rmb295.00. The company’s growth prospects and ability to navigate regulatory challenges make it a compelling investment.

Share Price Catalysts:

Continued strong performance in international markets.
Introduction of new products, driving revenue growth.
Potential easing of domestic policy uncertainties.

💊 The United Laboratories International (3933 HK) – Margin Expansion Supports Strong Earnings Growth

Recommendation: BUY
Target Price: HK$11.20
Stop Loss: Not specified
Date of Recommendation: 2nd September 2024
Broker: UOB Kay Hian

Investment Thesis: The United Laboratories International, a leading pharmaceutical company, reported strong 1H24 results, supported by improving margins and robust demand for its products. The company is well-positioned for continued growth, driven by its focus on cost efficiency and product innovation.

Strong Earnings Growth: The United Laboratories reported a solid 1H24 performance, with core earnings growth driven by margin expansion and increased sales volumes. The company’s focus on cost control and efficiency improvements has resulted in higher profitability.
Product Innovation and Pipeline: The company continues to invest in its product pipeline, with several new drugs expected to launch in the coming years. This focus on innovation is expected to drive long-term growth and support margin expansion.

Valuation:
The United Laboratories’ shares are trading at a favorable valuation, with a target price of HK$11.20. The company’s strong earnings growth and product pipeline make it an attractive investment.

Share Price Catalysts:

Continued margin expansion, supported by cost efficiency initiatives.
Successful launch of new products, driving revenue growth.
Positive developments in the company’s product pipeline.
Thank you