Daily Investment Strategy

2025.01.17 09:00

Daily focusCRRC(1766)

Since 2018, CRRC has raised dividends every two years. With a net cash position, it has the capacity to increase dividends. In 3Q24, operating cash flow turned positive at RMB 7.62 billion, compared to a negative RMB 3.99 billion last year, driven by higher cash receipts. The local government debt swap program is expected to improve the account receivable collection of the infrastructure sector, supporting the company’s outlook. Railway FAI during the 14th Five-Year Plan period will be comparable to 13th period, implying that the FAI is expected to surpass RMB 900 billion in 2025, with a 13.4% YoY increase, higher than 2024's 11.2%. The China National Railway Group plans to accelerate key projects, including major routes to Tibet, Xinjiang, and coastal areas, to meet 14th Five-Year Plan goals. CRRC, a global transit equipment leader, saw its high-speed train additions doubled in the period of 2010-2014 when compared to 2007-2009. The 2010-2014 fleet is currently driving an increase in after-sales maintenance. Also, with the "old-for-new" policy boosting equipment upgrades, the pace of railway equipment replacement is set to accelerate, supporting revenue growth for CRRC. Target price: $5.3.

 

S&P 500 closes lower, Apple leads tech losses

The S&P 500 retreated on Thursday as strong earnings in the banking sector were offset by weakness in technology stocks led by Apple, which fell 4%, leading the decline in technology stocks. Research firm Canalys reported that Apple sold 42.9 million smartphones in China in 2024, a 17% annual decrease, and gave up the top spot to local competitors such as Vivo and Huawei. Meanwhile, U.S. retail sales rose 0.4% last month, down from an upwardly revised 0.8% increase in November and below expectations of 0.6%. U.S. Treasury yields fell, with the U.S. 10-year Treasury yield falling about 5 basis points to 4.6%. Federal Reserve Governor Christopher Waller welcomed recent data showing slowing inflation, saying that if the trend continues, it is "reasonable to think rate cuts could come in the first half of the year."

Hong Kong Stock Connect had a net inflow of HK$6.29bn on Thursday of which Tencent (700) had the largest net inflow, reaching HK$1.36bn; followed by SMIC (981). Hua Hong (1347) recorded the largest net outflow at $0.21bn, followed by Innovent (1801).

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Wen Kit Kenny is a SFC licensed person accredited to KGI Group to carry on regulated activities (for details, please refer to:https://apps.sfc.hk/publicregWeb/indi/AJF244/details). He and/or his associate do not have any financial interest in the recommended issuer or new listing applicant.

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