GMT EIGHT - Research

CITIC SEC: AI+ strategy supports NETDRAGON's (00777) game business in reducing costs and increasing efficiency, maintaining a "buy" rating with a target price of HK$16.

CITIC SEC released a research report stating that they are maintaining a "buy" rating for NETDRAGON (00777) with a target price of 16 Hong Kong dollars. The company announced its full year 2024 performance, with revenue/profit attributable to owners reaching 6.05/0.31 billion yuan in 2024. Looking ahead to 2025, the company's gaming business may face some pressure in the first half of the year due to strategic adjustments, but the bank predicts that the company is expected to achieve good cost control through AI+ strategy, with full-year operating profit expected to remain stable; in terms of Mynd.ai business, in the long term, with the trend of increasing penetration of global education informatization, the company's business is expected to resume growth. The main points of CITIC SEC are as follows: Overall Performance The company announced its full-year 2024 performance, with revenue/profit attributable to owners reaching 6.05/0.31 billion yuan in 2024. This was mainly due to a one-time non-cash deferred income tax expense impact (approximately 450 million yuan), and after excluding this impact, the company's net profit increased by 17.4% year-on-year. In terms of profitability, the company's full-year gross profit margin was 65.2%, an increase of 3.3 percentage points year-on-year; sales, administrative, and research and development expense rates were 12.5%, 19.3%, and 20.1% respectively, each up by 1.1, 2.4, and 3.4 percentage points year-on-year, and the pre-tax profit was 760 million yuan, up by 19.1% year-on-year. Gaming and Application Service Business The company's gaming and application service business revenue for the full year of 2024 was 3.94 billion yuan, and the decline in operating revenue was mainly due to the company actively adjusting its payment strategy to lower the entry threshold for new users. The gross profit margin during the period reached 86.3%, with research and development, sales, and administrative expense rates of 31.2%, 12.4%, and 17.9% respectively, up by 2.9, 1.3, and 2.4 percentage points year-on-year, and OPM was 23.5%. Looking ahead, the company proposed the "AI+ Gaming" strategy in 4Q24, planning to reduce costs and increase efficiency through AI (reduce research and development personnel). The bank predicts that the company's gaming business profitability is expected to stabilize and rebound. Mynd.ai Business The company's Mynd.ai business revenue for the full year of 2024 was 2.11 billion yuan, mainly due to the overseas education informatization industry still being in an adjusting period. The gross profit margin was 26.0%, up by 1.0 percentage point year-on-year, mainly due to savings in unit material and transportation costs. The research and development, sales, and administrative expense rates were 9.6%, 12.6%, and 17.2% respectively, up by 2.9, 1.4, and 8.0 percentage points year-on-year. Profit Forecast, Valuation, and Rating 1. For the gaming and application service business, the bank predicts that the net profit for this business in 2025 will be 690 million yuan. Referring to the current valuation levels of comparable companies in the industry in 2025 (37 Interactive Entertainment Network Technology Group 12x PE, Kingnet Network 17x PE, both are Wind consensus forecasts), the company's gaming and application service business is given a 2025 PE of 9x, corresponding to a market value of 6.19 billion yuan. 2. For the Mynd.ai business, the bank expects the revenue for this business in 2025 to be 1.72 billion yuan. Referring to the current valuation levels of comparable companies in the industry in 2025 (Guangzhou Shiyuan Electronic Technology 1.1x PS, Shenzhen KTC Technology 0.6x PS, both are from CITIC SEC research department forecasts), the company's Mynd.ai business is given a 2025 PS of 0.7x, taking into account the company's 74.1% stake (as of December 31, 2024), giving the company's Mynd.ai business a valuation of 900 million yuan. In addition, considering the company's active dividend distribution and emphasis on shareholder returns, CITIC SEC assigns a valuation of 940 million yuan (corresponding to 0.5x in 2025) for a part of NETDRAGON's net cash in 2025 (18.8 billion yuan). As a whole, the company's target price for 2025 is set at 16 Hong Kong dollars, and the "buy" rating is maintained.

01/04/2025

CICC: Raises target price of CHINA FEIHE (06186) to 6.5 Hong Kong dollars. Rating "Outperform" compared to the market.

Bank of China International released a research report stating that CHINA FEIHE (06186) saw a year-on-year increase in net profit of 5% to 3.57 billion yuan last year. With the support of a strong product portfolio and sales channels, the group's sales growth in the infant formula milk powder business continued to improve last year, with market share steadily increasing. The bank expects revenue to increase by 7.5% to 22.308 billion yuan in the 2025 fiscal year, benefiting from its continued focus on the high-end infant formula milk powder market. Its target price has been raised from the original 4.5 Hong Kong dollars to 6.5 Hong Kong dollars, with a rating of "outperform".

01/04/2025

BOCOM INTL: Raises AKESO (09926) target price to 92 Hong Kong dollars, and Ivosy will usher in several key developments.

BOCOM INTL released a research report stating that AKESO (09926) experienced strong sales growth in the previous year. The bank expects that the group's medical insurance coverage will drive further sales volume this year and achieve a breakeven point. With the overseas registration research of IVOXI entering the sprint stage, more new antibodies, ADCs, and candidates in the self-immunization field entering clinical development, the company's pipeline value continues to increase, raising the target price to HK$92 with a "buy" rating. AKESO's performance exceeded expectations last year and in the second half of the year, with the possibility of recording positive year-on-year net profit by the end of this year in terms of accounting net profit and non-IFRS net profit. Additionally, the bank currently expects the company to record accounting net profit of HK$23 million and non-IFRS net profit of HK$103 million by the end of this year, while also raising the adjusted profit forecast for 2026 by 3% to HK$1.2 billion.

01/04/2025

BOCOM INTL: Lower target price of NEW ORIENTAL-S (09901) to 46 Hong Kong dollars, study abroad business growth under pressure.

BOCOM INTL released a research report stating that it is expected that the non-examination business of NEW ORIENTAL-S (09901) will see a 22% year-on-year increase in revenue in the third quarter, while the adjusted operating profit will decrease by approximately 2.5 percentage points year-on-year, mainly due to slower growth in study-abroad related businesses than expected and increased investment in culture and tourism. The bank predicts that the non-examination business's full-year revenue will grow by 25%, with an operating profit margin increase of 11.5%, although growth in study-abroad business is expected to remain under pressure. The bank believes that the group's long-term profit margin still has room for improvement, and has adjusted the target price from a decline to 46 Hong Kong dollars. Additionally, the company has sufficient cash flow, and despite the need for business adjustments, its brand and scale remain industry leaders with an attractive valuation, maintaining a "buy" rating.

01/04/2025

BOCOM INTL: GCL TECH (03800) valuation attractive, rating upgraded to "buy"

BOCOM INTL released a research report stating that the low-carbon advantage of GCL TECH's granular silicon has not yet been reflected in the selling price, but with the release of the "Low-carbon Evaluation Requirements for Export Products of Photovoltaic Modules (Draft for Solicitation of Comments)" and the implementation of the EU carbon tariffs in 2026, it is expected that the discount of granular silicon compared to rod silicon will gradually turn into a premium, and the profit advantage will significantly expand. The bank believes that after the recent stock price correction, the stock valuation is attractive, and it will raise the rating to "buy".

01/04/2025

DBS: Raise BOC HONG KONG (02388) target price to 34.5 Hong Kong dollars and reiterate "Buy" rating.

DBS released a research report stating that BOC HONG KONG (02388) exceeded expectations in the fiscal year 2024, with a net profit increasing by 16.8% year-on-year to HK$38.2 billion. The bank raised its profit forecast for the fiscal years 2025/2026 by 10%/7% mainly due to the strong performance in the fiscal year 2024 and the assumption of an increase in non-interest income. It reiterated a "buy" rating and raised the target price from HK$28.5 to HK$34.5. Compared to its peers, the stock's risk-return profile is attractive, with a dividend yield of over 6%.

01/04/2025

Lyon: Upgraded China Feihe (06186) rating to "highly confident outperforming the market" and expected more policy incentives to stimulate the birth rate this year.

Lyon released a research report stating that CHINA FEIHE (06186) is expected to accelerate its sales growth this year, and it is estimated that its subsidy of 1.2 billion yuan will not significantly impact profits. The company will also reduce the impact by improving cost distribution and increasing efficiency. The bank believes that there will be more policy incentives to stimulate fertility rates this year, which may boost market sentiment. Considering potential policy incentives, stable performance, and generous dividend payouts (forecasting a dividend yield of 6% this year), the investment rating has been upgraded from "outperform market" to "highly confident in outperforming market".

01/04/2025

Lyon: AKESO(09926) target price raised to HK$95.3, rated "outperform market"

Lyon released a research report stating that AKESO (09926) product sales increased by 25.3% year-on-year, and the bank believes that the sales of AK104 and AK112 should meet the company's expectations. The company's management revealed that since AK112 was included in the National Reimbursement Drug List (NRDL) earlier this year, its sales have achieved good growth. The bank has raised its target price from 72.1 Hong Kong dollars to 95.3 Hong Kong dollars, maintaining a "outperform" rating.

01/04/2025

Goldman Sachs: Raises SEAZEN (01030) target price to HK$2.25, maintains "Neutral" rating.

Goldman Sachs released a research report stating that it has lowered its core profit forecast for SEAZEN (01030) by an average of 19% from this year to 2027, and revenue forecast by an average of 5%. This reflects a 9% decrease in pre-sales forecast, a decrease in profits from joint ventures, and an increase in effective corporate income tax rates from last year's trend. The bank, based on the company's lower-than-expected net debt levels last year, has raised its forecast of net asset value per share to 4.5 yuan by the end of this year. Based on a 50% discount, the target price for the stock has been raised from HK$2.15 to HK$2.25, maintaining a "neutral" rating.

01/04/2025

Goldman Sachs: Lowered CSPC PHARMA (01093) target price to HK$7.84, maintains "buy" rating.

Goldman Sachs released a research report stating that CSPC PHARMA (01093) had weak fourth quarter performance as expected, with the deepening impact of destocking and ongoing centralized procurement being the main reasons. The bank adjusted the profit forecast for the company for the next two years by 5.2% and 5.8% due to increased research and development expenses. The target price was lowered from HK$8.52 to HK$7.84, with a "buy" rating maintained. The bank cited management as saying that the company is expected to resume growth this year, benefiting from a low base and incremental sales of approximately 1.5 billion RMB from new drugs launched after 2021. The bank noted that sales in the fourth quarter of last year were 6.32 billion RMB, a 16.6% year-on-year decrease, with finished pharmaceutical sales down 20% year-on-year, and oncology drug sales down 61% year-on-year, particularly weak due to the impact of docetaxel and Cinuclotide from centralized procurement.

01/04/2025

Contact: [email protected]