Zhitong Hong Kong Stock Analysis | "Ghost Stories" Storm Disturbs Hong Kong Stocks, New Energy Vehicles Continue to Lead

[Market Dissection]

Overnight, the U.S. stock market fell quite alarmingly, especially the Nasdaq index which dropped by 1.21%, following a 2.2% decline on the previous trading day. However, the main concern is that the Nasdaq Golden Dragon China Index fell over 5%, with Alibaba surprisingly dropping over 10%. It would be a lie to say there is no fear. Today, the Hong Kong stock market opened down 2.68%, but market sentiment remained relatively stable, with funds stepping in to buy the dip after the initial drop, closing down only 1.32%. For Alibaba (09988), it closed down just 3.76%.

The main reason for the decline is a "America First" investment memorandum issued by the U.S., which includes four key points: 1. Restricting Chinese companies from investing in key infrastructure, technology, and data. 2. Limiting U.S. pension funds and endowments from investing in China's technology sector. 3. Potentially revoking China's Most-Favored-Nation status. 4. Reviewing VIE financial standards. The most impactful point is the second one; if investment is restricted, it means U.S. institutions can only sell and not buy. This creates selling pressure that stock prices cannot withstand. However, upon closer analysis, similar rumors often circulate, and the likelihood of implementation is not high. Even if implemented, institutions have ways to circumvent regulations, such as entering China through other countries, so it can only be said that this is another "ghost story" for a sector, using high positions to launch an airstrike.

A slightly impactful event is that tech giant Microsoft has canceled some data center leases, with the company responding that it will stick to its original capital expenditure plan. This behavior raises market doubts about spending in the AI direction, which is reflected in NVIDIA's decline. Essentially, the main concern is that after the rise of DS, Microsoft does not want to spend too much on AI in the U.S., including OPENAI, unless it proves to be stronger and more worthy of investment. Additionally, the future of NVIDIA remains unclear, but objectively speaking, NVIDIA's computing power is still the most impressive; it's just that if funds are insufficient or if they are not pursuing top-tier products, domestic alternatives can be used.

Electric vehicle sales in Europe have surged, but Tesla's sales have halved year-on-year. Data released by the European Automobile Manufacturers Association on February 25 shows that Tesla registered 9,945 new cars in the EU, European Free Trade Association, and the UK market in January, a 45.2% drop from 18,161 units in the same month last year. Interestingly, in January, Tesla's sales in several European countries were surpassed by China's BYD (01211). Specifically, BYD's monthly sales in the UK, Spain, and Portugal increased by 551%, 734%, and 207% year-on-year, while Tesla's sales in these three countries decreased by 8%, 76%, and 29%, respectively. Including Ireland, BYD's sales in these four European countries exceeded Tesla's.

Chinese new energy vehicles are quite competitive in the international market. New force Li Auto (02015) announced that its first pure electric SUV, the i8, has entered the countdown to mass production and is expected to officially debut at the Shanghai Auto Show on April 23. As the first model in Li Auto's "i" series, the i8 is positioned as a six-seat mid-to-large pure electric SUV, targeting family travel scenarios, with the target users being families with two children. According to Li Auto's product roadmap, the company plans to launch five range-extended models, one super flagship (MEGA), and five pure electric models before 2025 Today, it surged over 12%. When investing in car companies, an important point is to see whether the subsequent new models can sell well. The reason why XPeng (09868) has shown a strong performance, rising over 4% today, is that many competitive models are being released this year. Additionally, Xiaomi (01810) rose over 3% today, once again reaching a historical high.

Tesla's sales have encountered a setback, and it can only seek compensation in the direction of autonomous driving. On February 25, Tesla China officially announced that it would update software for Chinese customers in batches. This includes the launch of the city road Autopilot automatic driving assistance. Some are concerned about whether this will put pressure on Chinese car companies. Ouyang Minggao, an academician of the Chinese Academy of Sciences, stated that because Chinese automotive companies widely access Deepseek, DS reduces the computing power and algorithmic technical threshold for end-to-end autonomous driving, which will greatly promote the acceleration of autonomous driving and maintain confidence in domestic companies' continued leadership in the intelligent driving field.

Richard Yu from Huawei stated that Huawei's intelligent driving is better than FSD even without the lidar version, and the performance is even better with lidar. "They (Tesla) don't use lidar, we do, which compensates for perception capabilities. In China, we are slightly better than them." The equalization of intelligent driving undoubtedly brings huge demand to the leading company Horizon Robotics (09660), which surged 8.7% today. Horizon's strategic partner, Zhixing Automotive Technology (01274), announced that the integrated controller iDC 300 has been mass-produced and implemented in a leading domestic new energy vehicle model, and it is about to welcome its first OTA after the model's launch. The iDC 300 achieves advanced parking functions such as Automatic Parking (APA) and Memory Parking (HPA) based on an 8TOPS computing platform, and expands to achieve high-speed navigation functions through the dual Journey 3 from Horizon. This is the industry's first solution to successfully deploy and mass-produce BEV perception models on an 8TOPS low-computing power platform, which also rose nearly 7% today. The lidar leader is Suoteng Juchuang (02498); for parts, there are Zhejiang Shibao (01057) and Nexperia (01316).

There are continuous updates about robots. Shenzhen Zhongqing has achieved the world's first humanoid robot front flip. Compared to back flips, front flips pose higher requirements for the robot's dynamic balance, instant acceleration, and precise landing. Zhongqing Technology has successfully overcome this technical challenge through in-depth research on robot kinematics, combined with intelligent control algorithms and advanced sensor technology. On February 25, Yushu Technology released a video on Weibo showcasing a robot that can perform kung fu. Yushu Technology claims that with upgraded algorithm capabilities, any action can be learned. The video shows that the robot can smoothly perform difficult martial arts movements such as punches and spinning kicks. It is evident that the development speed of Chinese robots is quite astonishing, continuously bringing surprises. Today, the market reacted with MicroPort Scientific (02252) surging over 12%. The market has also uncovered another robot concept, as Gaowei Electronics (01415) and Suoteng Juchuang have jointly established Liteng Innovation (Gaowei holds 51%), responsible for the assembly, calibration, and testing of lidar. Meanwhile, on February 24, Apple announced the largest investment plan in history, stating that it will spend and invest over $500 billion in the United States over the next four years, a move expected to create 20,000 new jobs Apple is planning to fully produce foldable iPhones and is reportedly in the final stage of selecting suppliers. As a genuine variety in the Apple supply chain, Gao Wei Electronics (01415) rose over 4% today.

Yesterday, discussing the reconstruction of Ukraine, the latest news is that Russia has put forward conditions for a ceasefire: the Ukrainian army must surrender, and Kyiv must fully or partially cede five regions; Ukraine must announce it will no longer join NATO, and there must be a new regime advocating for "de-Nazification." The conditions will certainly require further negotiation, and Russia also needs to talk with Europe. The process will not be quick, but funding continues to exceed expectations. According to the research report "UA RDNA3 report" jointly released in February 2024 by the United Nations, World Bank, European Commission, and the Ukrainian government, the post-war reconstruction of Ukraine is expected to require an investment of $486.2 billion, with core investment areas including: housing ($80.3 billion, accounting for 16.5%), infrastructure construction ($148 billion, accounting for 30.4%), energy, electricity, and other public facilities. This means that industries such as construction, cement, and steel are expected to see significant incremental demand, and related companies will directly benefit. China may become an important partner in Ukraine's post-war reconstruction. Among cement companies are Western Cement (02233) and China National Building Material (03323); in the construction machinery sector are China National Heavy Duty Truck Group (03808), Weichai Power (02338), and Zoomlion Heavy Industry Science and Technology (01157); in the electricity sector is Huadian International (01071), and in steel is Ma'anshan Iron & Steel (00323).

【Sector Focus】

Citi published a research report indicating that the central government has disclosed the market-oriented reform policy for new energy grid connection prices. The bank believes that in the long term, market-oriented pricing will lead to lower internal rates of return for projects, and this policy will slow the growth of solar installed capacity in the future, but it is also expected to promote more sustainable and stable industrial growth. In the short term, the bank believes this policy will drive an installation boom before June 1 of this year. Citi believes that strong short-term demand should lead to a surge in production; channel surveys expect that the planned module production in March this year may reach about 50 gigawatts, a month-on-month increase of 25%. Meanwhile, after the Lunar New Year, solar glass inventory has decreased by 5%, and major component manufacturers plan to raise component prices by 2 to 5 cents per watt. Solar glass and polysilicon are expected to benefit in the short term from the installation boom.

Main varieties: Flat Glass Group (06865), GCL-Poly Energy (03800), Xinyi Solar (00968).

【Stock Picking】

Weichai Power (02338): The construction of data centers is on the rise, and demand for high-end diesel generators is growing rapidly.

Recently, Alibaba's capital expenditure and AI business progress have both exceeded market expectations. In terms of future investment plans, Alibaba will increase capital expenditure to meet the demand for AI infrastructure, with total capital expenditure expected to reach 150 billion yuan over the next three years. In 2024, Weichai Power will deliver 400 large-bore high-speed engines specifically for data centers, with 60% sold overseas. It is expected that sales will increase by 1.5 times year-on-year to 1,000 units by 2025.

Comment: Benefiting from the sustained high prosperity of domestic AIDC and data center construction, demand for high-end diesel generators is growing rapidly. In recent years, the company has been fully committed to expanding the high-end market for data centers both domestically and internationally and has made positive progress, with sales in the data center application field increasing year by year Weichai Power continuously upgrades its technology through Baudouin (a French company acquired by Weichai Power over a decade ago) and has developed a large-bore high-speed engine that can be applied to various applications, including data centers. The company's assisted driving technology has achieved mass production for heavy truck products, and the company stated that it will continue to promote the product application of assisted driving and autonomous driving technologies.

The company has fully laid out hydrogen internal combustion engine technology, completing breakthroughs in key core technologies and commercial applications. In June 2022, it jointly launched the first commercial hydrogen internal combustion engine heavy truck in the country, equipped with Weichai Power's independently developed hydrogen internal combustion engine, in collaboration with China National Heavy Duty Truck Group. The growth in capital expenditure for data centers has driven a high demand for disaster recovery power sources (diesel generators), while overseas engine companies are expanding production slowly. Domestic units have price elasticity, presenting a good localization opportunity for domestic engine manufacturers. Disaster recovery power sources are essential for data centers, with a market space exceeding 5 billion yuan in 2024 and expected to reach 8.3 billion yuan in 2025, a year-on-year increase of 49%.

【Disclaimer】This VIP information product is for communication and discussion purposes only and does not constitute any investment advice. Unauthorized reproduction is strictly prohibited. For more quality information and data products, please log in to the【智通财经】APP for inquiries.