Automobile & Air (Zhang Jing)

This month I released updated reports of Geely (175.HK), Yutong (600066.CH) , and one initiation report of CFMOTO POWER (603129.CH).

In the first quarter of 2026, Geely Auto delivered a cumulative 709.4 thousand vehicles, up 0.8% yoy, setting a new record high for the same period in history and regaining the top position among domestic brands. Among the sub-brands, the premium brands delivered standout performance: LYNK&CO sold 82 thousand units, up 12.5% yoy, while Zeekr sold 77 thousand units, up 86.1% yoy. We believe that the launch of flagship 9-series models, such as the LYNK&CO 900, Zeekr 9X and Galaxy M9, marks the beginning of a new chapter in the Company’s premiumisation strategy in the SUV segment.

In overseas markets, Geely Auto recorded cumulative exports of 203 thousand units in Q1, up 125.7% yoy, far exceeding the industry’s average growth rate of 56.7%, representing explosive growth and accounting for 28.6% of total sales. The Company has provided 2026 full-year export sales guidance of no less than 640 thousand units, with a target of 750 thousand units, equivalent to yoy growth of 52.4% to 78.6%. Export business is expected to become the most important growth driver this year. We believe that the rapid volume expansion and high profitability of overseas markets will help offset the slowdown in domestic sales and improve profit margins.

Geely Auto’s new energy transition is entering an accelerated phase. In Q1 2026, the Company’s cumulative sales of new energy vehicles reached 369.1 thousand units, up 9% yoy, with the penetration rate rising to 52%, and further increasing to 55% in March alone.Recent geopolitical conflicts in the Middle East have led to volatility in oil prices, which has objectively accelerated the global adoption of electric vehicles. In the long term, this trend benefits leading automakers with advantages in products, technology, cost, and supply chains. The Company’s new energy vehicle segment is expected to achieve a favourable trajectory of simultaneous volume and profit growth.We revised our financial forecast and target price to HK$26.6, equivalent to 12.5/10/8.4x P/E ratio in 2026/2027/2028, and we give the rating of Accumulate.

Yutong reported revenue of RMB41.4 billion (RMB, the same below) in 2025, up 11% yoy; net profit attributable to the parent company of RMB5.55 billion, up 35% yoy; and net profit attributable to the parent company excluding non-recurring items of RMB4.58 billion, up 32% yoy. The Company implemented a high dividend plan, with an annual cash dividend of RMB2 per share, together with an interim dividend of RMB0.5 per share, bringing total cash dividends for the year to RMB5,535 million, close to 100% of its RMB5,554 million net profit, fully demonstrating the Company’s abundant cash flow and management’s commitment to shareholder returns.

According to the Company's FY2026Q1 result, Yutong's revenue arrived5.909 billion yuan, down 7.92% yoy; net profit attributable was 659million yuan, down 12.69% yoy; and net cash flow from operatingactivities was 3.494 billion yuan, up 146.51% yoy. In terms of salesdata, the Company sold a total of 7,652 vehicles in the first quarter,down 15.08% yoy. Domestic market sales were pressured by high baseeffects and industry adjustments (-29% yoy), while overseas markets(+31% yoy) and new energy bus exports (+57% yoy) continued to performstrongly.

Yutong's export business has covered six major regions, includingEurope, the Americas, Asia-Pacific, the Middle East, the CIS, andAfrica. The Company has achieved bulk exports of new energy buses tomore than 60 countries and regions, and has established localisedcooperation through KD assembly in more than ten countries and regions,including Kazakhstan, Pakistan, Ethiopia, and Malaysia, forming a globalsales network characterised by "multi-polar support and riskdiversification", effectively hedging against domestic demandfluctuations. The Company's first overseas new energy vehicle KD planthas been established in Qatar, with an annual production capacity of 300units, expandable to 1,000 units, supporting continuous expansion inexport share and marking a significant acceleration in the Company'soverseas new energy expansion. The overall penetration rate of overseasnew energy buses is currently only about 15%, leaving substantial roomfor future growth. The Company's overseas market share is expected tofurther increase, while the rising share of new energy buses willcontinue to drive net profit margin improvement.

In addition, the Company's L2–L4 intelligent connected buses haveachieved regular operations in 26 domestic cities as well as overseasmarkets such as Qatar and Singapore, covering multiple scenariosincluding public transport, industrial parks, and airports. With theaccelerated commercialisation of autonomous driving technology, this isexpected to further enhance product competitiveness and value-added.

The Company's leading position remains solid, with significant economiesof scale, mature technology, strong brand recognition, and supply chainadvantages. Its performance is expected to sustain steady growth. Yutonghas always placed importance on shareholder returns. Since its listing,the Company has maintained a cumulative payout ratio, highlighting itslong-term investment value.

We forecast that Yutong's EPS in 2026/2027/2028 will beRMB2.71/3.13/3.46yuan, our target price is set unchanged at RMB43.5. Itis equivalent to a prospective 2025/2026/2027 PE of 16/13.9/12.6xrespectively. We give "BUY" rating.

CFMOTO POWER was established in 1989, starting with the R&D of corecomponents, and entered complete vehicle manufacturing in 1998. Itscurrent core business focuses on the R&D, production, and sales of ATVs,fuel motorcycles, and electric two-wheelers, with products preciselycovering diverse scenarios such as sports and leisure, outdooroperations, and public service transportation. The Company is a domesticleader in ATVs and mid-to-large displacement motorcycles. Among them,ATVs are mainly for export sales, with displacements ranging from 400ccto 1,000cc, covering ATV (All-Terrain Vehicle), UTV (Utility Vehicle),and SSV (Side by Side Vehicle) models. The Company has ranked first inmarket share of ATVs in major European markets for more than tenconsecutive years. Fuel motorcycles mainly focus on mid-to-largedisplacement high-end models, with displacements primarily ranging from125cc to 1,250cc. In the domestic market for straddle motorcycles andscooters above 200cc, the Company ranks first. Electric two-wheelersrepresent a newly established business segment, mainly targeting thehigh-end market to build new growth drivers for results.

CFMOTO POWER released its 2025 Annual Report and 2026 Q1 results: In2025, the Company recorded revenue/net profit attributable to the parentcompany/net profit attributable to the parent company excludingnon-recurring items of RMB19,746 million/RMB1,675 million/RMB1,581million (RMB, the same below), up 31.3%/13.83%/9.70% yoy, respectively.Among these, overseas revenue reached RMB13.79 billion, accounting for69.84%. Gross margin was 26.94%, down 3.12 ppts yoy, mainly due toincreased tariffs. Net cash flow from operating activities amounted toRMB3,966 million, up 33.4% yoy.

The significantly lower growth rate of net profit compared with revenuein 2025 was mainly due to: 1) Increased tariffs on exports to the U.S.in 2025, resulting in additional retrospective tax payments of RMB978million (vs. only RMB228 million in 2024); 2) Exchange losses caused byRMB appreciation.

In 2026 Q1, the Company recorded revenue/net profit attributable to theparent company/net profit attributable to the parent company excludingnon-recurring items of RMB5,359 million/RMB423 million/RMB417 million,up 26.07%/1.81%/1.55% yoy, respectively. Despite continued exchange ratefluctuations and the impact of U.S. tariffs, the Company's resultsremained relatively resilient in the first quarter.

The global sales volume of ATVs has generally stabilised, while theproduct mix continues to upgrade towards UTV and SSV. Leveraging itsglobalised operating system and continuous technological innovation, theCompany has steadily advanced its product portfolio towardshigh-performance and high-value segments. Its core model, U10PRO, hasdelivered outstanding performance in the global market, effectivelydriving brand premiumisation and increasing ASP. In 2025, the Companysold a total of 197 thousand ATVs, up 16.45% yoy, and recorded salesrevenue of RMB9,608 million, up 33.26% yoy. Export value accounted for74.01% of the industry total, continuing to lead the industry exportrankings. As for motorcycle, in 2025, the Company achieved fuelmotorcycle sales volume of 295.9 thousand units, up 3.27% yoy, and salesrevenue of RMB6,471 million, up 7.18% yoy. Among these, overseas salesreached 159.5 thousand units, up 11.3% yoy, with overseas revenue ofRMB3,587 million, up 21.88% yoy. The Company's premiumisation strategyhas delivered remarkable results. As for Electric Two-Wheeler, CFMOTO's"ZEEHO" brand electric two-wheelers adhere to a high-end positioning of"fuel motorcycle performance + intelligent technology". In 2025, totalsales reached 551.2 thousand units, up 420.2% yoy, with sales revenue ofRMB1,912 million, up 381.0% yoy. Gross margin increased by 6.75 ppts to-0.03 ppts, approaching break-even. The Company leverages its expertisein recreational motorcycles to enter the electric motorcycle segmentwith clear technological advantages and a strong pipeline of newproducts, positioning it well to capture structural growthopportunities.

Looking ahead, the Company's ATV and motorcycle businesses are expectedto continue gaining overseas market share, supported by technologicalR&D and brand building. We believe the overseas market will remain a keydriver of sustained growth in the Company's results.

As for valuation, we expected diluted EPS of the Company to RMB13.84/18.29/23.46 of 2026/2027/2028. And we accordingly gave the targetprice to RMB 359.3, respectively 26x P/E for 2026. "BUY" rating.

Utilities, Commodity, Consumer Discretionary (Margaret Li)

This month I released 2 reports of BLOKS (325.HK) & Laopu Gold(6181.HK).

BLOKS is a leader in China's assembly character toys market. Thecompany holds over 500 patents, possesses original IP capabilities, andhas non-exclusive licenses for approximately 50 well-known IPs. Itsproduct positioning is "high quality at a reasonable price."Leveraging its product strength and supply chain advantages, BLOKSmaintains cost competitiveness while continuously expanding its productcategories. The company has established a multi-channel sales network,and since 2022, has primarily focused on offline channels centered ondistributors. According to Frost & Sullivan, the company's GMV reachedapproximately RMB 1.8 billion in 2023, + 170% YoY, with a market shareof 30.3% in China's assembly character toys market and 7.4% in thebuilding toy market. During the same period, China's assembly charactertoys market was valued at RMB 5.8 billion, accounting for 5.5% of theoverall toy market, 14.3% of the character-based toy market, and 24.4%of the building toy market.

The company achieved sales revenue of RMB 2.91 billion in 2025, + 30.0%YoY. By series, Transformers, Ultraman, Kamen Rider, and HEROSPIRE werethe company's top four best-selling series, generating revenues of RMB951 million, RMB 815 million, RMB 331 million, and RMB 264 million,respectively. By product category, building-and-character toy generatedrevenue of RMB 2.84 billion, accounting for 97.6% of total revenue, +29.1% YoY; the assembly vehicle toys and building block toys generatedrevenue of RMB 70 million, accounting for 2.4% of total revenue, + 77.0%YoY. By channel, offline distribution generated revenue of RMB 2.64billion, accounting for 90.5% of total revenue, + 27.8% YoY; consignmentsales generated revenue of RMB 22.5 million, accounting for 0.8% oftotal revenue; online channels generated revenue of RMB 253 million,accounting for 8.7% of total revenue, + 62.3% YoY. The growth rate ofonline channels outpaced the company's overall revenue, demonstratingstrong development momentum. Adjusted profit was RMB 675 million, +15.5% YoY; profit for the year was RMB 634 million, achieving aturnaround from losses in the previous year. As of the end of 2025, thecompany's R&D team consisted of 618 members, accounting for 66.1% oftotal employees. The company holds 548 domestic granted patents, 24overseas granted patents, and 83 domestic invention patents. The R&Dexpense ratio for 2025 was 9.1%, + 37.3% YoY, reflecting a systematicstrengthening of the company's R&D capabilities. The company expandsproduct categories based on core user demands, achieving significant R&Dresults in themes such as vehicles, animals, and dress-up. Its productmatrix continues to diversify, with positive market feedback. During thereporting period, the company launched the "BLOKEES WHEEL" series,which combines ease of assembly and modification, integrates diverse IPthemes and automotive culture, and utilizes high-density materials withindependent intellectual property rights. It also developed the"TERRAVENTUR" animal-themed toys (e.g., Dinosaur series), achieving anintegration of building, articulation, and fine skin textures throughthe "one-Skin-Feature System". Additionally, the company launched the"DaaLaMode 1/12" dress-up theme series, featuring modular bodies andstandardized joints, paired with fabric clothing suitable for variousscenarios.

BLOKS holds significant advantages in Lower-Tier Markets. BLOKS'channel penetration strategy in lower-tier markets is not a meredistribution push but a systematic effort. Its core logic can besummarized as: attracting customers with low-priced products, covering adense network of outlets, maintaining an efficient distributor system,and precisely positioning stores near school campuses. Consumers inlower-tier markets are highly price-sensitive, but they do not simplychase low prices, they seek "ultimate cost-effectiveness." BLOKSaccurately captures this demand by launching products such as the 9.9RMB "Star Edition" and BLOKEES WHEELS series, as well as the 14.9 RMB"TERRAVENTUR" animal-themed toys, further penetrating these markets.We believe BLOKS has built a moat in lower-tier market channels that aredifficult to replicate. By deeply integrating classic IPs with modernbrick-building techniques, BLOKS effectively satisfies the youngergeneration's desire for refined collecting and handling of childhoodmemories, creating a strong emotional bond with users.

On the IP front, the company launches "Premium Blokees" centered onmajor IPs such as DC, Ultraman, and Transformers. With high-fidelityaccuracy, these products trigger a sense of nostalgic compensation amongconsumers born from the 1980s to the 2000s. On the cultural front, basedon over 500 patents, BLOKS builds a "Chinese Bricks" system infusedwith Chinese cultural elements, enhancing the cultural confidence andsense of belonging for a local brand. On the product front, the companyemphasizes the assembly experience and high poseability, aligning withcurrent trends in trendy toy consumption, thereby creating uniquecultural products that are both display-worthy and collectible. Overall,BLOKS re-presents classic cultural symbols in the form of "building +collecting," establishing differentiated emotional connections andcompetitive barriers.

Looking ahead, we believe the company will continue to benefit from itsmoat in lower-tier markets and its globalization strategy. We forecastthe company's operating revenue for 2026–2028 to be RMB 3.8 billion,RMB 4.76 billion, and RMB 5.8 billion, respectively. EPS is projected atRMB 3.09 / 4.20 / 5.11, corresponding to P/E ratios of 18.3x / 13.5x /11.1x. We assign a 22x P/E ratio for 2026, resulting in a target priceof HKD 78.14. Initiate coverage with a "Buy" rating.

Fig 1. Performance of Recommended Stocks

A stock is calculated by RMB yuan.
Source: Phillip Securities Research

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