Zhitong Hong Kong Stock Analysis | Computing Power Infrastructure Continues to Catalyze, Early Speculation on Post-War Reconstruction in Ukraine

[Market Dissection]

Last week, the Hong Kong stock market was very optimistic, directly reaching a multi-year high. According to normal trends, it should continue to rise on Monday, but the actual performance saw a slight rise followed by fluctuations and a drop of 0.58% at the close.

There doesn't seem to be much to worry about; looking at last Friday, all three major U.S. stock indices fell over 1.7%, so the performance of the Hong Kong market is quite strong. In February, the U.S. Consumer Confidence Index dropped from 71.7 in January to 64.7, a month-on-month decrease of 9.8%, far below market expectations. The services PMI was only 49.7, below the expected 53.0, marking the first contraction in over two years. Many people are now pessimistic about the U.S. stock market and optimistic about the Chinese stock market, and this trend is continuously strengthening. It is expected that the pace of foreign capital inflow will continue to accelerate.

Warren Buffett's letter to shareholders this year was relatively disappointing, and the market reaction was not enthusiastic. The letter did not mention topics such as AI, DS, Nvidia (NVDA.US), Bitcoin, or chips, which aligns with Buffett's style: he generally avoids tech stocks, with Apple (AAPL.US) being an exception. In terms of cash, as of the end of last year, Berkshire's cash level reached a historic high of $334.2 billion, indicating a lack of optimism about the current market. He remains fond of Japanese stocks, continuously increasing investments in Japan. The total fair value of equity investments is concentrated 71% in American Express, Apple, Bank of America, Chevron, and Coca-Cola; in the fourth quarter of last year, the only new stock Berkshire entered was the beverage company Constellation Brands (STZ.US), purchasing over 5.62 million shares valued at over $1.24 billion, ranking 19th. In the fourth quarter, he increased his holdings in Domino's Pizza (DPZ.US), adding 1.1 million shares, an increase of 86.49% compared to the third quarter. He still prefers traditional industries. This year's shareholder meeting will be held in Omaha on May 3rd. More specific information may be released then.

Over the weekend, a series of positive news related to DS emerged. For example, on February 22, it was reported that Tencent's Yuanbao surpassed Doubao, rising to second place in the free APP download rankings in China; Jieyue Xingchen officially announced its focus on intelligent terminal Agent direction; the Qinghai Provincial Data Bureau stated in the news broadcast that by 2025, the province will have standardized racks, with computing power doubling from last year's basis. Currently, it seems that the market has become aesthetically fatigued with such news, as it has indeed been speculated many times, and what should have risen has repeatedly risen. Last week's news from Alibaba (09988) has almost reached a climax. The market continues to see residual movements in stocks with relatively small increases, such as in computing power infrastructure. On February 24, Alibaba Group CEO Eddie Wu announced that over the next three years, Alibaba will invest more than 380 billion yuan to build cloud and AI hardware infrastructure, totaling more than the past decade combined. Additionally, Deepseek Day 1: DeepSeek's efficient MLA decoding kernel optimized for Hopper GPU, designed specifically for processing variable-length sequences, is now in production. The optimization is for Nvidia, benefiting domestic alternative computing power cards. The logic for domestic servers has strengthened, with ZTE Corporation (00763) rising over 5%. In the chip sector, there are rumors that the latest process is continuously breaking through, but we should wait for official announcements. There are expectations for Huahong (01347), which is believed to quickly integrate its advanced processes to fill the gap left by SMIC (00981) The underlying optical fibers continue to strengthen, with Yangtze Optical Fibre and Cable Joint Stock Limited Company (06869) rising over 13%, mainly due to a relatively small increase.

As for the impact on NVIDIA, it seems to be limited. On the 24th, media reports indicated that NVIDIA has secured over 70% of TSMC's (TSM.US) CoWoS-L advanced packaging capacity this year to meet the demand for its latest Blackwell architecture GPU chips. Analysts expect that the shipment volume of NVIDIA's Blackwell architecture chips will grow at a rate of over 20% per quarter, with annual shipments expected to exceed 2 million units. The U.S. "Interstellar Gateway" program is expected to stimulate a new wave of AI server construction demand, and NVIDIA is likely to further increase its orders with TSMC. Meanwhile, the demand for AI chips from the four major cloud service providers (CSPs) remains strong, providing robust support for NVIDIA's performance.

Represented by a series of large models such as DeepSeek, the landscape and future of the securities industry are undergoing profound changes. On February 19, Jiufang Zhitu Holdings (09636) officially launched the web version of the "Jiufang Lingxi" financial dialogue intelligent agent, which integrates DeepSeek-R1 and possesses autonomous thinking chain decision-making reasoning capabilities among other functions. The company will continue to build a "1+N" large model service base to promote the application of AI technology in various fields such as intelligent investment advisory. In terms of performance, the company recently issued a profit warning, expecting the net profit attributable to shareholders for last year to be approximately 260 million to 280 million yuan, a year-on-year increase of 36.1% to 46.6% compared to about 191 million yuan in 2023; the expected order amount is about 3.509 billion yuan, an increase of approximately 1.161 billion yuan compared to the same period in 2023, with expected revenue of about 2.306 billion yuan, an increase of approximately 341 million yuan compared to the same period in 2023, and expected operating cash flow to increase by about 1.184 billion yuan, a year-on-year increase of approximately 267%. Today, it surged over 16%. The story of DS empowerment in the pharmaceutical and medical sectors continues, with companies like Kangji Medical (09997) and Gushengtang (02273).

Robotics is also intensively stimulated, with Xin Guobin, Vice Minister of the Ministry of Industry and Information Technology, holding a symposium for manufacturing enterprises: solidly promoting high-quality development of the robotics industry. Shenzhen: A special policy for humanoid robots will be released soon. Norway's 1X company launched a household humanoid robot Neo Gamma: capable of doing laundry and vacuuming. The authentic variety UBTECH (09880) rose over 4% again; Jinli Permanent Magnet (06680) continues to see speculation in its permanent magnet materials, rising over 8%; Shoucheng Holdings (00697) recently saw its subsidiary under Shoucheng Capital invest in a variable company, further promoting the data collection, model training, and scene implementation of the next generation of unified end-to-end embodied intelligent general models. Embodied intelligent general models are relatively scarce, and if breakthroughs can be achieved, the prospects are quite broad. Shoucheng Holdings (00697) has performed quite well recently.

Today, real estate stocks also made some moves. On February 21, Vanke Enterprises (02202) announced the "Announcement on Shareholder Loans Provided by Shenzhen Metro Group to the Company and Related Transactions." Vanke's largest shareholder, Shenzhen Metro Group, intends to provide a shareholder loan to Vanke in the amount of 4.2 billion yuan. This loan is intended to repay the principal and interest of bonds issued by Vanke in the public market On February 10th of this year, Vanke announced that its major shareholder, Shenzhen Metro Group, provided a loan of 2.8 billion yuan. As of now, it has cumulatively provided 7 billion yuan in shareholder loans to Vanke for repaying public market bonds. The industry itself is also leaning towards positivity, with some cities experiencing month-on-month growth in real estate sales in January and February, and the real estate index rising by 2.2%. China Jinmao (00817) and Sunac China (01918) both saw increases of nearly 7%.

The Central Document No. 1 for 2025 was released on February 23rd, titled "Opinions of the Central Committee of the Communist Party of China and the State Council on Further Deepening Rural Reform and Solidly Promoting Comprehensive Rural Revitalization." This is the 13th Central Document No. 1 guiding "agriculture, rural areas, and farmers" since the 18th National Congress of the Communist Party. It mentions promoting high-quality development of agricultural machinery and equipment, accelerating the research and application of advanced domestic agricultural machinery, and advancing the scrapping and updating of old agricultural machinery. It supports the development of smart agriculture and expands the application scenarios of technologies such as artificial intelligence, data, and low-altitude. The upper limit of the types of agricultural machinery eligible for scrapping and updating subsidies that regions can determine themselves has been increased from 6 to 12. As always, the first stock to surge is First Tractor Company (00038), which rose nearly 5%, and COFCO Joycome (01610) also rose nearly 6%. Agricultural stocks have historically not performed well.

Ukrainian President Volodymyr Zelensky expressed his hopes for China's contribution to peace at a press conference held last night. In response to a question from a Phoenix reporter, Zelensky stated that he hopes to receive China's assistance in peace and reconstruction, and Ukraine is willing to engage in dialogue with China. As for how to develop in the future, it remains uncertain and quite complex. However, this does not prevent the market from speculating in advance; today, Zoomlion, China Railway (00390), and CRRC (01766) all had funds lurking in advance.

【Sector Focus】

On the afternoon of February 23rd, Lu Weibing, partner and president of Xiaomi Group (01810), president of the mobile phone department, and general manager of the Xiaomi brand, stated that one of Xiaomi's goals for high-end products in the next five years is to achieve a breakthrough in the 6,000 yuan+ price segment. "Ultra is the key product for the 6K+ breakthrough, and the Xiaomi 15 Ultra will be a generational product." At the same time, he also mentioned on Weibo, "See you next week," when the new phone, Xiaomi 15 Ultra, representing "Xiaomi's highest standard," will be officially released.

On February 24th, Richard Yu, Executive Director, Chairman of Terminal BG, and Chairman of Smart Car Solutions BU at Huawei, released a video officially previewing that Huawei will launch its first "new form phone" born for the native HarmonyOS in March.

Main varieties: Sunny Optical (02382), AAC Technologies (02018), Q Technology (01478).

【Stock Picking】

Zoomlion (01157): Accelerating global industrial layout, excavator sales are expected to continue to grow.

Recently, the company announced that it will invest in building a modern intelligent factory for aerial work machinery in Tápiószentmárton, Hungary. This intelligent factory in Hungary is the company's second demonstration factory focused on high-altitude production and manufacturing overseas, covering the European and American markets alongside its manufacturing base in Mexico.

Comment: In recent years, Zoomlion has accelerated its global industrial layout, having previously established 10 R&D and manufacturing bases overseas. Excavator sales are expected to continue to grow. Recently, Zoomlion announced that its new agricultural machinery products have received orders exceeding 100 million yuan at the Jiangxi Agricultural Machinery Exhibition The company's profitability is leading. In the first three quarters, the export of concrete machinery has grown rapidly, with a significant increase in overseas market share. The penetration rate of electric mixer truck models has risen to over 50%. The overall market share of engineering lifting machinery ranks among the top, with the market share of 25-55 ton core truck cranes being the industry leader and the market share of crawler cranes over 1000 tons also being the industry leader. The market share of construction lifting machinery remains the largest in the world, with a rapidly increasing proportion of overseas revenue. The company's emerging sectors continue to grow rapidly, significantly enhancing its industry position. As of the end of September, the revenue share of new sectors such as earthmoving, high-altitude operations, agricultural machinery, and mining has exceeded 50%. The overseas business is diversifying and growing: in the first three quarters, the company achieved rapid growth in emerging potential markets such as South America, Africa, and South Asia; it also experienced rapid growth in traditional markets such as the European Union and North America. The company continues to pay dividends and values shareholder returns. Recently, Zoomlion held a major customer communication and technology release event in the Saudi market, where it launched 24 engineering machinery products, stating that it has now achieved full coverage of the main market in Saudi Arabia. In the field of humanoid robots, the company has developed a wheeled humanoid robot and a biped humanoid robot prototype.

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