China/Asia TMT

Shawn Yang

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Thematic (Sector/Industry)

<ul>
<li>We view the rallies in Chinese Internet and Consumer names to be sustainable in C3Q23 as regulatory environment to be both favourable and macro environment to be conducive; </li>
<li>Our China Internet top picks are Meituan and Tencent, and investors could buy PDD and NetEase after 2Q23 earnings. </li>
<li>Domestic consumption will also bottom out, but sustainability only confines to a few, our top picks in China consumer names are Miniso, Luckin Coffee, and Atour.</li>
</ul>


We view the rallies in Chinese Internet and Consumer names to be sustainable in C3Q23 as regulatory environment to be both favourable and macro environment to be conducive; 
Our China Internet top picks are Meituan and Tencent, and investors could buy PDD and NetEase after 2Q23 earnings. 
Domestic consumption will also bottom out, but sustainability only confines to a few, our top picks in China consumer names are Miniso, Luckin Coffee, and Atour.


[Blue Lotus Sector Update]: Time to Buy China Internet and Consumer Names

<ul>
<li>We updated our revenue forecasts for ByteDance (China domestic) , with the industry models. We estimate that ByteDance's domestic ad revenue/eCommerce GMV/local lifestyle GTV will grow by 17%/50%/134% this year.</li>
<li>In the advertising space, we recommend Tencent and iQIYI. Both Tencent and iQIYI experienced a decline in their advertising revenue market share in 2022, followed by a rebound in 2023.</li>
<li>In transactional GMV/GTV, we prefer Meituan and Pinduoduo. Meituan's market share experienced a significant decline in 2022, but the decline rate is expected to narrow significantly this year.</li>
</ul>


We updated our revenue forecasts for ByteDance (China domestic) , with the industry models. We estimate that ByteDance's domestic ad revenue/eCommerce GMV/local lifestyle GTV will grow by 17%/50%/134% this year.
In the advertising space, we recommend Tencent and iQIYI. Both Tencent and iQIYI experienced a decline in their advertising revenue market share in 2022, followed by a rebound in 2023.
In transactional GMV/GTV, we prefer Meituan and Pinduoduo. Meituan's market share experienced a significant decline in 2022, but the decline rate is expected to narrow significantly this year.


[Blue Lotus Multi-Platform Sector Update]: ByteDance Forecasts and Implications for China Internet

<ul>
<li>XPEV: Xpeng and Volkswagen cooperation updates, per the analyst call with IR team (/)</li>
<li>3690.HK: NDRC adds guidelines for restoring consumption of catering and tourism (+)</li>
<li>241HK/ 6618HK：Central Discipline Committee launched crackdown on healthcare corruption (-)</li>
</ul>


XPEV: Xpeng and Volkswagen cooperation updates, per the analyst call with IR team (/)
3690.HK: NDRC adds guidelines for restoring consumption of catering and tourism (+)
241HK/ 6618HK：Central Discipline Committee launched crackdown on healthcare corruption (-)


China TMT Update-XPEV/3690HK/241HK/6618HK-Volkswagen Cooperation;Crackdown on Healthcare Corruption

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Bottom-Up

<ul>
<li>In June, mainstream parcel pricing declined by over 10% Y/Y, but SF Holding saw ASPs rise</li>
<li>We believe J&amp;T Global Express' planned IPO could negatively impact the industry in H2</li>
<li>Pricing pressure has increased, in our view, and we expect margins to decline in H2 23</li>
</ul>


In June, mainstream parcel pricing declined by over 10% Y/Y, but SF Holding saw ASPs rise
We believe J&amp;T Global Express' planned IPO could negatively impact the industry in H2
Pricing pressure has increased, in our view, and we expect margins to decline in H2 23


Monthly Chinese Express Tracker | Mainstream ASPs Down 10% in June | J&T IPO Impact? | (July 2023)

<ul>
<li>We expect CPNG to report C2Q23 revenue and profit in-line and (31.6%) vs. cons., respectively. CPNG's profit miss is largely due to rapid expansion in Taiwan...</li>
<li>...which we estimate it will impact net profit by up to 40% this year.  AliExpress continues its development in South Korea, Temu, is expected to put pressure on Coupang. </li>
<li>We maintain SELL on Coupang and revise down this year's EPS estimate by 16% and cut our TP to US$ 13.7 to reflect the changes on the profit side.</li>
</ul>


We expect CPNG to report C2Q23 revenue and profit in-line and (31.6%) vs. cons., respectively. CPNG's profit miss is largely due to rapid expansion in Taiwan...
...which we estimate it will impact net profit by up to 40% this year.  AliExpress continues its development in South Korea, Temu, is expected to put pressure on Coupang. 
We maintain SELL on Coupang and revise down this year's EPS estimate by 16% and cut our TP to US$ 13.7 to reflect the changes on the profit side.


[Coupang Inc. (CPNG US, SELL, TP US$13.7) TP Change]: Taiwan Expansion Will Lower the Profit Margin

China

PDD Holdings Inc. is a multinational commerce group that owns and operates a portfolio of businesses. The Company focuses on digital economy so that local communities and small businesses can benefit from the increased productivity and new opportunities. PDD Holdings has built a network of sourcing, logistics, and fulfillment capabilities for its underlying businesses.

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PDD Holdings (PDD US)

[Blue Lotus Sector Update]: Time to Buy China Internet and Consumer Names

We view the rallies in Chinese Internet and Consumer names to be sustainable in C3Q23 as regulatory environment to be both favourable and macro...

Blue Lotus Research Institute

[Blue Lotus Multi-Platform Sector Update]: ByteDance Forecasts and Implications for China Internet

We estimate that ByteDance's domestic ad revenue/eCommerce GMV/local lifestyle GTV will grow by 17%/50%/134% this year. We prefer Tencent, iQiyi,...

Blue Lotus Research Institute

China TMT Update-XPEV/3690HK/241HK/6618HK-Volkswagen Cooperation;Crackdown on Healthcare Corruption

XPEV: Xpeng and Volkswagen cooperation updates(/);3690.HK: NDRC adds guidelines for restoring consumption(+);241HK/6618HK：Central Discipline...

Blue Lotus Research Institute

Monthly Chinese Express Tracker | Mainstream ASPs Down 10% in June | J&T IPO Impact? | (July 2023)

Monthly figures from the China-listed express companies show that parcel pricing continued to decline in June, with slowing e-commerce sales and...

Tracking Traffic

[Coupang Inc. (CPNG US, SELL, TP US$13.7) TP Change]: Taiwan Expansion Will Lower the Profit Margin

We expect CPNG to report C2Q23 revenue and profit in-line and (31.6%) vs. cons., respectively. CPNG's profit miss is largely due to rapid expansion...

Blue Lotus Research Institute

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