occurrences

On December 6, 2023, Yuandong Hongxin issued an announcement stating that the board of directors recommended that Hongxin C&D shares be distributed to eligible shareholders as a special dividend. Eligible shareholders will be issued 1 Hongxin C&D share for every 27 shares held. According to the company's announcement, if approved by subsequent shareholders' meetings, Hongxin C&D shares are expected to be distributed on or around January 16, 2024. The number of Hongxin C&D shares to be distributed this time accounts for 5% of Hongxin C&D's total share capital. After the distribution is completed, Yuandong Hongxin is expected to still hold 66.72% of Hongxin C&D's shares and have stable controlling rights.

reviews

Special dividends enhance dividend returns, and current dividend yields are attractive. Based on the current stock prices of Yuandong Hongxin and Hongxin C&D (as of December 6, 2023), the distribution of Hongxin C&D shares is expected to increase the dividend yield of 2.2% 1, corresponding to the total dividend rate of Yuandong Hongxin 2023E by 10.0%. The current dividend return is strong.

The company took a number of measures in the second half of this year, continuing to demonstrate confidence in development and the importance it attaches to shareholder returns. In addition to the proposed special dividend, on October 24, 2023, the company issued an announcement stating that it decided to repurchase no more than 10% of the total issued shares (431,748,386 shares) in the company's share capital on the voting date of the annual shareholders' meeting, corresponding to the closing price of the last trading day before the announcement (October 20), and the maximum repurchase amount was HK$2,379 million. The company directly enhances shareholders' profit returns through various methods such as repurchases and dividends, which also effectively conveys the company's confidence in future long-term development.

The company's operating conditions are steady, and potential policies may catalyze downstream industry demand. According to the company's announcement, the company achieved a slight year-on-year increase in revenue and net profit in the first three quarters. Among them: 1) the overall financial business was stable, as shown by a slight increase in the size of interest-bearing assets, a steady rise in interest spreads over the middle of the year, and remained stable; 2) industrial operations continued to grow. Among them, Hongxin C&D benefited from international business and platform business development, and achieved relatively rapid growth in revenue and net profit on the basis of deep cultivation in the mainland China market. Hongxin Health's comparable revenue and net profit also continued to grow in the first three quarters, and capitalization preparations have begun. Looking ahead, we believe that with the gradual implementation of potential fiscal and real estate policies, downstream industry demand is expected to recover steadily, which may drive the company's industrial operations to accelerate and help stabilize the quality of financial business assets.

risks

Macroeconomic downside risks, asset quality falls short of expectations, and industrial operation growth falls short of expectations.