The Zhitong Finance App learned that CMB International released a research report stating that maintaining the Hongxin C&D (09930) “buy” rating, the recent sell-off is unreasonable; it is expected that the selling pressure will end within 2-3 days; it is recommended to buy at the current low level, with a target price of HK$5.2.

The bank believes that the decline in stock prices is due to the sale of shares by some shareholders of Yuandong Hongxin after receiving their shares, and these shareholders may need to cash out in order to achieve their own financial goals. Although the bank was surprised by the market's lack of carrying capacity, analysis showed that the selling pressure would only take about 2-3 more days. The bank sees the current sharp pullback as a buying opportunity because the sell-off is not driven by fundamentals. Hongxin C&D is currently trading at 5 times the 2024 price-earnings ratio, which the bank sees as attractive. At the same time, continue to be optimistic that the company's shift to an asset-light model will improve balance sheets and profits. Furthermore, overseas expansion will be a new driving force for growth in the next few years.

According to the report, on January 16, a total of 160 million shares of Hongxin C&D shares were distributed to Yuandong Hongxin shareholders. On January 17/18, Hongxin C&D's trading volume reached 6.6 million shares/15 million shares, far higher than the two-month average of 370,000 shares. The bank believes that the increase mainly comes from Yuandong Hongxin shareholders. Sinochem Group is the largest shareholder of Yuandong Hongxin, holding 21.3% of the shares. Kong Fanxing, CEO of Far Eastern Hongxin, holds 20.8% of the shares. DCP Capital Partners, an institutional investor with a seat on the board, holds 8.4% of the shares. The bank believes that these three shareholders (holding about 50.5% of shares in total) have no intention of selling Hongxin C&D's shares. Therefore, assuming that all remaining Yuandong Hongxin shareholders sell shares in Hongxin C&D, the total number of shares that can be sold is about 79 million shares. After deducting the amount that has already been traded in the past two days, and assuming a daily trading volume of 20 million shares in the future, it will only take 2-3 days to complete the sale of the remaining shares.