Zhitong Decision Reference | The market continues to explore new faces for rebound

[Editor’s Market View]

Due to the optimistic expectations released by the Two Sessions, Hong Kong stocks continued to rise last week.

The U.S. non-farm payroll data for February fell short of expectations, adding 151,000 jobs, with the unemployment rate rising to 4.1%. The prior expectations were 160,000 and 4%. Jerome Powell reassured the market: long-term inflation expectations remain generally stable, and there is no need to rush into interest rate cuts.

The current funding of the U.S. government will expire at 00:01 on March 15. If Congress and the Trump administration do not reach an agreement before then, the U.S. government will shut down. Foreign media: Putin is prepared to conditionally accept a ceasefire in Ukraine. The Ukrainian side: does not rule out signing an agreement with the U.S. in Saudi Arabia.

The decline of U.S. stocks within a controllable range is not necessarily a bad thing, but a one-sided downward trend could have negative impacts. Pay attention to whether the government will shut down, and the Russia-Ukraine conflict is also a significant variable. The Two Sessions will conclude early this week, and policy catalysts will shift towards the development of the industry itself. However, the weakening of the U.S. dollar is quite favorable for Hong Kong stocks.

According to the "Science and Technology Innovation Board Daily," Zhiyuan Robotics will officially launch its first general-purpose embodied base model, Zhiyuan Qiyuan large model, on March 10, which will integrate collection and training, rapid generalization with small samples, cross-entity applications of "one brain with multiple forms," continuous evolution, and human video learning capabilities. He Xiaopeng: XPeng's L3 humanoid robot will enter mass production next year and has already been put into use at the Guangzhou factory. The market continues to explore new faces for rebound.

Additionally, Huawei has officially formed a medical and health legion. It is reported that the medical and health legion will focus on building an AI-assisted diagnostic solution system, promoting the application of large medical models in clinical scenarios. With the continuous iteration of Manus technology and ecological openness, the AI + medical field is expected to welcome opportunities.

Beijing: Starting from the fall semester of 2025, all primary and secondary schools in the city will carry out AI general education. AI + education deserves attention.

This Monday, the Hong Kong Stock Connect targets will officially be adjusted. Among them, 27 stocks including Xiaocaiyuan, Mao Geping, Beike-W, and Weilong Delicious will be added. The related increase is not significant, and the added varieties can be monitored.

[This Week's Golden Stock]

Bilibili-W (09626)

Bilibili disclosed its fourth-quarter and full-year performance for 2024, exceeding market expectations. In Q4 2024, it achieved revenue of 7.734 billion yuan, a year-on-year increase of 22% and a quarter-on-quarter increase of 16%; Non-GAAP net profit was 452 million yuan, turning a profit compared to the previous year, and achieving GAAP quarterly profitability for the first time. Full-year revenue reached 26.832 billion yuan, a year-on-year increase of 19%, setting a new record.

Commentary: Bilibili achieved comprehensive profitability for the first time in a single quarter, with significant contributions from its three core businesses. Advertising business: Q4 revenue was 2.389 billion yuan, a year-on-year increase of 24%; full-year revenue was 8.189 billion yuan, a year-on-year increase of 28%. In the fourth quarter, the average daily usage time per user increased by 4.2% year-on-year to 99 minutes, and the average daily video views increased by 14% year-on-year to over 4.8 billion, while having 258 million official members, providing a user base for the growth of advertising and other businesses.

Mobile gaming business: Q4 revenue was 1.798 billion yuan, a year-on-year increase of 9%; full-year revenue was 5.610 billion yuan, a year-on-year increase of 40%, mainly due to the strong performance of the exclusive licensed game "Three Kingdoms: Strategizing the World," which is the fastest game in Bilibili's history to reach 1 billion in revenue. The revenue from two evergreen games, "FGO" and "Azur Lane," continues to grow Value-added services: Q4 revenue reached 3.083 billion yuan, a year-on-year increase of 8%; annual revenue was 10.999 billion yuan, a year-on-year increase of 11%, mainly due to the growth of other value-added services and the turnover of premium members, with the number of premium member subscriptions maintaining steady growth. The company's management stated that over the past year, our operating profit margin improved from -10% to 6%, and it is expected that the medium to long-term operating profit margin can reach 15%-20%.

【Industry Observation】

Positive news for AI healthcare emerged over the weekend, including:

Huawei officially formed a healthcare team, focusing on building an AI-assisted diagnostic solution system and promoting the application of large medical models in clinical scenarios; Lei Haichao, director of the National Health Commission, stated at a press conference on people's livelihood that efforts will be made to further enhance the information technology capabilities at the grassroots level and extensively apply AI-assisted technologies to improve service capabilities and standards.

Some institutions organized communication and exchanges with relevant listed companies and experts, learning that Huawei's formation of the team will not abandon other medical partners, and there are currently no plans in this regard; the establishment of the team is mainly to address the shortcomings in the healthcare sector, as there has not been a large-scale medical system before, and this is also to further enhance the position of AI healthcare within Huawei's various sectors. Huawei's AI healthcare mainly addresses the technical difficulties in the implementation process of the industry, and currently, hardware remains the main source of profit. Additionally, the AI healthcare market is vast, with significant market space and application potential, and the ecosystem requires major players to work together to expand the market, as it is still far from the stage of "competing for the cake." Many hospitals, including top-tier hospitals, have increased their AI budgets this year (for example, a top-tier hospital in Shanghai has a budget of 10 million this year, which was not the case in previous years).

Overall, the penetration rate of AI in the healthcare field is continuously increasing, and many catalysts are being implemented, making this year likely to be the inaugural year for AI healthcare. Key stocks to watch in the Hong Kong market include Yidu Tech (02158) and Jingtao Technology (02228).

【Data Overview】

The Hong Kong Stock Exchange announced that the total number of open contracts for the Hang Seng Index futures (March) is 107,946, with a net open position of 32,044. The settlement date for the Hang Seng Index futures is March 28, 2024.

From the distribution of bullish and bearish positions in the Hang Seng Index at the 24,231 point level, the upper bearish certificate concentration is close to the central axis, while the lower bullish certificates show a high deviation, indicating bullish momentum for the Hang Seng Index. Institutions believe that the Chinese AI industry chain has finally formed a closed-loop ecosystem, and the Hang Seng Index is bullish this week.

【Editor's Remarks】

UBS trading desk observed that short-term purely bullish funds continue to buy into the Hong Kong market, but the scale is relatively small. Hedge funds are reducing positions in response to tariff news. The activity of southbound funds is high, but sustainability is weakening. However, UBS's strategy analysts also noted that the Chinese market is currently trading at a deep discount of up to 40% compared to emerging markets (where the average premium before the COVID-19 pandemic was 25%), indicating that the upside risk is greater than the downside risk in the long term Therefore, despite some profit-taking pressure, the main characteristic of the current market is "taking two steps forward and one step back." With the spread of hot topics, there have recently been some calls for buying cyclical stocks. It is essential to explore new faces for catching up and seize opportunities.

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