Morning Brief

MarketResearch MorningBrief 4469093 [July19th,2024] MorningBrief ZHOUJinyu021‐38674924zhoujinyu011178@gtjas.comS0880516080007 Contents TopRecommendations ●MacroResearch:SpecialReport ●ElectronicComponentsSector:UpdateReport ●Uni‐PresidentChina(0220.HK):OW ●TunnelEngineering(600820):OW,TP@RMB9.00 LatestReports ●361Degrees(1361.HK):OW ●RockchipElectronics(603893):OW,TP@RMB91.74 SectorRatingsoftheMonthMarketStrategyWeeklyViewpoint 本报告内容译自同日发布的简体中文报告《国泰君安晨报》，报告观点及内容如有任何不一致的地方，一律以该简体中文版报告为准。 TopRecommendations MacroResearch:SpecialReport Weexpectthatthereformsproposedbythe3rdPlenarySessionofthe20thCPCCentralCommitteewillreflectthe“goal‐orienteddirection,problem‐orientedsolution”.Theso‐called“goal‐orienteddirection”istofocusonthebiggestgoalof“China’smodernization”.Theso‐called“problem‐orientedsolution”meanstheneedtosolvethecurrentpracticalproblemsofChina’seconomicdevelopment,includingtheconflictbetweenthedeclineintheriskappetiteofthewholesocialcapitalcausedbyagingandtheneedforhigh‐riskcapitaltopromotenewqualityproductivity,theconflictbetweenthecurrentmismatchofcentralandlocalgovernments’financingpowerafterthedeclineoflandsalesrevenue,andtheconflictbetweenthelocaleconomyandnationaleconomy.Inbrief,anewwaveoffiscalandtaxsystemreforms,theconstructionofaunifieddomesticmarket,andtheoptimizationofanew‐typenationalmobilizationsystemareontheway. ElectronicComponentsSector:UpdateReport TheproductioncapacityutilizationsofChinesemainlandmaturemanufacturingprocessFabsnowtoptheworld.AccordingtothedatafromIcmynaandcompanywebsites,in2024Q2,thecapacityutilizationratioofHuaHongSemiconductorwas100%;itsbusinessordersforMCU,NorFlashandserverpowersourceswereontherise;thecompanyplanstoraisewaferOEMchargeby10%in2024H2.ThecapacityutilizationrateofSMICSwas90%,andtheinventoriesofitsclientsstartedtoimprove. Werecommendthesemiconductorcompaniesengagedinimportsubstitution,including(1)(OEM)SMICS(688981)andHuaHongSemiconductor(688347);(2)(semiconductorequipment)NauraTech(002371),AMEC(688012)andPiotech(688072).OtherbeneficiariesincludeHwatsingTech(688120)andSkyverseTech(688361). Uni‐PresidentChina(0220.HK):OW [Rating:OW(Prv:OW);TP:N/A(Prv:N/A);MP:HKD6.42;Mkt‐Cap:HKD27730mn] TheCompany’srevenuegrowthrecoveredwhenthepandemicimpactswereover.Beveragebusinessisthekeycontributorofprofitgrowth.Profitmarginisontherise.TheCompany’sdistributionrateswere100%orbetterthanexpectationafter2018.Itscurrentstockpricecorrespondstodividendyieldof8%high.WeforecasttheCompany’s2024‐2026EPSofRMB0.42,0.46and0.49.Currentstockpricecorrespondsto2024PEof15x.Wesuggest“Overweight”rating. TunnelEngineering(600820):OW,TP@RMB9.00 [Rating:OW(Prv:OW);TP:RMB9.00(Prv:RMB9.00);MP:RMB6.50;Mkt‐Cap:RMB20437mn] ShanghaigrantedthelicenseofautopilotIOTvehicles.TheCompany’ssubsidiaryUrbanConstructionEngineeringDesignGroupisnowengagedinseveralsampleVehicle‐InfrastructureCloudprojects.In2024Q2,theCompany’snewbusinessordersroseby11%toRMB23.5bn.Atpresent,itsdividendyieldis5.78%, anditsPB(0.69x)and2024PE(6.3x)areatrecordlow.WemaintainourforecastsoftheCompany’s2024‐2026EPSofRMB1.02(+9%yoy),1.10(+8%yoy)and1.17(+7%yoy).WemaintaintargetpriceofRMB9(2024PEof8.8x)and“Overweight”rating. LatestReports 361Degrees(1361.HK):OW [Rating:OW(Prv:OW);TP:N/A(Prv:N/A);MP:HKD3.72;Mkt‐Cap:HKD7692mn] TheCompanyisaleadingsportsshoesandsportswearsupplierfocusingonlower‐tiermarketsinChina.Itssalesgrowthhasbeentakingtheleadinindustrysofarthisyear.Anditsbusinessordersfornextspringareveryhigh.WemaintainourforecastsoftheCompany’s2024‐2026netprofitofRMB1.13bn,1.32bnand1.52bn.Currentstockpricecorrespondsto2024‐2026PEof7x,6xand5x.Wemaintain“Overweight”rating. RockchipElectronics(603893):OW,TP@RMB91.74 [Rating:OW(Prv:OW);TP:RMB91.74(Prv:RMB91.74);MP:RMB66.74;Mkt‐Cap:RMB27909mn] Becauseofthere‐stockingofdownstreamindustriesafter2024Q1,theCompany’srevenueandprofitin2024Q2bothrecoveredfasterthanexpectation.Accordingly,weraiseourforecastsoftheCompany’s2024‐2026EPStoRMB1.06(from0.98),1.62(from1.37)and2.16.TheCompanyisexpandingthefast‐growingdownstreamAIoTindustry.Withreferencetotheaverage2024PE(52x)ofcomparableSoCcompanies,andalsotakingintoaccountthefewnumberoflistedChinesecompaniesinvolvedin8nmchips,wemaintaintargetpriceofRMB91.74(2024PEof86.5x)and“Overweight”rating. SectorRatingsoftheMonth RatingSector OW BuildingMaterials,ComprehensiveFinance,Insurance,CommercialBanking,Coal,Food&Drink, Pharmaceutical,RealEstate,MachineryManufacturing,Transportation,ConstructionEngineering,NonferrousMetals HouseholdAppliances,TransportationEquipment,MassMedia&Cultural,Agriculture,Textile& NT UWInformationTechnology,InformationScience Garments,Retailing,PowerEquipment,SocialServices,PublicUtilities,Iron&Steel Note:TheratingsabovearemadebyGTJAStrategyTeam,whichmaynotalwaysbeinlinewiththeopinionsofGTJAindustryanalystsduetodifferentemphasesandtimerangeswhentheseratingsaremade. MarketStrategyWeeklyViewpoint(LastUpdate:July7th,2024)A‐ShareStrategyWeekly:HittingBottom A‐sharemarketishittingthebottom.ShanghaiCompositehasbeenheadingallthewaydownw