Blue Lotus China New Economy Research, Blue Lotus Research Institute

Eric Wen

Blue Lotus China New Economy Research

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

Equity Bottom-Up

<ul>
<li>In our view, China growth equity faces high geopolitical uncertainty in C3Q24 ahead of the US election, but can experience a relief rally in C1Q24.</li>
<li>We prepared high beta and low risk recommendations for 2024</li>
<li>For low-risk, we recommend JD/JDL/JDH, Tencent and Luckin. For high beta, we recommend BEKE, LI Auto and Kuaishou.</li>
</ul>


In our view, China growth equity faces high geopolitical uncertainty in C3Q24 ahead of the US election, but can experience a relief rally in C1Q24.
We prepared high beta and low risk recommendations for 2024
For low-risk, we recommend JD/JDL/JDH, Tencent and Luckin. For high beta, we recommend BEKE, LI Auto and Kuaishou.


[Blue Lotus Sector Update]: 2024 High Conviction Idea: Two Scenarios Towards Year End

China New Economy Equity Analyst, Blue Lotus Research Institute

Robert McKay

China New Economy Equity Analyst

Thematic (Sector/Industry)

<ul>
<li>China consumption shows rebounding demand following appreciation in asset values and home appliance subsidies. A record number of parcels were delivered last week, while home appliance sales grew rapidly;</li>
<li>We’ve raised 4Q estimates for online shopping growth given the recent demand trends which we expect to sustain through the quarter, so long as stimulus remains forthcoming;</li>
<li>JD and BABA remain our top ecommerce picks given their exposure to recent home appliance subsidies, as well as benefiting from a longer-term improvement in consumer sentiment.</li>
</ul>


China consumption shows rebounding demand following appreciation in asset values and home appliance subsidies. A record number of parcels were delivered last week, while home appliance sales grew rapidly;
We’ve raised 4Q estimates for online shopping growth given the recent demand trends which we expect to sustain through the quarter, so long as stimulus remains forthcoming;
JD and BABA remain our top ecommerce picks given their exposure to recent home appliance subsidies, as well as benefiting from a longer-term improvement in consumer sentiment.


Old E-Commerce Names Are The Biggest Winners of New Stimulus

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 Capital Markets

Hive Box Holdings / Equity Capital Markets

<ul>
<li>In this insight we compare Hive Box to InPost, a smart locker specialist</li>
<li>The firms play in different geographies, making apples:apples comps tough</li>
<li>In the absence of better comps, comparing Hive Box to InPost still useful</li>
</ul>


In this insight we compare Hive Box to InPost, a smart locker specialist
The firms play in different geographies, making apples:apples comps tough
In the absence of better comps, comparing Hive Box to InPost still useful


Hive Box Holdings Pre-IPO, Part 3: Hive Box Vs InPost Group: Similarities & (BIG) Differences

Alibaba Group Holding  / Equity Capital Markets

To match service levels offered by <a href="https://www.smartkarma.com/entities/446" target="_blank" data-smartkarma-citation="entities:446:1">JD.com Inc (ADR) (JD US)</a> and leading express carrier <a href="https://www.smartkarma.com/entities/4128" target="_blank" data-smartkarma-citation="entities:4128:1">S.F. Holding Co Ltd (002352 CH)</a>, <a href="https://www.smartkarma.com/entities/787" target="_blank" data-smartkarma-citation="entities:787:1">Alibaba Group Holding Ltd (BABA US)</a> and its logistics partners are making a belated push to invest in first- and last-mile parcel delivery capacity. BABA and its partners have so far avoided making the large investments needed to control 100% of their parcel delivery networks. Instead of direct ownership of first- and last-mile assets, BABA has tried to rely upon the 'transparency' provided by its technologically sophisticated logistics subsidiary, CaiNiao Network (CN). But five years after BABA set up CN, JD.com's continued lead in logistics quality and logistics speed -- confirmed in private surveys of Chinese consumers -- seems to have convinced BABA and its partners that they must finally take the plunge.Battle lines in this coming logistics war have been drawn over the past year or so. JD.com established JD Logistics in April 2017, and the private company recently raised US$2.5 bn at a valuation of US$13.4 bn. SF Express -- China's largest express carrier by revenue -- already offers first- and last-mile delivery, and has shown a willingness to butt heads with BABA. The five smaller express companies aligned with BABA have recently announced moves that will bring them even closer to the e-commerce giant; there are also indications these express companies are stepping up their own first- and last-mile investments at the behest of BABA.For the five carriers aligned with BABA, a belated push into ownership of first- and last-mile service will require an enormous increase in capital expenditures. The five carriers had combined capex of about 8.3 bn RMB in 2017; we estimate the push to acquire control of first- and last-mile capacity could require additional annual capex of 25 bn RMB or more over the next few years (BABA itself had CapEx of 29.8 bn RMB in its latest fiscal year). Such a dramatic increase in capital spending -- assuming it is mainly shouldered by the express companies -- will require significant, dilutive fundraising by these five express carriers over the next few years; we also anticipate initial returns on these investments will be very low.Alternatively, if it is BABA's private logistics subsidiary CN that does the heavy lifting, this would likely bring forward the timing of that company's IPO (it was valued at US$20 bn in a September 2017 funding round). We do not believe the expansion of first- and last-mile capacity is part of CN's projected total CapEx of 100 bn RMB between 2017-2021. The ultimate beneficiary of this costly expansion of express networks? Alibaba, of course. As a result of the expected push into first- and last-mile delivery, the e-commerce giant will likely end up with deeper reach and faster, more reliable delivery service. These improvements should allow it to retain its position as China's pre-eminent e-commerce company. The apparent asymmetry of expected capex and expected benefits from first- and last-mile investments -- express companies invest, BABA reaps the benefits -- suggests a pair trade: Long BABA against Short positions in China's express companies.

To match service levels offered by JD.com Inc (ADR) (JD US) and leading express carrier S.F. Holding Co Ltd (002352 CH), Alibaba Group Holding Ltd (BABA US) and its logistics partners are making a belated push to invest in first- and last-mile parcel delivery capacity. BABA and its partners have so far avoided making the large investments needed to control 100% of their parcel delivery networks. Instead of direct ownership of first- and last-mile assets, BABA has tried to rely upon the 'transparency' provided by its technologically sophisticated logistics subsidiary, CaiNiao Network (CN). But five years after BABA set up CN, JD.com's continued lead in logistics quality and logistics speed -- confirmed in private surveys of Chinese consumers -- seems to have convinced BABA and its partners that they must finally take the plunge.Battle lines in this coming logistics war have been drawn over the past year or so. JD.com established JD Logistics in April 2017, and the private company recently raised US$2.5 bn at a valuation of US$13.4 bn. SF Express -- China's largest express carrier by revenue -- already offers first- and last-mile delivery, and has shown a willingness to butt heads with BABA. The five smaller express companies aligned with BABA have recently announced moves that will bring them even closer to the e-commerce giant; there are also indications these express companies are stepping up their own first- and last-mile investments at the behest of BABA.For the five carriers aligned with BABA, a belated push into ownership of first- and last-mile service will require an enormous increase in capital expenditures. The five carriers had combined capex of about 8.3 bn RMB in 2017; we estimate the push to acquire control of first- and last-mile capacity could require additional annual capex of 25 bn RMB or more over the next few years (BABA itself had CapEx of 29.8 bn RMB in its latest fiscal year). Such a dramatic increase in capital spending -- assuming it is mainly shouldered by the express companies -- will require significant, dilutive fundraising by these five express carriers over the next few years; we also anticipate initial returns on these investments will be very low.Alternatively, if it is BABA's private logistics subsidiary CN that does the heavy lifting, this would likely bring forward the timing of that company's IPO (it was valued at US$20 bn in a September 2017 funding round). We do not believe the expansion of first- and last-mile capacity is part of CN's projected total CapEx of 100 bn RMB between 2017-2021. The ultimate beneficiary of this costly expansion of express networks? Alibaba, of course. As a result of the expected push into first- and last-mile delivery, the e-commerce giant will likely end up with deeper reach and faster, more reliable delivery service. These improvements should allow it to retain its position as China's pre-eminent e-commerce company. The apparent asymmetry of expected capex and expected benefits from first- and last-mile investments -- express companies invest, BABA reaps the benefits -- suggests a pair trade: Long BABA against Short positions in China's express companies.

Battle Lines Drawn As BABA Builds Out First/Last-Mile Capacity; But Who Will Fund 75+ Bn CNY CapEx?

<ul>
<li>In this insight we provide an overview of Hive Box's business and its history</li>
<li>We then go into detail on key relationships &amp; investors, focusing on SF Holding</li>
<li>We end with some initial questions and what's up next in the IPO process</li>
</ul>


In this insight we provide an overview of Hive Box's business and its history
We then go into detail on key relationships &amp; investors, focusing on SF Holding
We end with some initial questions and what's up next in the IPO process


Hive Box Holdings Pre-IPO, Part 1: What They Do, History, Relationships, & What's Next

China

JD.com Inc is an online direct sales company in China.  The Company offers a wide selection of products through its website and mobile applications.  JD.com sells appliances, computers, digital products, communication products, garments, books, and household items to consumers and vendors.

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JD.com Inc (ADR) (JD US)

[Blue Lotus Sector Update]: 2024 High Conviction Idea: Two Scenarios Towards Year End

China growth equity faces geopolitical uncertainty in C3Q24 due to the US election, but a relief rally is expected in C1Q24. Blue Lotus prepared...

Blue Lotus Research Institute

Old E-Commerce Names Are The Biggest Winners of New Stimulus

China's consumption seeing increased demand for home appliances and online shopping, leading to record parcel deliveries. JD and BABA are top...

Blue Lotus Research Institute

Hive Box Holdings Pre-IPO, Part 3: Hive Box Vs InPost Group: Similarities & (BIG) Differences

In this insight we compare Hive Box to InPost, a publicly-traded smart locker and e-comm fulfillment specialist based in Poland. It's not a perfect...

Tracking Traffic

Battle Lines Drawn As BABA Builds Out First/Last-Mile Capacity; But Who Will Fund 75+ Bn CNY CapEx?

As China's largest smart locker company Hive Box prepares for a potential IPO in Hong Kong, we are resurfacing this old insight to help readers...

Daniel Hellberg

Hive Box Holdings Pre-IPO, Part 1: What They Do, History, Relationships, & What's Next

Chinese smart locker operator Hive Box has filed to go public in Hong Kong. In this insight we offer an overview of its business, a corporate...

Tracking Traffic

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

[Blue Lotus Sector Update]: 2024 High Conviction Idea: Two Scenarios Towards Year End

​China growth equity faces geopolitical uncertainty in C3Q24 due to the US election, but a relief rally is expected in C1Q24. Blue Lotus prepared...

Blue Lotus Research Institute

Old E-Commerce Names Are The Biggest Winners of New Stimulus

​China's consumption seeing increased demand for home appliances and online shopping, leading to record parcel deliveries. JD and BABA are top...

Blue Lotus Research Institute

Hive Box Holdings Pre-IPO, Part 3: Hive Box Vs InPost Group: Similarities & (BIG) Differences

In this insight we compare Hive Box to InPost, a publicly-traded smart locker and e-comm fulfillment specialist based in Poland. It's not a perfect...

Tracking Traffic

Battle Lines Drawn As BABA Builds Out First/Last-Mile Capacity; But Who Will Fund 75+ Bn CNY CapEx?

As China's largest smart locker company Hive Box prepares for a potential IPO in Hong Kong, we are resurfacing this old insight to help readers...

Daniel Hellberg

Hive Box Holdings Pre-IPO, Part 1: What They Do, History, Relationships, & What's Next

Chinese smart locker operator Hive Box has filed to go public in Hong Kong. In this insight we offer an overview of its business, a corporate...

Tracking Traffic

China growth equity faces geopolitical uncertainty in C3Q24 due to the US election, but a relief rally is expected in C1Q24. Blue Lotus prepared...

China's consumption seeing increased demand for home appliances and online shopping, leading to record parcel deliveries. JD and BABA are top...