The idea of Hong Kong stock market allocation in February: take advantage of the shock to get on the train and port stocks, allocate strategic assets, and recover in the game cycle.

• The bull market trend of Hong Kong stocks is still there, and the short-term shock is the time to get on the bus.
  

Fundamental outlook, the Hong Kong stock market will continue to benefit from the return of value driven by earnings reversal.Thanks to the cumulative effects of extraordinary stimulus policies, the large-scale use of vaccines and the fact that inventories in Europe and the United States are already at historically low levels, the economic recovery driven by voluntary inventory replenishment in Europe and the United States may exceed expectations. China has entered the opening year of the 14th five-year Plan, and the upward momentum of the inventory cycle is still there. The subsequent global investment style will be conducive to earnings-driven and revaluation of value stocks.

First of all, the popularity of vaccines in the United States has accelerated, superimposed by a new round of economic stimulus package, and economic recovery is expected to increase.

• After Biden took office on January 20, he announced that the United States would use "wartime means" to deal with the epidemic, increase the production of medical materials, expand testing and strengthen epidemic prevention measures, and the popularity of vaccines in the United States accelerated. As of January 29th, the cumulative number of vaccinations in the United States reached 26.92 million, or 8.2 percent, and the vaccination rate exceeded the previous plan of 24 million.

• In addition, a new round of economic stimulus package totaling 900 billion US dollars passed in December 2020 is gradually being implemented. Us consumer demand is expected to recover further in February as higher-than-expected vaccination overlaps a new round of fiscal subsidies, and US stocks are expected to lead a return to profit-driven and revaluation of global investment styles.

Second, from the recent data, China needs to continue to improve both inside and outside, the trend of taking the initiative to replenish inventory in mainland China continues, and economic resilience continues.

• In December 2020, the profits of industrial enterprises increased by 20.1% compared with the same period last year, and the profit growth rate continued to pick up rapidly compared with November. The inventory of finished goods increased by 7.5% year-on-year, continuing the trend of replenishing inventory. Exports increased by 18.1% year-on-year, better than expected by 15%. Overseas productive demand remains strong to drive exports.

• In January 2021, the manufacturing PMI index was 51.3, the 11th consecutive month in the expansion range.

Capital outlook: there are still aftereffects of the short-term game and gamma squeeze risk in the US stock market in early February, but the systemic risk is small, and China's liquidity "hit the brakes" will end before the Spring Festival, so February is a good time for a bull market in Hong Kong stocks.

First, the recent extreme stock game and option gamma squeeze in US stocks have led to a fall in high-quality weighted stocks, which will not repeat the March 2020 version, but will still be volatile in early February.

• The liquidity shock of US stocks is only the release of game risks within the US stock market, does not change the general trend of economic recovery in Europe and the United States and overseas macro liquidity easing, and will not repeat the March 2020 version. The current fundamentals and liquidity environment are very different from those in March 2020. And after the 2020 crisis, the Fed has ample tools to stop the liquidity crisis from spreading further.

• But the short-term volatility in the stock market has not abated. Wall Street institutions joined forces to "subvert and believe in" self-help, eating extremely ugly. Although the risk of bankruptcy of large hedge funds has been reduced, it has raised business ethical and legal issues. Previously, various trading platforms have restricted the trading of stocks such as GME without authorization, and are only allowed to close positions and are not allowed to buy, so that some short sellers take advantage of the opportunity to close their positions. And GME short positions are still as high as 70%, and short-term disturbances are still there.

• For the whole of 2021, overseas monetary policy will need to tie in with expansionary fiscal policy, and the overseas liquidity environment will remain loose, or at least difficult to tighten voluntarily. At present, there is little risk of substantial inflation in developed countries, and there is even deflationary pressure, so through high debt and monetary easing to alleviate deep-seated social contradictions, the road of boiling frogs in warm water and drinking oysters to quench thirst seems to continue. Otherwise, once the currency illusion is punctured, it is easy to repeat the financial crisis.

Second, the liquidity environment in mainland China is expected to improve around the Spring Festival.

• China's macro policy "does not make a sharp U-turn" in 2021, so there may be a periodic "slam on the brakes" but no systemic risks. Liquidity on the mainland has been tight recently: from January 25 to January 29, SHIBOR overnight interest rates rose 84.6bp to 3.28 per cent and weighted interbank pledge repo rates rose 186.9bp to 4.39 per cent. Liquidity in the mainland is tight before the Spring Festival is normal, but overall there is no systemic risk.

• In the medium to long term, both Hong Kong stocks and A shares will continue to benefit from increased stock holdings by ordinary Chinese people and increased holdings of Chinese assets by foreign investors.With the deepening of the interconnection mechanism, Hong Kong stocks have become the core channel for China's social wealth to increase its core assets, and the mainland funds invested through the Hong Kong Stock Connect are expected to become the mainstay and "local" funds of the Hong Kong stock market. In January, southward funds flowed a total of 259.54 billion yuan through the Hong Kong Stock Connect.

  Third, the risk appetite will improve, and the attractiveness of Hong Kong stocks to the allocation of capital at home and abroad will be significantly improved.First of all, with the weakening of the COVID-19 epidemic and geopolitical influence in 2021, Sino-US relations will not be worse than in 2020. Secondly, the boom in new shares has boosted investor confidence, especially the listing of high-quality Chinese stocks and New Economic Unicorns in Hong Kong.

Investment advice: "empty" refueling recovery market, "earthquake" after the bull market of Hong Kong stocks

First of all, China's manufacturing industry has gone deep into the Nuggets, A shares and Hong Kong stocks have good companies, and the recovery in Europe and the United States and China's 14th five-year Plan will be short-and medium-term opportunities.1) the recovery in Europe and the United States is conducive to the prosperity of semiconductors, consumer electronics, automobiles and spare parts, home appliances, furniture, chemicals, industrial metals and other industries. 2) China's 14th five-year Plan and the implementation of the "new infrastructure" are conducive to the rise of advanced manufacturing industries and are optimistic about new energy vehicles, semiconductors, new energy, military, high-end manufacturing and industrial Internet for a long time.

Second, the tactical position of deep value stocks has come, as the fundamentals improve and "fireworks" style "Davis double-click".Choosing to increase the core assets of traditional industries in Hong Kong stocks, the subsequent popularity of vaccines and the recovery in Europe and the United States will drive Hong Kong stocks to reevaluate the higher-than-expected values such as energy, non-ferrous metals, financial and real estate. In particular, the "Trump red envelope stocks" such as CNOOC and the three major operators are expected to make reference to the GME-style market.

Third, strategically bullish on the core assets of China's new economy and select Internet leaders and large consumer services.(property, brand consumption, education, tide play, gambling, etc.), medicine, etc. Be optimistic about 1)The leader in the field of InternetThe core competitiveness of the Internet leader is still there, benefiting from the "local celebration" of the Spring Festival in the short term and the new business layout in the long run; 2)medicineSelect targets for performance recovery; 3)Optional consumptionSelect industry leaders that have benefited from economic recovery and whose performance has exceeded expectations.

Risk hints: global economic growth is declining; monetary policy in China and the United States is not as loose as expected; big country game risk.

Recommended stock combination logic in February

• Tencent (0700.HK): the scene is further expanded, and the liquidity is expected to be reassessed.
  

Revenue and profit exceed expectations, Tencent's ecology may further expand under anti-monopoly:Since 20H2, Tencent, including JD.com, Pinduoduo, Meituan and other top platforms, has increased its investment in e-commerce, life services, payment and other businesses, and continued to increase the market share of each track. The company's 20Q3 revenue was 125.45 billion yuan, 1.3% higher than market expectations, and 1.7% higher than market expectations. Core business driven by payment rates and games going out to sea from January to October 2020, the average number of daily active users of "Arena of Valor" exceeded 100 million. As the key game pipeline gradually obtains the version number, it will further boost the profitability of the game business.

Convert traffic directly with Wechat to generate short videos and LVB:The number of daily active users of the video account has exceeded 400 million, while it continues to enrich the content ecology in order to expand the average daily online time; although we judge that the video number will not be monetized in the short term, but the number of users still symbolizes a solid foundation in the short video track. The number of daily active users of WeCom has increased by more than 100% compared with the same period last year, and the Tencent meeting has more than 100 million registered users. At the same time, Wechat to nearby people and live broadcast, increase the layout and realization of live broadcast in the same city.

The growth rate of advertising is better than that of the industry. Mini Program extends e-commerce and corporate ecology:Advertising business increased 16% to 21.35 billion yuan, of which advertising spending in education, Internet services, e-commerce and other industries remained strong, while automotive, real estate, financial services, essential consumer goods and other industries continued to recover. In terms of channels, social advertising increased by 21%, mainly due to the steady growth of Wechat advertising revenue compared with the same period last year, mainly due to the increase in eCPM and exposure; at the same time, Tencent's video advertising effect was good, and mobile advertising alliance revenue increased rapidly compared with the same period last year.

Risk hints: policy regulatory risks; international situation affects business cooperation; advertising business is not as expected.

• Meituan (3690.HK): the local Spring Festival is good for home-to-store service, and the performance is expected to exceed expectations.

20Q4 takeout performance growth has high certainty:According to a report by CCTV Finance on January 1, by the end of 2020, the transaction volume of the national takeout market will reach 835.2 billion yuan, an increase of 14.8% over the same period last year. We expect the company's takeout transaction volume 20Q4 to grow by more than 36% and more than 24% for the whole of 20 years, while the market share and operating profit margin will continue to increase slightly.

On-site Spring Festival is good for home and store business from the level of supply and demand, and its first-quarter results may exceed expectations:The government issued the notice on ensuring local services for the people during the first quarter of 2020. During the epidemic in the first quarter of 2020, home service and contactless distribution were continuously promoted. The local Chinese New year policy in 2021 is expected to maintain strong demand for store arrival and takeout in first-and second-tier cities. At the same time, there are more business stores and transport capacity support. We expect the volume of 21Q1 takeout transactions to increase by more than 30%.

With the continuous increase of new business layout, Meituan's optimal selection has a rapid development momentum:Community group purchase nine must not promote the healthy development of industry competition. Community group purchase competition looks at resources in the short term, operation in the medium term and ecology in the long term. Meituan has entered the community group buying market since July 2020 and has covered 310 + cities in 27 provinces by the end of December, which helps to promote the deep coordination of 2B and 2C business and the continuous optimization of the company's system-wide supply chain, and enhance the ability of cross-diversion and advertising.

Risk tips: policy risk; strict control of the epidemic affects the store business; the prosperity of the catering industry is declining; the loss reduction of new business is not as expected.

• Hua Hong Semiconductor (1347.HK): grasp the business cycle of automotive electronics, accelerate the production expansion of 12-inch factory
  

Under the warming of automotive electronics demand, power devices are in short supply, and 8-inch production capacity ushered in a business cycle:At present, the capacity utilization rate of three 8-inch factories has reached 100-110%. We judge that with the continuous decline in the price of new energy vehicles, automotive electronic components may fully benefit from the increase in sales of new energy vehicles (more than 30 per cent of CAGR in the next five years) and an increase in the value of semiconductors per car (four times for cameras and 10 times for power devices). We expect the 8-inch factory to remain fully loaded for 21 years, and the overall gross profit margin of 8 inches may rise to 30% this year.

Wuxi plant plans to accelerate construction to 65000 pieces per month by the end of 21 years, and its revenue is expected to double after the expansion of all 80, 000 pieces.According to our research, Wuxi 12-inch factory currently has a monthly production capacity of 15000 pieces, including CIS 11K/ monthly, embedded storage 1K/ monthly, and power device 3K/ monthly. At present, the company's smart cards, power devices and CIS have been delivered to customers, NOR expects 21Q1 shipments, power management 21Q2 shipments, MCU has not yet shipped. The company expects to expand to 65000 pieces per month by the end of the year, and expects 21Q1 EBITDA balance and 21H2 break-even (25000 pieces / month shipments). The company plans to eventually expand to 80, 000 pieces per month, which will contribute US $1 billion in annual revenue (15-20% CAGR in the next three years).

Beishui south gradually grasp the pricing power, the company as a wafer foundry head company is expected to open the valuation space:At present, Hong Kong shares account for more than 30% of the company's freely tradable share capital and more than 10% of the total number of Hong Kong shares. With the northward movement of the water to the south, mainland investors have gradually mastered the pricing power of high-quality assets in Hong Kong stocks; at the same time, the top four shareholders of the company (all with a Chinese character background) also own 60% of the shares. We believe that there is still room for improvement in the valuation of the company as the leading OEM with domestic characteristics.

In the short term, under the tight 8-inch production capacity, there is still room for improvement in ASP; at the same time, the utilization rate of Wuxi 12-inch factory is expected to continue to rise under the high demeanor of the industry, or iron out the impact of depreciation. In the long run, we are optimistic that the company's product portfolio optimization and scale effect may significantly improve its profitability after the expansion of the new plant, and the gross profit margin is expected to rise by 35%.

Risk hint: the demand boom is not as good as expected; the production capacity of Wuxi plant is not as good as expected.

• Zhuzhou CRRC Times Electric (3898.HK): igbt has broad business prospects, and A-share listing is conducive to the improvement of valuation.

Zhuzhou CRRC Times Electric is the leading supplier of rail transit traction converter system in China, mainly engaged in the research and development, design, manufacture, sales and related services of rail transit equipment products, with the industrial structure of "device + system + whole machine". The products mainly include rail transit electrical equipment, rail engineering machinery, communication signal system and so on. At the same time, the company also actively distributes industries other than rail transit, and carries out business in the fields of power semiconductor devices, industrial converter products, electric drive systems of new energy vehicles, sensors, marine equipment and so on.

Science and Technology Innovation Board's listing application was accepted by the Shanghai Stock Exchange, and the successful landing is expected to further improve the valuation of the company's H shares.According to the company announcement This fund-raising is mainly invested in rail transit traction network technology and system research and application projects, rail transit intelligent road bureau and smart urban rail key technologies and system research and application projects, new industry advanced technology research and application projects (including new energy vehicle electric drive system, research and application of four projects), new rail construction machinery research and development and manufacturing platform construction project Innovative experimental platform construction projects and supplementary liquidity. In addition, under the conditions of cash dividends, the company plans to distribute not less than 20% of the profits available for distribution in the form of cash each year, and not less than 60% of the average annual distributable profits over three years, so as to fully safeguard the interests of investors. We believe that the successful landing of this listing is to enhance the company's cash level, accelerate the progress of new project research and development, and improve the company's financing capacity and H-share valuation.

Risk hint: railway investment is not as expected; urban rail construction is frozen by policy; the company's IGBT competitiveness is insufficient.

• CNOOC Limited (0883.HK): the upward trend of oil prices is clear, and the leader of low-cost oil and gas is going forward.

In the short term, the oversupply situation in the global oil and gas industry is expected to continue to ease, crude oil demand has entered a recovery cycle, and the upward trend of global oil prices is clear.As a domestic offshore oil and gas giant, CNOOC continues to increase reserves and production, with assets all over the world, and its resource conditions are the most growing among the three barrels of oil. The company has excellent cost control ability, good financial fundamentals, and pays attention to shareholder returns. At present, the investor structure is changing, and Northwater funds are flowing into the company at an accelerated pace, which brings a systematic opportunity for the company's valuation repair. As a strategic core asset in China, CNOOC is obviously undervalued and suppressed compared with large oil and gas exploration and development enterprises at home and abroad.

Assuming that the average spot price of Brent crude oil remains at $52 and $53 per barrel in 2021 and 2022, we expect the company's homing net profit from 2020 to 2022 to be 238 shock 419 / 42.6 billion yuan, respectively, and the corresponding EPS to be 0.53 shock 0.94 pounds 0.95 yuan respectively. Give the company a "buy" rating of HK $14.30, corresponding to 1.11 times PB in 2021.

If oil prices rise to $60, $70 and $80 a barrel in 2021, the company's net profit could reach 546,701 and 82.1 billion yuan, with dividend yields of 7.7%, 9.9% and 11.6% based on a 40% dividend yield and current market capitalization.

Risk hints: international oil prices fluctuate sharply; the global economic recovery is not as expected; the actual production reduction of OPEC is not as expected; and the company's progress of increasing production is not as expected.

• Metro Hyatt Service (1755.HK): remarkable results have been achieved in outward expansion, and high growth momentum continues.

The company is still in a period of rapid growth:On the one hand, it comes from the rapid expansion of the area under management, reaching 200 million square meters by 2022; on the other hand, it comes from the expansion of the company's diversified value-added services, including community value-added services, wisdom park services and so on.

With the reduction of social security and the improvement of human efficiency, it is expected that the profit margin of basic property management will still show an upward trend in the second half of the year:The company's comprehensive gross profit margin in the first half of 2020 was 29.8%, an increase of 0.6% over the same period last year. Social security relief during the epidemic period will be extended in the second half of the year. It is expected that it will be reduced by 28.54 million yuan from July to December, with a total social security reduction of 54 million yuan for the whole year.

The cooperative development and management ability is strong, and Wetco has made good achievements again. the company has previously guided that the area under management will reach 200 million square meters in 2022:As of December 28, 2020, the company has achieved more than 200 million square meters of contract area and more than 100 million parties in the management area, of which the third party accounts for 40% of the total area. High-quality market extension capacity and sufficient contract area reserve will lead to sustained high growth in the next two years.

Highly motivated and strong executive team, it is expected that the return net profit will achieve a compound annual growth of more than 50% in the next three years:The management equity incentive, the strong 19 regional development cooperation teams, the BU community value-added team and the continuous high delivery of the parent company all provide guarantee for the growth of each business line of the company. On this basis, we expect the company's return net profit to achieve a compound growth of more than 50% in the next three years.

Risk tips: business expansion is not as expected; property management satisfaction is reduced; property management fee collection rate is reduced; property management fee increase is blocked.

• Blue Moon (6993.HK): a leader in household cleaning, ushering in a new era of laundry (Song Jian / Song Yiru)
  

Maintain a leading position in the industry and have a broad market space:Blue Moon is China's leading provider of household cleaning solutions, taking the lead in launching detergent and hand sanitizer products in China. Its market share has remained the first in the industry for ten years in a row, and its brand influence has remained the first in the past decade. There is still room for doubling the market penetration rate of detergent and hand sanitizer in Japan and the United States, and the CAGR of the industry is expected to reach 13.6% in the next five years. Over the past five years, the CR5 of the laundry detergent industry has been stable at more than 75% and the pattern is stable, and the company has continuously maintained a strong barrier to the first brand.

The company takes the lead in online channels and maintains rapid growth:The company has a wide range of offline channels and takes the lead in the layout of online sales. It is expected that the market will continue to change from detergent to detergent, soap to hand sanitizer in the future, and the company, as an industry leader, will enjoy the double dividends of market expansion and share improvement.

Keen R & D genes, take the lead in laying out the next round of product upgrading:The founder of the company focused on research and development and grasped the trend of turning powder into liquid ten years ago. The company is also one of the earliest CR5 companies in the industry and takes the lead in consumer education. Company hand sanitizer brand influence of the first ten years, disinfectant brand influence of the first three, after the epidemic era demand for continuous volume.

The permeability of super-concentrated products is broad, and the demand for hand sanitizer and disinfectant is increasing:Overseas super-concentrated products were updated in 2009-12. By 2019, the permeability of overseas super-concentrated detergent has reached 100%, while China's super-concentrated permeability is only 8%, which has broad room for improvement. By 2019, the penetration rate of hand sanitizer is 29%, and that of the United States is 74%. There is plenty of room for improvement, and the epidemic has led to an explosive growth in demand and income for hand sanitizer and disinfectant.

Risk tips: intensified competition in the industry; channel structure adjustment; market acceptance of new products is not as expected; COVID-19 epidemic changes.

• Man Wah (1999.HK): global software home leader, sinking city consumption upgrading
  

Maintain a leading position in the industry and have a broad market space:The company's market share in China and the United States remain in the forefront. China's market share rose from 29.5% in 2015 to 50.1% in 2019, and the market share of functional sofas is about five times that of home furnishings. The company's market share in the United States has remained at around 10% for many years. The company has also maintained its position as one of the top 10 suppliers in the American furniture market for many years.

The layout of the whole industry chain of functional sofa:Through years of layout, the company has become an international intelligent home enterprise integrating the research and development, design, manufacture, sales and service of intelligent iron frames, precision motors, exclusive sponges, sofas, mattresses and other furniture accessories and finished products. From 2007 to 2019, the penetration rate of functional sofas (the proportion of functional sofas in the sofa market) increased from 4.6% to 14.0%, which is larger than the 41.5% in the United States in the same period.

Strong growth trend in domestic sales, fine management and high incentives for dealers, and rapid recovery of export sales:By the end of the first half of FY21, the company had a total of 3532 domestic stores, a net increase of 658 over the end of FY20. More than 1000 stores are planned to open in each of the next two years. The company gives dealers shop opening and decoration subsidies, new product subsidies and other help to speed up shop opening. Q3 export has returned to positive growth, and export sales are expected to achieve double-digit growth for the whole year.

Risk tips: intensified competition in the industry; COVID-19 epidemic and other factors that may affect the macro environment; market acceptance of new products is not as expected; expansion and operation of new stores is not as expected; product quality events.

• Haohai Biotechnology (6826.HK): short-term performance gradually recovered, long-term internal and external expansion into a big ophthalmology giant
  

The company has benefited significantly from the collection of 3-6 sets of intraocular lens. after winning the bid for the middle and low-end varieties sold by its distributors, it is expected that the hospital coverage will be greatly increased, the domestic alternative imports will accelerate, the sales volume will increase and the sales expense rate will decrease at the same time. It is expected that the high probability of national collection will not be carried out. There are many reserves of M & A targets, and the construction of large ophthalmology medicine and equipment combination, the scale advantage and technical barrier are becoming more and more obvious. When entering Hong Kong in February, the share price of Kechuang / H shares is 101.67% premium. the H shares have equal investment channel status with Science and Technology Innovation Board, and the price is lower to attract value investors. Revenue and profits in the third quarter have turned to double-digit positive growth compared with the same period last year, and the performance trend in the fourth quarter and 2021 is expected to continue, and the impact of the epidemic has been eliminated.

Risk tips: the impact of the epidemic is higher than expected; the price reduction of products is higher than expected; the market competition is intensified.

• Kang Zhe Pharmaceutical (0867.HK): the basic market continues to be consolidated, and the new future is worth looking forward to.
  

Stable performance and high performance-to-price ratio:Without considering the launch of new products and the contribution of large health products, thanks to the company's good sales ability and mechanism, we expect the original products to maintain stable double-digit endogenous growth in 20-21 years. The closing price on January 29 corresponds to a price-to-earnings ratio of only 8.2 times for 21 years, and the current price ratio of the dividend is 4.9%, which has a very good performance-to-price ratio. According to wind statistics, Chairman Lin Gang and COO Chen Hongbing accumulated about 34.72 million shares and 5.225 million shares in 2020, with a cumulative amount of about 295 million yuan and 41 million yuan, respectively. Major shareholders and management are optimistic about the long-term development of the company.

The category has become increasingly rich, and the circle of ability has been further expanded:After several years, the company has accumulated more than ten innovative pharmaceutical equipment pipelines and a series of complex generic drug pipelines, and has gradually entered the harvest period in 21 years. Among them, diazepam nasal spray is expected to be approved by the end of 21 years, and Plenity capsules have recently been officially sold as cross-border e-commerce in Kangzhe Health Mall. In addition to Plenity, the company will continue to introduce OTC, equipment, dietary supplements and medical food that have a certain reputation and brand image in Europe and the United States, and will be launched in the Great Health Mall to meet the needs of customers for weight loss and body shaping, hair care, beauty and beauty care, nourishing health care, regular medicine, tranquilizing sleep, gender health, child nutrition, nutritional supplement and so on. The company will continue to select and introduce high-quality products with rich categories of ability for many years, and at the same time expand new marketing methods and channels according to product characteristics, and further expand the capacity circle on the basis of strengthening the original capabilities. We expect new business type to bring additional performance and valuation flexibility to the company, laying the foundation for long-term sustained and healthy development.

Risk tips: the impact of the epidemic exceeded expectations; the progress and sales of products on the market were not as expected; market competition intensified.

3Risk hint

The full text of the industry views and subject-matter research contents involved in this report are collated in the published report. For complete research views and risk tips, please refer to the full text of the relevant research report mentioned in the text.