Gelonghui, Feb. 24 | Recently, short selling agency Jehoshaphat Research published a report saying that it is short selling Chuangke Industrial (0669.HK), indicating that its stock price could fall by 60% to 80%. Daiwa Development Research reports that during the Blackout Period (Blackout Period), it is difficult for management to fully respond. Daiwa believes that most of the claims in the above short selling report are unreasonable. Chuangke is still the bank's first choice, reaffirming the target price of HK$120 and its “buy” rating.

Yamato said that the short selling report compared the R&D capitalization and R&D cost ratios of brands such as I&T, SWK, and Makita, pointing out that the capitalization of R&D expenses of I&T is clearly high, but believes that this is largely due to the different accounting standards between US GAAP (SWK) and IFRS (TTI), and believes that I&T is reasonable in handling intangible assets.

Yamato pointed out that between 2020 and 2021, I&T's supply chain was blocked due to the pandemic, and the group's strategic inventory was accumulated, enabling it to meet customer needs and obtain a large amount of market share from peers. It also indicates that the company has begun to remove inventory since the second half of 2022. He believes that the inventory risk of the current downward cycle is manageable for Chuangke Industrial.

Daiwa mentioned that the short selling questioned that the disposal of PP&E (real estate, plant and equipment) by Chuangke can only recover very little value. According to its understanding, the group needs to dispose of outdated inventory to launch new products, so that the company can maintain its leading position in the market and gain market share.