Dim Sum Daily 每日港股簡評 10 June 2021 Yesterday, the Hang Seng Index had a narrow range trading, intraday Market Overview trading range was within 200pts. China basic material sectors outperformed after recent correction. Yet, news highlighted that the Chinese government is pondering a price cap on thermal coal, as the electricity cost showed no sign of weakening despite the fast-approaching Summer. This may lead selling pressure again related sectors, esp. on China coal sector. The Hang Seng Index was down 38pts to 28,742pts. Daily turnover declined 5.1% DoD to HKD116.3b. Sector News ------------------------------------------------------------------------------------------------------------ China Machinery CCMA reported May excavator sales of 27,220 units, down 14.3% YoY, and largely in line with CME former estimate. The YoY decline is mainly due to weak domestic sales, which declined 25.2% YoY. Market believes the weak growth in domestic sales was mainly due to: (1) high base in 2Q20 caused by pent up demand, and (2) construction activities in 2021 front-loaded to some extent due to early work resumptions after Chinese New Year. On seasonality, domestic excavator sales in May declined 46% MoM to 22,070 units, which was weaker than seasonality vs. an average of -29% MoM in May during 2016-20. Some turned slightly cautious towards the construction machinery sector in view of the weak monthly sales, yet forecast the excavator sales in 2021 grow over 10% YoY. Company News ------------------------------------------------------------------------------------------------------------ China Longyuan (916 HK) China Longyuan reported power generation data for May with total power generation of 5,715GWh (+20.6% YoY), of which, the domestic wind power generation saw an 18.4% YoY growth to 4,729GWh. Its average wind curtailment rate was 5.94% in May 2021, representing a 0.35pp YoY decrease compared to the May 2020 rate of 6.29%. Tianjin led the power generation increase with superior YoY growth of 108%, followed by 100%/84%/84% for Hunan/Guangxi/Jiangxi, respectively. Longyuan’s coal power generation in May 2021 amounted to 825GWh(+26.8% YoY), which is likely due to the higher thermal power demand compared with that in the same period of last year as the economic activities are quickly recovering from the pandemic impact. Great Wall Motor (2333 HK) Great Wall Motor's May wholesales volume was up 6% YoY to 86,965 units, whose growth was higher than the overall passenger vehicle sector-wide's 2% YoY decline. Overall SUV segments (Haval brand + WEY brand + Tank brand) sales volume increased 11% YoY in the months, while the pick-up segment sales fell 9% YoY. Ora brand volume rose 48% YoY. In 5M21, the company sold 517,547 units of vehicles, 20% more than in the same period of 2019, largely contributed by pick-ups, Ora and Tank, also driven by a low base in May 2019. So far, it has reached 41% of the target. Key to highlight: its high-price (RMB176k -220k), high-margin (>30% gross margin) 'Tank 300' SUV sales volume hit a record-high in May to 6,090 units (+11% YoY). Tank 300 SUV currently has ~60k unit order backlog on hand and targets 100,000 unit sales in 2021. Chow Tai Fook (1929 HK) Its share price reached to record high after the company released strong FY2021 results. Yet, its growth momentum is expected to peak in 2HFY21E. Its management believes its gross profit margin (GPM) will normalize, with c.27%-28% GPM for the mainland China market (c.1% lower than FY21) and c.25%-26% for the Hong Kong and other markets. Its management expects OPM to be 50-80bp lower in China due to well-controlled SG&A and HK and other markets’ OPM will reach 3%-4% in FY22. The company aims to open 700 more stores in mainland China where most of the new openings will be franchise stores in low- tier cities, its management guides revenue will record mid- to high-teen percentage growth in mainland China. In terms of the HK and other markets, its management guided SSS will recover to c.70%-80% of 1HFY20 levels in 1HFY22 and c.80%-90% of 2HFY20 levels in 2HFY22E. HKTV (1137 HK) HKTV launched a new targeted promotional campaign to reactivate some dormant users, and judging from the May results, which was effective. This campaign will continue in the coming months, which is likely to help the June and July GMV. Market also notes that HKTV has revamped its electronics category by reducing the category’s take-rate and allowing direct merchant delivery. This should attract new merchants, and given the high average basket size of electronic products, it could be a further boon to GMV growth. 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