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>Even though we are long-term optimistic on the rise of Chinese consumer brands, we believe short-term optimism is misplaced. </li>
<li>Two themes: (1) structural changes led by China’s transition to an older and more affluent society, (2) substitution and globalization that can break the ceiling for valuation;</li>
<li>Our TOP PICKS are Li Auto, Atour, Luckin, FUTU, BEKE and Miniso</li>
</ul>


Even though we are long-term optimistic on the rise of Chinese consumer brands, we believe short-term optimism is misplaced. 
Two themes: (1) structural changes led by China’s transition to an older and more affluent society, (2) substitution and globalization that can break the ceiling for valuation;
Our TOP PICKS are Li Auto, Atour, Luckin, FUTU, BEKE and Miniso


[Consumer Brands Deep Dive]:Structural and Substitution Drive Chinese Consumer

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>China’s passenger-vehicle (PV) retail sales volume rose 11% YoY in Feb 2023, 4% lower than our prior forecast.</li><li>Wholesale volume also rose 11% YoY last month, 13% higher than our prior projection, again largely due to inventory restocking and higher export volume.</li><li>PV exports surged 86% YoY to about 271,000 units in Feb 2023. Automakers in China added about 131,000 units of inventories into their dealers in Feb 2023 based on our calculations, which has led to 2.2 months of inventories based on our projected retail sales volume for Mar and Apr 2023. </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.

China’s passenger-vehicle (PV) retail sales volume rose 11% YoY in Feb 2023, 4% lower than our prior forecast.Wholesale volume also rose 11% YoY last month, 13% higher than our prior projection, again largely due to inventory restocking and higher export volume.PV exports surged 86% YoY to about 271,000 units in Feb 2023. Automakers in China added about 131,000 units of inventories into their dealers in Feb 2023 based on our calculations, which has led to 2.2 months of inventories based on our projected retail sales volume for Mar and Apr 2023. 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.

China Auto Sector – A trough in the short term?

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Private Capital Markets

<ul>
<li>AISpeech is a high-tech start up specializing in computer speech recognition and AI chip design in China.</li>
<li>The company is developing intelligent voice interaction technology designed to improve human-machine interaction. It is also developing human-computer dialogue operating system and artificial intelligence chip modules to improve speech recognition.</li>
<li>AISpeech is in the process of listing in the Shanghai Star Market, aiming to raise about US$1.5 billion.</li>
</ul>


AISpeech is a high-tech start up specializing in computer speech recognition and AI chip design in China.
The company is developing intelligent voice interaction technology designed to improve human-machine interaction. It is also developing human-computer dialogue operating system and artificial intelligence chip modules to improve speech recognition.
AISpeech is in the process of listing in the Shanghai Star Market, aiming to raise about US$1.5 billion.


AISpeech: Leading Company in China for AI-Driven Speech Recognition Technology

Equity Bottom-Up

<ul>
<li>Li Auto reported 4Q22 top line in line, and bottom line beating consensus and our estimate, thanks to recovered vehicle margin and improved SG&amp;A efficiency. </li>
<li>We reiterate Li Auto as our top pick, because of 1) positive growth outlook in 2023 driven by intact model cycle (L9/L8/L7); </li>
<li>2) margin upside in 2023 driven by expanded scale economy and sharing of auto parts among its product line-ups; and 3) less impacted by Tesla’s price war.</li>
</ul>


Li Auto reported 4Q22 top line in line, and bottom line beating consensus and our estimate, thanks to recovered vehicle margin and improved SG&amp;A efficiency. 
We reiterate Li Auto as our top pick, because of 1) positive growth outlook in 2023 driven by intact model cycle (L9/L8/L7); 
2) margin upside in 2023 driven by expanded scale economy and sharing of auto parts among its product line-ups; and 3) less impacted by Tesla’s price war.


[Li Auto Inc. (LI US) Earnings Review]: Intact Model Cycle Drives Growth in 2023

<ul><li>Our top pick. Li Auto’s 4Q22 earnings were largely in line with our previous forecasts, in terms of both revenue and net profit.</li><li>Management projects recordhigh sales volume in 1Q23, which could be followed by another all-time high deliveries in 2Q23.</li><li>We believe such sequential growth in sales volume could be a positive catalyst for its share price. </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.

Our top pick. Li Auto’s 4Q22 earnings were largely in line with our previous forecasts, in terms of both revenue and net profit.Management projects recordhigh sales volume in 1Q23, which could be followed by another all-time high deliveries in 2Q23.We believe such sequential growth in sales volume could be a positive catalyst for its share price. 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.

China

Li Auto Inc. manufactures automobiles. The Company designs, develops, and sells smart new energy electric sport utility vehicles. Li Auto conducts businesses in China.

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Li Auto (LI US)

[Consumer Brands Deep Dive]:Structural and Substitution Drive Chinese Consumer

Chinese underconsumption is only half true. It only occurs in categories associated with development stages; Our TOP PICKS are Li Auto, Atour,...

Blue Lotus Research Institute

China Auto Sector – A trough in the short term?

Wholesale volume also rose 11% YoY last month, 13% higher than our prior projection, again largely due to inventory restocking and higher export...

CMB International

AISpeech: Leading Company in China for AI-Driven Speech Recognition Technology

AISpeech is a high-tech start up specializing in computer speech recognition and AI chip design in China. AISpeech is in the process of listing in...

Douglas Kim

[Li Auto Inc. (LI US) Earnings Review]: Intact Model Cycle Drives Growth in 2023

We reiterate Li Auto as our top pick, because of 1) intact model cycle (L9/L8/L7); 2) margin upside in 2023; and 3) less impacted by Tesla’s price...

Blue Lotus Research Institute

Li Auto Inc. (LI US) – Well on track

Our top pick. Li Auto’s 4Q22 earnings were largely in line with our previous forecasts, in terms of both revenue and net profit.

CMB International

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