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Document Summary: Market Overview and Sector News

Core Content Overview

The document provides a summary of the Hong Kong stock market performance and key sector updates as of 24 May 2022. It highlights the impact of policy changes on the auto and coal sectors, along with company-specific news from Xpeng-W, Xiaomi-W, and Wuxi Bio.

Market Performance

• Hong Kong Stocks Market: The market corrected yesterday, with tech and Macau gaming stocks declining. However, most China auto companies (excluding NEV players) advanced due to the reduction of passenger car purchase taxes by RMB60 billion.
• Hang Seng Index: Closed down by 357 points to 20,112 points, with a daily turnover of HKD113.6 billion.
• Company News:
  • Kuaishou-W (1024 HK) and NetEase-S (9999 HK) both reported quarterly results that exceeded market expectations.
  • HSBC (5 HK) ADR increased by 4%.

Sector News

China Auto - Reduce Passenger Car Purchase Taxes by RMB60b

• The Chinese government announced a package of measures to stabilize the economy, including relaxing car purchase restrictions and reducing passenger car purchase taxes by RMB60 billion on a time-limited basis.
• Current purchase tax is at 10%, and it is expected to be lowered to 5%.
• With an average selling price (ASP) of RMB150,000 per passenger vehicle, the tax cut is projected to boost auto retail value by RMB1.2 trillion and increase vehicle sales by 1-2 million units in the second half of 2022.
• The policy is expected to stimulate sales of mid- to low-end models.

China Coal - Stable Weekly Trend

• Coal prices (CCTD QHD5,500 blended coal, QHD5,500 spot coal, and BSPI) remained stable.
• Coal production increased by 10.7% YoY in April to 360 million tonnes, with an average daily output of 12.09 million tonnes.
• Coal inventory at QHD decreased by 5.7% WoW to 4.45 million tonnes, while coal IPPs in eight coastal provinces saw an increase of 1.7% to 30.15 million tonnes.
• Market expects coal prices to remain stable in the second quarter of 2022 (2Q22E), supported by the effective control of COVID-19 cases and the resumption of Daqin Railway maintenance on 20 May.
• The QHD5,500 mid-to-long term coal contract price range of RMB570-770 per ton has remained in effect since 1 May.

Company News Highlights

Xpeng-W (9868 HK)

• 1Q22 Results: Revenue of RMB7.5 billion (+153% YoY), with a vehicle gross margin of 10.4% (+0.3pp YoY).
• Performance: The gross margin slightly underperformed market expectations due to price hikes offset by rising battery costs and reduced subsidies.
• Guidance: Expected sales volume of 31k-34k units and revenue of RMB6.8-7.5 billion in 2Q22E.
• Mid-Term Outlook: Management expects the gross margin to reach 25%, with one of the two 2023E car launches projected to have a gross margin >20%.

Xiaomi-W (1810 HK)

• Product Launch Event: Unveiled new devices, including the Redmi Note 11T series (MediaTek Dimensity 8,100 processor), Mi Band 7, and Redmi Buds 4 Pro.
• Future Launch: Market anticipates the release of the high-end Mi 12 Ultra in July, featuring cameras co-engineered with Leica.
• Strategic Focus: Xiaomi is committed to expanding its presence in the premium smartphone segment through:
  • Enhancing technological capabilities via a global partnership with Leica Camera.
  • Extending market penetration and optimizing SKUs/sales in China's offline channels and overseas markets.

Wuxi Bio (2269 HK)

• Business Updates: Management addressed the impact of Shanghai lockdowns and new projects.
• UVL Delay: The prolonged Shanghai lockdown delayed the UVL inspection for the Shanghai and Wuxi sites, but the company stated that the issue has minimal impact on its business and clients.
• On-Site Inspection: Actively working with Chinese and US governments to conduct an on-site inspection of the Wuxi site.
• New Projects: Added 47 new integrated projects as of end-April 2022.

Disclaimer

• This document is for general information only and not intended as investment research or recommendation.
• No representation is made regarding the accuracy or completeness of the information.
• MIB Securities (HK) Ltd and its affiliates may have financial interests in the mentioned companies and may serve as directors or have positions in the securities discussed.
• The document does not constitute a solicitation to buy or sell any securities.
• Users are advised to consult their financial advisors before making any investment decisions.