Blue Lotus Research Institute

Andy Fu

China growth and global non-US Internet equities

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>O2O has made a huge impact on China's e-commerce scene in 2024. The Coupang-invented model suits mega cities with dense population and order volumes;</li>
<li>Online drug O2O, in particular, has gained momentum because drugs, prescription and non-prescription have robust storage and distribution needs on the ground for O2O use;</li>
<li>Meituan's drug sales has grown its overall market share from 3.6% in 2022 to 7.1% in 2024. We project it to grow to 12.3% by 2030. </li>
</ul>


O2O has made a huge impact on China's e-commerce scene in 2024. The Coupang-invented model suits mega cities with dense population and order volumes;
Online drug O2O, in particular, has gained momentum because drugs, prescription and non-prescription have robust storage and distribution needs on the ground for O2O use;
Meituan's drug sales has grown its overall market share from 3.6% in 2022 to 7.1% in 2024. We project it to grow to 12.3% by 2030. 


Meituan (3690 HK): Online Drug Sales Is the First Sweet Spot of O2O Vs. E-Commerce

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyze the 3Q2024 Shanghai/Shenzhen northbound Connect flows with our data engine as the exchange changed the rule to only disclose north bound position once a quarter.</li>
<li>We estimate that the inflows in 3Q were US$7,684 million and holdings were USD340bn.</li>
<li>We highlight flows for Midea, Moutai, Ping An Insurance, Catl, Yangtze Power.</li>
</ul>


We analyze the 3Q2024 Shanghai/Shenzhen northbound Connect flows with our data engine as the exchange changed the rule to only disclose north bound position once a quarter.
We estimate that the inflows in 3Q were US$7,684 million and holdings were USD340bn.
We highlight flows for Midea, Moutai, Ping An Insurance, Catl, Yangtze Power.


Northbound Flows (3Q2024): Wait and See Mode

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Capital Markets

Beijing Yuanxin Technology Group Co Ltd / Equity Capital Markets

<ul>
<li>The essence of Yuanxin's business is selling drugs.Although Yuanxin is backed by Tencent, it’s difficult to come up with more outstanding advantages to compete with Alibaba Health and JD Health.</li>
<li>We have doubts about Yuanxin’s core competitiveness and sustainable profitability, which are also far behind its peers. In our view, the market/investors may find it difficult to accept such stories.</li>
<li>Pre-IPO valuation level of Yuanxin has greatly exceeded the valuation of its drugstore business model. Yuanxin’s valuation should be lower than peers, or for example, P/S ratio of below 1x.</li>
</ul>


The essence of Yuanxin's business is selling drugs.Although Yuanxin is backed by Tencent, it’s difficult to come up with more outstanding advantages to compete with Alibaba Health and JD Health.
We have doubts about Yuanxin’s core competitiveness and sustainable profitability, which are also far behind its peers. In our view, the market/investors may find it difficult to accept such stories.
Pre-IPO valuation level of Yuanxin has greatly exceeded the valuation of its drugstore business model. Yuanxin’s valuation should be lower than peers, or for example, P/S ratio of below 1x.


Pre-IPO Beijing Yuanxin Technology Group (PHIP Update) - Risk of Overvaluation and Poor Profit Model

<ul>
<li>Yuanxin’s financial performance has not improved and it is still in a state of continuous loss. At such low gross margin level, Yuanxin will find it difficult to make money.</li>
<li>As China's retail pharmacy market has entered a new era of integration as the industry growth is slowing down, the challenges Yuanxin has to face would be different from before.</li>
<li>When the market pattern has been basically determined, Yuanxin has little chance to break through. Being acquired may be a better outcome. If IPO, valuation would be lower than peers.</li>
</ul>


Yuanxin’s financial performance has not improved and it is still in a state of continuous loss. At such low gross margin level, Yuanxin will find it difficult to make money.
As China's retail pharmacy market has entered a new era of integration as the industry growth is slowing down, the challenges Yuanxin has to face would be different from before.
When the market pattern has been basically determined, Yuanxin has little chance to break through. Being acquired may be a better outcome. If IPO, valuation would be lower than peers.


Pre-IPO Beijing Yuanxin Technology Group - Some Points Worth the Attention

Guangzhou Baiyunshan Pharmaceu / Equity Bottom-Up

<ul>
<li>Baiyunshan is not a typical TCM company. As Great Commerce accounts for the majority of revenue, it clearly drags down the quality of total assets and growth expectation for valuation.</li>
<li>As Jin Ge and Wang Lao Ji are facing different challenges, the overall growth/profitability of Baiyunshan is under pressure.Due to uncompetitive product line, Baiyunshan’s future growth appears to lack momentum.</li>
<li>The valuation of Baiyunshan-A share is still expensive, but Baiyunshan-H share is attractive. After all, the future consumption recovery would be beneficial for boosting Baiyunshan’s valuation. Then, trading opportunity occurs. </li>
</ul>


Baiyunshan is not a typical TCM company. As Great Commerce accounts for the majority of revenue, it clearly drags down the quality of total assets and growth expectation for valuation.
As Jin Ge and Wang Lao Ji are facing different challenges, the overall growth/profitability of Baiyunshan is under pressure.Due to uncompetitive product line, Baiyunshan’s future growth appears to lack momentum.
The valuation of Baiyunshan-A share is still expensive, but Baiyunshan-H share is attractive. After all, the future consumption recovery would be beneficial for boosting Baiyunshan’s valuation. Then, trading opportunity occurs. 


Guangzhou Baiyunshan Pharmaceutical (874.HK) - When Valuation Is Low Enough, Drawbacks Are Tolerable

China

Laobaixing Pharmacy Chain JSC wholesales and distributes medical products. The Company provides Chinese herbal medicines, antibiotic preparations, biochemical drugs, and other products. Laobaixing Pharmacy Chain also provides medical equipment.

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Laobaixing Pharmacy Chain (603883 CH)

Meituan (3690 HK): Online Drug Sales Is the First Sweet Spot of O2O Vs. E-Commerce

O2O revolutionizes China's e-commerce, especially in online drug sales with Meituan leading the way to significant market share growth. The share...

Blue Lotus Research Institute

Northbound Flows (3Q2024): Wait and See Mode

We analyzed Northbound connect data for 3Q2024 and highlight flows for Moutai, Midea, Wuliangye, Catl, Gree Electric Appliances.

Ke Yan, CFA, FRM

Pre-IPO Beijing Yuanxin Technology Group (PHIP Update) - Risk of Overvaluation and Poor Profit Model

The dilemma of single revenue model and excessive reliance on drug sales is hard to overcome.Due to low gross margin, it's difficult to generate...

Xinyao (Criss) Wang

Pre-IPO Beijing Yuanxin Technology Group - Some Points Worth the Attention

Yuanxin has weak profitability. It's questionable whether investors can achieve expected returns on this company.We think Yuanxin may eventually be...

Xinyao (Criss) Wang

Guangzhou Baiyunshan Pharmaceutical (874.HK) - When Valuation Is Low Enough, Drawbacks Are Tolerable

Due to the special "positioning" of Baiyunshan's business, the market's enthusiasm for the company is not high. But when its valuation is low...

Xinyao (Criss) Wang

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Meituan (3690 HK): Online Drug Sales Is the First Sweet Spot of O2O Vs. E-Commerce

​O2O revolutionizes China's e-commerce, especially in online drug sales with Meituan leading the way to significant market share growth. The share...

Blue Lotus Research Institute

Northbound Flows (3Q2024): Wait and See Mode

We analyzed Northbound connect data for 3Q2024 and highlight flows for Moutai, Midea, Wuliangye, Catl, Gree Electric Appliances.

Ke Yan, CFA, FRM

Pre-IPO Beijing Yuanxin Technology Group (PHIP Update) - Risk of Overvaluation and Poor Profit Model

The dilemma of single revenue model and excessive reliance on drug sales is hard to overcome.Due to low gross margin, it's difficult to generate...

Xinyao (Criss) Wang

Pre-IPO Beijing Yuanxin Technology Group - Some Points Worth the Attention

Yuanxin has weak profitability. It's questionable whether investors can achieve expected returns on this company.We think Yuanxin may eventually be...

Xinyao (Criss) Wang

Guangzhou Baiyunshan Pharmaceutical (874.HK) - When Valuation Is Low Enough, Drawbacks Are Tolerable

Due to the special "positioning" of Baiyunshan's business, the market's enthusiasm for the company is not high. But when its valuation is low...

Xinyao (Criss) Wang

O2O revolutionizes China's e-commerce, especially in online drug sales with Meituan leading the way to significant market share growth. The share...