Broker: UOB Kay Hian
Date of Report: 4 June 2025

China Alpha Picks: Top Stock Conviction Calls and Sector Outlook for June 2025

Market Overview: Navigating Tariff Truces and Policy Tailwinds

The Hang Seng Index (HSI) and MSCI China Index rebounded 5.3% and 3.5% month-on-month in May 2025, following a 90-day tariff truce between China and the US. The agreement reduced US tariffs on Chinese goods from 145% to around 30%, with China reciprocating. Despite this positive momentum, risks from ongoing geopolitical uncertainties and potential tariff escalations persist. As a result, the focus remains on domestic policy beneficiaries and defensive sectors, which have gained investor favor in recent weeks.
Key portfolio actions for June include the addition of Prudential and Sino Biopharm to the buy list, profit-taking on SHKP and Trip.com, and a loss cut on Desay SV. The portfolio continues to emphasize companies positioned to benefit from domestic reflation policies and those insulated from global trade volatility.

Portfolio Performance and Methodology

The Alpha Picks portfolio showed robust returns relative to the HSI, with the following performance metrics:

Individual stock performance in May highlighted Innovent (+15.3%) and SHKP (+14.4%) as top gainers. The table below summarizes key recommendations and upside potential:

Comprehensive Company Analyses

Alibaba (9988 HK): AI-Driven Growth and Cloud Momentum

Taobao Tmall Group (TTG) stands to benefit from AI integration and strong domestic online retail growth. Core marketing revenue (CMR) is projected to rise by 8% year-on-year to RMB 247 billion in FY26, driven by software service fees and increased adoption of Quanzhantui.
Strategic focus areas include one-hour delivery upgrades, a new “Flash Purchase” channel, and collaboration with Ele.me for enhanced real-time logistics.
Alibaba Cloud saw revenue growth accelerate to 18% year-on-year in 4QFY25, powered by public cloud and AI-related products, with EBITA margin up 2 percentage points to 8%.
AI-related cloud revenue has maintained over 100% growth for seven consecutive quarters.
Non-GAAP net profit is forecast to increase by 12% in 2025, with a net margin of 17%. Alibaba trades at 12.7x FY26F PE, which is 1 standard deviation below its historical mean.
BUY rating maintained with a HK$165.00 target price (16.3x FY26F PE).
Catalysts: Resilient domestic consumption, sustained cloud profitability, and user growth (timeline: 2H25).

China Resources Beer (291 HK): Resilient Volume and Profit Growth

Year-to-date sales volume has been solid, supporting expectations for single-digit volume and higher profit growth than revenue in 2025.
Drivers include a potentially strong peak season, healthy inventory, and disciplined cost control.
Concerns over management share disposals are considered priced in.
Target price of HK$39.90 based on DCF, representing 12.2x 2025F EV/EBITDA and 11.0x 2026F EV/EBITDA.
Catalysts: Better-than-expected sales performance (timeline: 2Q25).

Han’s Laser (002008 CH): Beneficiary of Apple’s Supply Chain Shift

As a key laser equipment supplier to Apple, Han’s Laser is poised to benefit from Apple’s diversification and capacity expansion in India, as well as new product launches such as iPhone 17 Slim and iPhone 18 Flip Phone.
The PCB tools business will benefit from China’s import substitution trend and AI-driven capacity expansion.
The high-power and pan-semi (LED, packaging) tools segments are set for recovery, supported by cyclical upturns and increased 3C capex.
Target price: RMB 32.20, based on 26.1x 2025F PE.
Catalysts: Stronger order momentum recovery (timeline: 2Q25).

Innovent (1801 HK): Clinical Excellence and New Product Launches

1Q25 pharmaceutical revenue surged over 40% to RMB 2.4 billion; the company expects six more market approvals in 2025.
Innovent is targeting drug sales of RMB 20 billion by 2027, implying a 30%+ CAGR (2024-27).
Approval of the blockbuster Mazdutide (for obesity and type 2 diabetes) from NMPA is anticipated in 2025.
Out-licensed IBI3009 (DLL3-targeted ADC) to Roche, securing an $80 million upfront payment and milestones.
2025-27 revenue CAGR estimate raised from 32% to 33%; adjusted net earnings for 2025-27 refined to RMB 827m/1,128m/1,496m.
BUY rating with a target price of HK$78.00 (DCF model, 11% WACC, 4% terminal growth).
Catalysts: Strong results, R&D milestones, and new launches (timeline: 2H25).

JD Logistics (2618 HK): Domestic Leader, Attractive Valuation

Forecast to sustain 7.8% core earnings CAGR (2025-27), driven by penetration into Taobao/Tmall brands/merchants and international expansion.
95% of revenue comes from the domestic market, providing insulation from global trade tensions.
Revenue growth for 2025 is expected to accelerate, with management guiding for low-teens year-on-year growth.
Current valuation at 10.2x 2025F core PE (4.2x ex-net cash).
Target price: HK$22.00 (DCF-based).
Catalysts: Favorable policies, Alibaba collaboration, capacity expansion (timeline: 2025).

Prudential (2378 HK): Growth Momentum and Capital Management

1Q25 new business profit (NBP) up 12% year-on-year, with its China JV delivering double-digit growth.
Positive margin improvement expected from product repricing and mix optimization.
Tariff uncertainties have minimal impact on insurance sales; less sensitivity to equity market volatility compared to AIA.
For every 10% equity market decline, Prudential’s profit before tax and shareholder equity would fall by 12.5% and 1.8% respectively (versus AIA’s 18.5% and 3.5%).
BUY rating with a target price of HK$128.00 (1.0x 2025F PE).
Major catalyst: New capital management plan in August, with a potential US$1.5 billion buyback over three years.

Sino Biopharm (1177 HK): Oncology Pipeline and Revenue Acceleration

Notable clinical progress in oncology, with 12 oral presentations and 30+ posters at the 2025 ASCO Annual Meeting.
Key drugs Anlotinib and TQB2102 demonstrated significant efficacy in clinical trials.
2024 revenue reached RMB 28.87 billion (+10.2% year-on-year); oncology drugs led with RMB 10.7 billion (+22%).
Six new drugs approved in 2024 are expected to drive double-digit revenue growth in 2025, with innovative products projected to contribute 50% of total revenue and 60% by 2027.
Target price: HK$5.80 (SOTP valuation: HK$1.90/share at 8x 2025F PE for existing drugs, NAV-derived pipeline value HK$3.90/share).
Catalysts: Double-digit revenue growth, new product launches, and clinical progress (timeline: 2H25).

Shuanghuan Driveline (002472 CH): EV and Smart Actuator Outperformance

Well-positioned for growth in the EV market, overseas expansion, and higher-value product mix (coaxial gearboxes, smart actuators).
Gear content per vehicle for smart actuators has exceeded RMB 1,000 for select projects, up from RMB 500-700 for metal gears.
The robotic reducer segment is expected to benefit from the boom in humanoid robot investment.
Double-digit core business growth anticipated over the medium term.
BUY rating with a target price of RMB 41.90 (27.3x 2025F PE, 1.0x PEG).
Catalyst: Humanoid robot development updates (timeline: 2Q25).

Xiaomi Corp (1810 HK): IoT, EV, and AI Ecosystem Leadership

Xiaomi’s influence in smartphones, IoT devices, and the EV market strengthens its AI ecosystem edge.
Minimal exposure to US markets limits geopolitical risk.
Upcoming catalysts include the YU7 SUV launch in June, robust sales during 618 promotions, and solid 2Q25 results in August.
The recent SU7 accident is expected to have minimal brand impact mid- to long-term.
BUY rating maintained with a target price of HK$69.90 (SOTP: HK$52.10 core business at 30x 2025F PE, HK$17.80 for EV business at 10-year DCF, 9.6% WACC).
Catalysts: Investor Day, YU7 launch event (timeline: June-August 2025).

Valuation Snapshot for Key Alpha Picks

Conclusion: Focus on Domestic Resilience and Innovation

In a volatile macro environment, the June Alpha Picks prioritize companies with strong domestic exposure, robust growth catalysts, and sector leadership. The portfolio is well-positioned to capture upside from policy support, innovative product launches, and resilient consumer demand, while mitigating global trade uncertainties. Investors should keep a close watch on upcoming catalysts such as product launches, earnings results, and capital management initiatives for further upside potential.