Greater China Equity Long/Short Analyst

Eric Chen

Equity Bottom-Up

<ul>
<li>Sentiment driven rally is fading. Although COVID exit remains swing factor, individual company’s performance will increasingly be driven by their business models.</li>
<li>Our proprietary store expansion framework suggests divergent growth outlook for major players - stretched for Haidilao, moderate for Jiumaojiu and Yum China, and ample for Xiabuxiabu.</li>
<li>Xiabuxiabu is our top pick due to its strong turnaround not yet priced in depressed valuation. We also like Yum China but stay cautious on Jiumaojiu and Haidilao on valuation.     </li>
</ul>


Sentiment driven rally is fading. Although COVID exit remains swing factor, individual company’s performance will increasingly be driven by their business models.
Our proprietary store expansion framework suggests divergent growth outlook for major players - stretched for Haidilao, moderate for Jiumaojiu and Yum China, and ample for Xiabuxiabu.
Xiabuxiabu is our top pick due to its strong turnaround not yet priced in depressed valuation. We also like Yum China but stay cautious on Jiumaojiu and Haidilao on valuation.     


China Catering Sector: In Search of Alpha

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Budweiser Brewing  APAC  / Equity Bottom-Up

<ul>
<li>Hong Kong secular bull market has consolidated within its long-term support/resistance range of 22700 and 24000.  With increasing momentum and strength the market is poised for the next leg up.</li>
<li>Hong Kong tech and consumer discretionary sectors continue to have strong momentum with healthcare and materials sectors showing renewed strength.</li>
<li>
<a href="https://www.smartkarma.com/entities/budweiser-brewing-co-apac-ltd" target="_blank" data-smartkarma-citation="entities:28077:1" rel="noopener">Budweiser Brewing APAC (1876 HK)</a> shares bounce with the appointment of new CEO, pointing to increasing China revenue.  <a href="https://www.smartkarma.com/entities/yum-china-holdings-inc-0533692c-6dae-4014-baa1-ed0b050638f2" target="_blank" data-smartkarma-citation="entities:29259:1" rel="noopener">Yum China Holdings (9987 HK)</a> reported strong earnings and increased its dividend.</li>
</ul>


Hong Kong secular bull market has consolidated within its long-term support/resistance range of 22700 and 24000.  With increasing momentum and strength the market is poised for the next leg up.
Hong Kong tech and consumer discretionary sectors continue to have strong momentum with healthcare and materials sectors showing renewed strength.

Budweiser Brewing APAC (1876 HK) shares bounce with the appointment of new CEO, pointing to increasing China revenue.  Yum China Holdings (9987 HK) reported strong earnings and increased its dividend.


BUY/SELL/HOLD: Hong Kong Stock Update (March 11)

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>The 1H24 results were inline but the underlying was slightly positive (e.g. resilient GP margin, as well as the restaurant-level OP margin).</li><li>We agree that both Tai Er and Song are making loads of efforts to transform, but under such a tough industry and macro environment, we would not be able to turn positive, unless we can really see a compelling improvement in figures in the near term.</li><li>Despite the macro weakness, both Tai Er and Song are actively transforming themselves and we think they are making progress.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

The 1H24 results were inline but the underlying was slightly positive (e.g. resilient GP margin, as well as the restaurant-level OP margin).We agree that both Tai Er and Song are making loads of efforts to transform, but under such a tough industry and macro environment, we would not be able to turn positive, unless we can really see a compelling improvement in figures in the near term.Despite the macro weakness, both Tai Er and Song are actively transforming themselves and we think they are making progress.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Jiumaojiu (9922 HK) - Transforming Despite Tough Macro Backdrop

<ul><li>Jiumaojiu issued a profit warning for 1H24, which is still awful compared to our already negative outlook.</li><li>With risks to linger in the near future (SSSG drop may sustain and store expansion may also slow down, etc.), plus the fairly high valuation (23x FY24E P/E), we now cut our FY24E-26E net profit forecasts by 69%-57% and downgrade the stock to HOLD.</li><li>We also think the implications for the catering sector and most of the peers are rather gloomy.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Jiumaojiu issued a profit warning for 1H24, which is still awful compared to our already negative outlook.With risks to linger in the near future (SSSG drop may sustain and store expansion may also slow down, etc.), plus the fairly high valuation (23x FY24E P/E), we now cut our FY24E-26E net profit forecasts by 69%-57% and downgrade the stock to HOLD.We also think the implications for the catering sector and most of the peers are rather gloomy.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Jiumaojiu (9922 HK) - We See Risks in 2H24E After the Miss in 2Q24

<ul><li>Maintain BUY and raise TP to HK$8.39 (we now assume a gradual improvement in SSS recovery rate onwards as the group is rolling out more new initiatives this year).</li><li>We are still cautious about catering sector, but JMJ’s numbers have stabilized lately.</li><li>A rebound in share price is possible given undemanding valuation (12x FY24E P/E) while our TP is based on 17x and 3-year sales/ NP CAGR are at 20%/ 25%.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Maintain BUY and raise TP to HK$8.39 (we now assume a gradual improvement in SSS recovery rate onwards as the group is rolling out more new initiatives this year).We are still cautious about catering sector, but JMJ’s numbers have stabilized lately.A rebound in share price is possible given undemanding valuation (12x FY24E P/E) while our TP is based on 17x and 3-year sales/ NP CAGR are at 20%/ 25%.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Jiumaojiu (9922 HK) - Resilient Margin in 2H23 with Positive Outlook

China

Jiumaojiu International Holdings Limited operates as a holding company. The Company, through its subsidiaries, focuses on manufactures food products. Jiumaojiu International Holdings serves customers in China.

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Jiumaojiu (9922 HK)

China Catering Sector: In Search of Alpha

Sentiment-driven rally is fading. We expect investors' focus to shift to company fundamental. Our store expansion framework points to Xiabu as the...

Eric Chen

BUY/SELL/HOLD: Hong Kong Stock Update (March 11)

HK is consolidating within its long term support/resistance levels of 22700 and 24000. Mainland buying is at historically high levels. Bud APAC...

David Mudd