Zhitong Finance Hong Kong Stock March Investment Strategy and Top Ten Gold Stocks

The spring rally has officially begun, with the Hong Kong stock market showing an exceptionally fierce trend in February, moving upward in a one-sided manner and directly forming a reversal trend. The Hang Seng Index operates within the range of 19,764.67 to 24,076.53 points, with a monthly increase of 19.04%.

The main reasons for the strong upward trend in the Hong Kong stock market are: 1. After Trump took office, he did not immediately impose tariffs on China, giving the market some breathing space; 2. The government's support for private enterprises; 3. The sudden rise of DS has sparked overseas capital's enthusiasm for Chinese AI and a comprehensive revaluation.

The main driving force behind the market's rise is the internet giants, such as Alibaba (09988), Tencent (00700), Xiaomi (01810), BYD (01210), and SMIC (00981). Of course, the strongest sector is robotics-related, with Zhitong's gold stock Jinteng Juchuang (02498) rising over 62% last month, and gold stock Jinli Yongci (06680) rising over 83%; Horizon Robotics-W (09660) up 130%, and Delta Electronics Holdings (00179) up 83%; DS's emergence has ignited the AI computing power center, with the new idea network group (01686) rising over 176%, and AI-enabled CXO companies like Zhaoyan New Drug (06127) rising 92%, and Kedi Pharmaceutical-B (02171) reaching a maximum of 96%. BYD's equity stimulus has driven Naisite (01316) to rise over 71%. Mixue Ice City has set an IPO record, with a total of 16.6 trillion funds participating in the Mixue Ice City IPO, oversubscribed by 4,800 times, stimulating Naixue's Tea (02150) to surge 116%.

Having already performed strongly in February, will the Hong Kong stock market continue its strength in March, or will it experience fluctuations and adjustments? To answer this question, we need to consider the major events in March.

The tariff war has officially begun, with U.S. President Trump announcing that a 25% tariff on Mexico and Canada will take effect on March 4. On the same day, an additional 10% tariff will be imposed on Chinese imports. Trump stated that the new tariffs on Chinese imports will be added to the 10% tariff he imposed on February 4, resulting in a cumulative additional tariff of 20%. Europe is also in danger; on the 26th, during his first cabinet meeting after taking office, Trump launched a new round of fierce attacks on the EU, claiming that the establishment of the EU was "to mess with countries," and threatened to impose a 25% tariff on the EU. The tariff war has officially started, and it is important to pay attention to what countermeasures China will adopt. From this perspective, industries that rely on the U.S. market and are restricted need to be cautious.

Trump will address a joint session of Congress on March 4, marking his first major speech in his second term. The media expects his speech to outline key legislative goals and set the tone for his second term. Although Trump's speech may cover economic, national security, and foreign policy issues, specific policy statements remain uncertain. Attention should be paid to what statements are released, especially those involving policies related to China Regarding the Federal Reserve's interest rate decision, Federal Reserve officials Harker and Hahm expressed no intention to cut rates. They believe that with a robust labor market, officials should "let monetary policy continue to work" and added that they currently "hold an optimistic view" on the economic outlook. Meanwhile, Cleveland Federal Reserve Bank President Loretta Mester stated that interest rates are not "significantly restrictive," and officials should maintain stable rates for a period, waiting for evidence that inflation returns to the 2% target level. However, the Fed's preferred inflation indicator—the PCE price index (excluding food and energy) rose 2.65% year-on-year in January, in line with expectations, down from 2.8%, marking a new low since June 2024; the core PCE price index rose 0.3% month-on-month in January, also meeting expectations, up from 0.2%, reaching a new high since October 2024. Additionally, U.S. personal consumption expenditures fell 0.2% month-on-month in January, the largest decline since February 2021, ending the growth trend that began in March 2023. With inflation showing some degree of easing and consumer spending also declining, the relatively mild inflation data may suggest that the Fed could further cut rates. U.S. Democratic Senator Elizabeth Warren stated that the latest inflation data indicates that the Fed "has a small window to take action to cut rates." Therefore, there is a theoretical possibility of a rate cut in March, but current market expectations are not strong, with a general belief that cuts will occur in June or later. If a rate cut happens in March, it would be considered an unexpected move.

The Russia-Ukraine conflict had shown signs of hope under Trump's active promotion, but due to the fallout from the meeting between Zelensky and Trump at the White House, the situation has become complicated again. Given Trump's vindictive nature, he may pressure Zelensky to sign agreements, such as halting Musk's Starlink in Ukraine, and various military aid is likely to stop. At this stage, it depends on whether Europe can step up. Whether Russia will take the opportunity to launch a rapid counterattack remains uncertain. The situation is overly complex, making it difficult to predict the final outcome. However, one thing is clear: regardless of how the external situation changes, we can focus on developing our own affairs, and it will be difficult for the U.S. to extricate itself quickly. The best scenario is for Russia to take a more measured approach in its actions.

Currently, there are several positive phenomena: 1. Foreign investors' views on the Chinese stock market have become optimistic. Goldman Sachs stated in a research report on February 23 that supported by valuation advantages and policy expectations, A-shares are expected to see a catch-up rebound in the next three months, outperforming Hong Kong stocks, with an expected excess return of 2%. Morgan Stanley's strategy analysts noted that the Chinese stock market is expected to achieve more sustainable growth driven by AI, predicting that the MSCI China Index will reach 77 points by the end of 2025, significantly raising the previous target of 63 points. There is considerable room for allocation given the low allocation of foreign capital in the Chinese stock market (EPFR data shows that active fund allocation is only 6%).

1. U.S. stocks are now frequently flashing red signals, especially the seven major tech giants, whose performance has been quite poor. In comparison, the valuation of the Hong Kong stock market is very attractive. 3. According to Wind data, as of February 28, the cumulative net purchase of southbound funds in February reached HKD 152.778 billion Currently, southbound funds account for almost half of the share, and if this trend continues, they will gradually dominate the Hong Kong stock market. The most significant meeting in 2025 will be held on March 4-5. The Central Economic Work Conference has proposed "a more proactive fiscal policy" and "moderately loose monetary policy." The Two Sessions may further clarify details, such as the issuance of ultra-long special government bonds, expansion of special bond scales, and other fiscal tools, as well as the monetary policy path of reserve requirement ratio cuts and interest rate reductions (expected to cut the reserve requirement ratio by 1 percentage point and LPR by 35 basis points throughout the year); the market is concerned about whether GDP growth will maintain around "5%" and how to balance short-term stable growth with long-term structural transformation; the Two Sessions may further clarify real estate policies, including optimizing purchase restrictions and lowering mortgage rates. Unexpected debt replacement and city investment bond support policies may be implemented to alleviate market concerns about local debts.

Overall, due to the significant increase in Hong Kong stocks in February, it is normal to digest various uncertain news at the beginning of March. If the Two Sessions introduce unexpected measures later, the Hang Seng Index is likely to maintain a strong trend.

March 2025 Investment Strategy: Counterattack Under Defense

Zhitong Finance's gold stocks in February significantly outperformed the market again. The maximum increase of the Hang Seng Index in February was 19%; the average maximum increase of the top ten gold stocks in February was 29.4%. The specific maximum monthly increases of the top ten gold stocks are as follows: Jinli Permanent Magnet (06680) up 83.2%, Sutech Juchuang (02498) up 62.9%, China Communication Services (00552) up 39.1%, Jiantao Laminated Board (01888) up 29.3%, Fourth Paradigm (06682) up 25.8%, JS Global Life (01691) up 20.7%, China Gold International (02099) up 16.5%, China Ruyi (00136) up 7.6%, Dongyue Group (00189) up 7.5%, MGM China (02282) up 1.3%.

Last month was good, capturing the strongest robotics sector in the market, with both high-performing varieties reaped. At the same time, several increases in the DS direction were also decent. Grasping the market mainstream makes it relatively easy to outperform the market. The probability of a one-sided rise in March is not high; digesting the gains from February may be the main theme, and during the Two Sessions, there is generally more observation of policies. At this stage, the best strategy is: counterattack under defense. First defend, then counterattack.

From a defensive perspective, the market will inevitably move in the expected direction of the Two Sessions, with expectations of reaffirming the expansion of fiscal policy and focusing on the expected direction of the conference. Areas such as consumption (drinking, medicine, tourism, etc.), new energy, new productivity, and potential fiscal efforts (elderly care, urban renewal, new infrastructure) are all expected directions of the conference. From the above, real estate, gaming, and pharmaceutical sectors are worth allocating.

The direction of the counterattack mainly focuses on event-driven types. The robotics hotspot remains very high; although Goldman Sachs is bearish, it is difficult to change the industry's development trend. The robotics concept continues to be worth attention. The key direction of DS focuses on disaster recovery power supply and empowering AI + healthcare; in the automotive sector, the focus remains on intelligent driving; in the consumer electronics sector, such as the new product revealed by Richard Yu in a video, Huawei will launch a product in March that others might not expect This is the first new form of smartphone born for the native HarmonyOS, born in Harmony, with native intelligence. A breakthrough in hardware, software, and ecosystem, providing a brand new experience. Hardware, software, and ecosystem have all made breakthroughs, and ecosystem partners such as Tencent, ByteDance, Alibaba, and Meituan are making every effort to optimize the application experience. Huawei's industrial chain varieties are expected to have opportunities.

Specific varieties:

Smart Driving: Zhixing Automotive Technology (01274)

Automobile: Geely Automobile (00175)

Robotics: UBTECH (09880)

Engine: Weichai Power (02338)

Consumer Electronics: QiuTai Technology (01478)

Gaming: Galaxy Entertainment (00027)

Real Estate: Vanke Enterprise (02202)

Pharmaceuticals: United Pharmaceutical (03933)

Healthcare: Ping An Good Doctor (01833)

Steel: Maanshan Iron & Steel Company (00323)

Detailed list as follows:

1. Zhixing Automotive Technology (01274)

Zhixing Technology has become an excellent supplier of autonomous driving solutions in China through self-developed algorithms and hardware-software collaboration. The company's products cover a wide range of models from low-end to mid-high-end, capable of achieving L2 to L2++ level autonomous driving, with smart driving levels ranging from low to high being the iFC series, iDC series, and SuperVisionTM. As of April 2024, the company has secured over 40 designated models, with Geely being the largest customer, including popular models ZEEKR 001 and 009. The company has established a subsidiary in Germany to help domestic car companies enhance their competitiveness in overseas markets while assisting the company in expanding international clients. The company's business scale continues to expand, and it is expected to turn a profit, achieving revenue of 636 million yuan in the first half of 2024, with a net profit attributable to the parent company of -99 million yuan and a gross profit margin of 7.05%. With multi-dimensional improvements in operational levels, the company's future development potential is promising.

1) Cost control aspect: The company builds cost advantages through procurement and technology. As of June 2023, the gross margins of iDC Mid and iFC 2.0 were approximately 15.1% and -11.4%, respectively. With the improvement of scale efficiency, the company is confident in achieving strong cost control.

2) Product performance aspect: The next-generation enhanced integrated driving and parking solution iDC High has the capability for continuous OTA iterations. In addition to the performance improvement of the SoC chip, its performance and power consumption have also been optimized.

3) Business expansion aspect: On August 5, 2024, the company signed a joint venture agreement with Hangsheng Electronics, focusing on the research, production, and sales of integrated cockpit products, promoting diversification of the company's revenue sources. In the industry, the demand for smart cars drives the rapid growth of the autonomous driving solutions market, with the global market size approaching one trillion by 2030. Overall, the company is still in the product launch phase, with products aligning with the trend of automotive intelligence and possessing broad development space 2. Geely Automobile (00175)

With the strategic transformation entering a new stage, after several years of accumulation and development, the company is currently in a rapid transformation growth period.

Strategic Aspect: In 2020, Geely Automobile officially entered the era of Technology Geely 4.0. In 2021, it officially launched the Intelligent Geely 2025 strategy, marking the beginning of a new era of intelligent and electrified development for Geely Automobile. In September 2024, Geely Holding Group released the "Taizhou Declaration," announcing that the company has entered a new stage of strategic transformation. Product Aspect: The Galaxy is making strides in the mainstream new energy market, with a strong product cycle; ZEEKR continues to break through in the high-end market, accelerating category expansion; Lynk & Co is firmly shifting towards electrification, with sales recovering and increasing year-on-year. With the company's continuous acceleration in new energy, ongoing breakthroughs in high-end markets, and sustained growth in exports, it is expected to drive the company's sales growth.

Technical Aspect: The company has established a technological foundation through the SEA and GEA architecture platforms, breaking through hybrid models with the Thunder God EM-i, and accelerating the intelligent transformation through a parallel approach of self-developed and supplier solutions. Comprehensive advancement of high, medium, and low-level intelligent driving solutions, with ZEEKR OS and FlymeAuto enhancing the smart cockpit experience. Considering that the company is entering a new stage of strategic transformation and is in a rapid transformation growth period, the new car cycles of brands like Galaxy, ZEEKR, and Lynk & Co are strong, and sales are expected to continue to grow rapidly.

3. UBTECH (09880)

The first domestic humanoid robot stock, the company was founded in 2012, focusing on advanced perception, interaction, analysis, and other artificial intelligence technologies, providing intelligent service robot solutions that combine "hardware and software + operational services." The company's products target two major categories of users: 1) Enterprise-level: mainly from education, logistics, and healthcare industries, where the company is the largest education robot supplier in China, with a market share of 23% in 2022; 2) Consumer-level: mainly targeting tutoring, children's entertainment, and smart home life. In terms of business, in the first half of 2024, the revenue share of the company's education robots, logistics robots, and consumer-level robots was 33%, 12%, and 36%, respectively. From 2020 to 2023, the company's revenue CAGR was 13%, showing stable growth. In the first half of 2024, the company achieved revenue of 487 million yuan, a year-on-year increase of 87%, mainly due to the successful delivery of projects that were awarded or signed in 2023 during the first half of 2024, leading to a significant increase in revenue.

From 2020 to 2023, UBTECH's average R&D expenditure was 470 million yuan, with an average R&D expense ratio of 53%. By the end of 2022, the company had a total of 746 R&D personnel, accounting for 43.5%. Based on a full-stack technology approach, the company has built an efficient, stable, and cost-effective application system that provides complete services from front-end user interaction design to back-end data processing and server management, thereby reducing product costs and improving efficiency; at the same time, it can efficiently meet diverse commercial needs, strengthening the speed of product category expansion. Currently, the company covers education, logistics, general (cross-industry applications), healthcare, and consumer industries, and is expected to achieve large-scale sales in the future The company will launch the industrial robot Walker S by the end of 2023, which has already been applied in training at the Nio factory, with mass production imminent. According to estimates, the demand for humanoid robots in the domestic new energy vehicle industry is expected to be approximately 5,625 units in 2025 and 62,500 units in 2030. As the only domestic manufacturer currently capable of mature humanoid robots, the company is expected to capture a significant market share.

4. Weichai Power (02338)

Benefiting from the demand for data center construction, the company's large-bore engine business is expected to accelerate growth. On February 20, Alibaba released its financial report and stated that it expects the group's investment in cloud and AI infrastructure over the next three years to exceed the total of the past decade. Since 2024, Alibaba, ByteDance, Tencent, Kuaishou, and others have plans to significantly increase AI capital expenditures, and the demand for data center construction is expected to continue to grow rapidly in 2025.

The company's large-bore engine products are core components of backup power diesel generator sets for data centers, accounting for about 70% of the BOM cost of the units. In October 2024, Weichai Group will globally launch the Baudouin 20M55 generator set, with a power output of 4,250 kWe, leading the industry in performance. The company's large-bore engine products are expected to enjoy industry growth dividends due to advantages such as leading technology, domestic production capacity, and high cost-effectiveness. In the short term, the company's business is showing marginal improvement, with a focus on long-term investment value.

Referring to compulsory traffic insurance, in January, the penetration rates of natural gas/new energy heavy trucks increased by +9 percentage points/-1 percentage point to 23%/21%, respectively. As the heating season approaches its end, the steady decline in LNG prices has driven a rebound in natural gas heavy truck sales. After reaching a relatively high level, the growth rate of new energy heavy truck penetration has slowed. In 1Q25, the company's shipments of natural gas engines and diesel engines are expected to see a quarter-on-quarter increase. In the long term, the company is optimistic about expanding into high-power high-end power application scenarios based on its product technology strength in diesel and natural gas engines; at the same time, the company is gradually ramping up production and sales of products such as power batteries, electric drive control, and fuel cells, looking forward to leveraging group resources to empower its new energy business.

5. Q Technology (01478)

The recovery of the mobile phone industry and improvements in product structure resonate, with the company expecting a significant increase in performance in 2024. The company announced that it expects its comprehensive profit in 2024 to grow by approximately 200% to 280% compared to the same period in 2023. In 2023, the company's comprehensive profit was approximately RMB 83,531,000. The reasons for the significant increase in the company's performance in 2024 include: 1) The continuous improvement of the smartphone, smart driving, and Internet of Things smart terminal markets, leading to an increase in the supply share of the company's camera modules and fingerprint recognition modules; 2) The improvement in the product structure of the company's high-end camera modules and fingerprint recognition modules, enhancing product added value and gross margin. From January to December 2024, the company delivered a total of 420 million mobile phone camera modules, a year-on-year increase of 15%; among them, 32 million pixel and above mobile phone camera modules totaled 212 million units delivered, a year-on-year increase of 43%. The proportion of high-end modules in product deliveries continues to increase, exceeding 50% In addition, the continuous penetration of AI applications helps to enhance smartphone sales and specifications. Counterpoint Research predicts that the average selling price of global smartphones is expected to increase by 3% year-on-year in 2024, reaching $365; it will further grow by 5% in 2025. The shipment volume of GenAI smartphones is expected to exceed 730 million units by 2028, more than three times the expected shipment volume in 2024. By 2028, 9 out of every 10 smartphones priced over $250 will feature GenAI capabilities, indicating that GenAI has been widely adopted. The demand for acoustic and optical functionalities in GenAI smartphones will continue to upgrade, thereby driving the increase in component ASP. Overall, the popularization of AI applications promotes the enhancement of smartphone configurations, and the company's business structure continues to improve. Based on a PE of 20.5 times in 2025, the company's valuation is robust and reasonable, with significant upside potential.

6. Galaxy Entertainment (00027)

The company released its operating performance for 2024, achieving a net income of HKD 43.4 billion, a year-on-year increase of 22%, and a net profit attributable to shareholders of HKD 8.8 billion, a year-on-year increase of 28%. The adjusted EBITDA was HKD 12.2 billion, a year-on-year increase of 22%. In Q4 2024, the recovery of net income driven by gaming significantly improved quarter-on-quarter, with Galaxy Macau performing well, achieving net gaming revenue of HKD 8.853 billion in Q4 2024, a year-on-year increase of 11.2%, recovering to 82.4% of the same period in 2019, and a quarter-on-quarter recovery of +5.1 percentage points from Q3 2024. The total net income in Q4 2024 was HKD 11.294 billion, a year-on-year increase of 9.4%, recovering to 87.1% of the same period in 2019, with a quarter-on-quarter recovery of +3.1 percentage points, maintaining a high-quality performance despite some disturbances in the overall market recovery in Q4 2024. The EBITDA margin for Q4 2024 was 29%, an increase of 1.1 percentage points quarter-on-quarter; looking at the recovery of various gaming businesses in Q4 2024, the VIP business revenue recovered to 23.8% of the same period in 2019, with a quarter-on-quarter increase of 6.6 percentage points. The company is steadily advancing the construction of new properties in Macau and non-gaming development, actively exploring overseas opportunities. By the end of 2024, the total cash and liquid investments amounted to HKD 31.3 billion, and after deducting liabilities of HKD 4.2 billion, the net amount was HKD 27.1 billion. The robust financial condition allows the company to have sufficient funds to support development projects, actively explore overseas development opportunities, and return dividends to shareholders.

The company has been collaborating with the Macau Government Tourism Office to actively promote Macau as an international tourist destination and recently announced the opening of offices in Tokyo, Seoul, and Bangkok. In 2024, the company hosted approximately 460 performances and events, including major events such as Andy Lau's world tour concert, UFC Fight Night, the International Table Tennis Federation World Cup, and the World Women's Volleyball League. In 2025, the company will continue to host several major events, including a personal concert by Italian legendary tenor Andrea Bocelli at Galaxy Concert Hall in March, and the International Table Tennis Federation World Cup 2025 in April Galaxy Entertainment Group will bring Hong Kong's famous singer Jacky Cheung's tenth concert tour in June; the company is actively promoting the internal renovation and Phase IV project of Galaxy Macau, which is expected to open in mid-year, focusing on non-gaming businesses, mainly targeting entertainment and family-friendly facilities, including gaming.

The company has introduced electronic gaming tables in all its casinos, which is expected to improve overall operational efficiency and customer management. It continues to enhance its resorts, including adding new dining and retail facilities at Galaxy Macau. The Galaxy StarWorld Hotel is evaluating a series of upgrade projects, having completed upgrades on the third floor. Overall, the recovery of gaming is continuously improving, with Galaxy Macau performing well and the recovery of its mid-market business reaching a recent high. The company is actively promoting non-gaming development, new property construction, and overseas opportunity expansion, which is expected to continue benefiting from the growth brought by the overall enhancement of the experience.

7. Vanke Enterprise (02202)

Previously, ShenTian Group Chairman Xin Jie took over as Chairman of the Board. As the chairman of Vanke's major shareholder ShenTian Group, Xin Jie leading the Vanke Board reflects the gradual deepening of state-owned capital's control from initial financial assistance to direct intervention, which is beneficial for subsequent deployments to mitigate risks and ensure delivery. Former executives such as Yu Liang continue to serve as vice presidents, ensuring a smooth transition for the management team. Additionally, multiple parties have expressed strong support for Vanke's steady development. According to Shenzhen's announcement, officials from Guangdong Province, Shenzhen City, and relevant departments and financial institutions stated: they will fully support enterprises in prudently managing risks, maintaining Vanke's overall financing scale stability, and assisting the company's continuous healthy development.

Among them: 1. The head of Shenzhen State-owned Assets Supervision and Administration Commission stated: There is the capability, strength, and sufficient resources to support the Metro Group in promoting Vanke's steady development through all possible market-oriented and legal means. At the same time, it will reduce the Metro Group's asset-liability ratio and enhance its liquidity through direct capital injection and asset allocation, supporting it to better play the role of Vanke's largest shareholder.

2. The head of Shenzhen Housing and Urban-Rural Development Bureau stated: It will vigorously coordinate relevant parties to properly handle some of Vanke's idle land, helping Vanke to revitalize assets and recover funds. The Guangdong Provincial Housing and Urban-Rural Development Department stated: it will promote more real estate projects of enterprises to enter the "white list."

3. Heads of eight state-owned banks and joint-stock banks in Shenzhen stated: They will continue to actively use various financial tools to meet Vanke's reasonable financing needs and ensure the stability of its overall financing scale. At the same time, they will further increase support for Vanke's major shareholders. Overall, the management adjustment and major shareholder support provide important guarantees for the company's future development, while the support from state-owned assets and financial institutions will provide more development space for the company, and the company's debt risk is expected to gradually resolve.

8. United Pharmaceutical (03933)

Currently, the upstream antibiotic market is operating at a high level of prosperity, and United Pharmaceutical, as a leader, is benefiting from good performance in its main business; at the same time, with insulin as an anchor, the company has been deeply engaged in the endocrine field for over a decade, with a complete GLP-1 pipeline, and its self-developed innovative triple-target UBT251 is making leading progress and has global rights, which is worth paying close attention to; the three major animal health bases are about to be put into production, which is expected to relieve capacity pressure, and the animal health business is expected to become a second growth driver in the short to medium term On the other hand, the company launched an equity incentive plan in 2023, granting a total of 12.0969 million shares, accounting for 0.67% of the total share capital, which is expected to further enhance the group's cohesion.

In addition, the company's animal health business has seen rapid growth in recent years, with a CAGR of 75% from 2020 to 2023. The core products are mainly veterinary antibiotic formulations, which extend the advantages of the company's main business. New animal health bases are set to be released from the end of this year to next year, which is expected to alleviate supply bottlenecks, with a total output value exceeding 5 billion. Currently, economic animals remain the foundation, while pet medicine is the key focus area, with rapid revenue growth, expected to surpass aquaculture medicine for the first time in H1 2024. Additionally, there are currently over 40 pet medicines under research (including 5 Class 1 new veterinary drugs), and pet medicine is expected to drive high-speed growth in the future. Overall, upstream prices of antibiotics are stable, the main business is stabilizing, and the release of capacity in the animal health sector is imminent, giving the company’s performance upward elasticity. The construction of the GLP-1 team is complete, with global rights for innovative triple-target drugs, and progress is leading, making the company's development promising.

9. Ping An Good Doctor (01833)

Ping An Health organized a special shareholders' meeting on December 4, 2024, to vote on the distribution of a special dividend, resolving to distribute a dividend of HKD 9.7 per share (to be sent on January 24; with a total value of approximately HKD 10.85 billion). At the same time, a scrip dividend scheme was offered to shareholders (with a reference price of HKD 6.12 per new share). On January 7, 2025, the company announced that a total of 1.04 billion new shares would be distributed as a special dividend, corresponding to approximately HKD 4.41 billion in special dividends to be paid in cash. After choosing the scrip dividend scheme, Ping An Group's equity stake in Ping An Health will increase from 39.41% to 52.74%, making Ping An Health an indirect non-wholly-owned subsidiary of Ping An Group and subject to consolidated financial statements. This move also triggers a mandatory general offer (offer price is HKD 6.12; offer period until February 17), but Ping An Group stated that it will continue to maintain Ping An Health's existing main business and has no intention of privatizing the company.

After the consolidation, Ping An Health, as an important part of Ping An Group's "medical and elderly care" strategic focus, will see the release of synergies with other business lines within the group (such as commercial health insurance), which will be an important driver for improving its fundamentals and a key factor in enhancing its valuation. Ping An Health has long been deeply involved in managed medical services, accumulating relatively rich medical health data through its family doctor membership system and O2O service layout. This may be an effective way for Ping An Group to further capture opportunities for the development of commercial health insurance and optimize product benefits against the backdrop of medical insurance reform, and it will also help Ping An Health realize its business accumulation in its fundamental performance. According to Ping An Group's 3Q24 announcement, as of the end of September 2024, nearly 63% of Ping An's 240 million individual customers used services provided by the medical and elderly care ecosystem, with an average of about 3.35 contracts per customer and an average AUM of 57,800 yuan, which are 1.6 times and 3.9 times that of individual customers who do not use the medical and elderly care ecosystem services, respectively In addition, recent breakthroughs in domestic Deepseek technology promote the equalization of AI large model technology, which may benefit Ping An Health as a vertical leader to further efficiently apply AI large models in internet medical service practices, driving the actual value release of its high-quality medical service data.

Overall, after the special dividend-related arrangements conclude and Ping An Health achieves consolidation within the Ping An Group, the subsequent strengthening of collaboration between Ping An Health and other business lines within the group will be key to improving its fundamentals and enhancing its valuation. Against the backdrop of medical insurance reform, Ping An Health may further reinforce its important position in the group's medical and elderly care strategy, helping the group capture opportunities in the commercial health insurance sector while gradually realizing its long-term accumulation in the managed care sector in its fundamental performance.

10. Ma'anshan Iron & Steel Co., Ltd. (00323)

The company was incorporated into the central enterprise "Baowu Group" in 2019 and is currently positioned as the group's "core strength in special long products and important strength in plate and strip products," with a total production capacity of 20.5 million tons by the end of 2023. In terms of long products, the company's main products include section steel and wire rods, with production of 10.3 million tons in 2023 and 5.75 million tons in Q1-3 of 2024. The main producer of rebar, Yangtze Steel, reported a net loss of 580 million yuan in H1 2024. In terms of flat products, the company's main products include hot-rolled sheets, cold-rolled sheets, galvanized sheets, and color-coated sheets, with production of 9.42 million tons in 2023 and 7.36 million tons in Q1-3 of 2024. The gross profit margin for H1 2024 is 0.8%, up 4.6 percentage points year-on-year. In terms of wheels and axles, the company's main products include train wheels, axles, and rings, with production of 280,000 tons in 2023 and 200,000 tons in Q1-3 of 2024. The company has actively promoted the application of domestically produced high-speed wheels over the past decade, expecting that the volume increase of such products will optimize the product structure of wheels and axles and further enhance profits. In terms of special steel, the new special steel project is still in the ramp-up phase due to long certification cycles, and its overall profitability remains weak but is gradually improving, with an overall gross profit margin of -4.02% in H1 2024, up 9.98 percentage points year-on-year. Since 2024, domestic steel demand has dragged down steel prices, with declines exceeding those of raw material prices, putting pressure on industry profits.

According to My Steel, the average gross profit of major steel varieties in China has been in a loss state throughout the year. The company reported a total loss of 2.535 billion yuan in Q1-3 of 2024. Looking ahead, industry profits are the key factor for the company's performance turnaround. The steel industry may enter a phase of reduced development and inventory optimization. In August 2024, the Ministry of Industry and Information Technology has suspended the capacity replacement work in the steel industry; the China Iron and Steel Association will establish a mechanism for exiting existing capacity as soon as possible. If these policies are effectively implemented and more supply-side restriction policies are introduced, along with effective domestic economic policies stimulating demand, steel prices are expected to slow down in their decline in 2025-2026. Meanwhile, there will still be an increase in iron ore supply in 2025-2026, and it is judged that the decline in iron ore prices may exceed that of steel prices, which is expected to improve industry profits. Overall, since 2024, domestic steel demand has dragged down steel prices, with declines exceeding those of raw material prices, putting pressure on industry profits. The company reported a total loss of 2.535 billion yuan in Q1-3 of 2024. Industry profits are the key factor for the company's performance turnaround, and industry profits are expected to improve in 2025-2026, with attention to the implementation of policies on both the supply and demand sides domestically Written by/ Wan Yongqiang, Director of the Zhitong Finance Research Center

Disclaimer: The stocks mentioned in the article are for discussion among investors and do not constitute investment advice. The stock market carries risks, and investments should be made with caution.