China’s manufacturing activity expands in March after a 5-month lull

The National Bureau of Statistics announced that the manufacturing PMI in March was 50.8, 1.7 points up from February’s 49.1. returned to the expansion for the first time in nearly half a year. In terms of size of enterprises, the PMI for large corporates was 51.1, an increase of 0.7 points compared to the previous month. The PMI of small and medium-sized enterprises was 50.6 and 50.3 respectively, both above the threshold. Production, demand and expectations improved in March. The production index in March was 52.2, compared to the previous value of 49.8. The new orders index grew to 53.0 from 49.0 in Feb. The production and business activities expectation index grew to 55.6 from 54.2 in Feb. The export and import components also improved. The new export orders and import index were 51.3 and 50.4 respectively.

The non-manufacturing PMI for March was 53.0, an increase of 1.6 points from the previous month. In terms of industries, the business activity index for the construction sector was 56.2, 2.7 points increase from the previous month, while the business activity index for the service industry was 52.4, a MoM increase of 1.4 points. For the respective businesses, postal service, telecommunications, radio and television, satellite transmission services, monetary and financial services, and capital market services were in the high expansion range of more than 60. However, the business activity indices for air transportation, catering, and real estate were below the threshold. In terms of the Hong Kong stock market, the Hang Seng Index fell into a correction this week. It is expected to lack upward momentum in the near term and to fluctuate between 16,200-17,200 points.

In terms of industry, female purchasing power stands out, which has led to high growth in the topline of related companies. Their performance has exceeded the broader market. Investors can pay attention to related companies.

Giant Biogene(2367.HK)’s revenue amounted to RMB3.5 billion, representing an YoY increase of 49.0%. In terms of brands, the revenue from Comfy amounted to RMB2.78 billion, representing an YoY increase of 72.9% and accounting for 79.1% of total revenue in 2023. The revenue from Collgene amounted to RMB616.6 million, flat YoY and accounting for 17.5% of total revenue. The sales revenue from other brands amounted to RMB103.2 million, up 14.2% YoY, showing a stable growth and accounting for 2.9% of total revenue. The net profit stood at RMB1.4 billion, up 44.6% YoY.

Giant Biogene continued to expand the Online and Offline Layout and improve refined operation capability. In November 2023, the first offline standard outlet of Comfy in mainland China was officially opened to satisfy more diversified skincare needs of consumers. From May to December 2023, three Collgene franchised stores were opened, expanding the offline presence of Collgene and enhance our interaction with the consumers. All major e-commerce channels achieved faster growth, with the online omni-channel GMV growth rates of Comfy and Collgene exceeding 165% and 70% respectively during the 618 Shopping Festival, and exceeding 100% and 50% respectively during the Singles Day Shopping Festival, very promising. It is recommended to buy at HK$41.70, target at HK$48.60, and stop loss at HK$40.00.

JNBY(3306.HK)’s revenue in 1H24 reached RMB2.98bn, up 26% YoY, mainly due to a 24% SSSG, a 24% increase in online sales, and 32 net openings compared to 1H23. Net profit amounted to RMB574mn, up 54% YoY, both record highs. The company declared a total dividend of HK$0.85 per share (HK$0.46 interim dividend and HK$0.39 special dividend). By brands, JNBY/CROQUIS/jnby by JNBY/LESS contributed to RMB1,700/ 413/ 479/ 336mn of sales, increased by 24/17/36/39% YoY, respectively.

In 1HFY24, JNBY achieved a gross profit of RMB1,948mn with a GPM of 65.5%, up 0.8ppts YoY, mainly driven by increase in revenue and improved brand mix. JNBY’s selling expense/admin cost stood at RMB926/246mn in 1HFY24, up 13%/17% YoY, accounting for 31.1/8.3% of total sales, down 3.5/0.7 ppts YoY, respectively. Benefiting from the cost control, JNBY’s operating profit increased by 55% YoY to RMB803mn with OPM of 27%, up 5.1ppts YoY. It is recommended to buy at HK$14.60, target at HK$17.00, and stop loss at HK$14.00.