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>ZLAB: Laekna Therapeutics IPO’ed in HK with two AKT inhibitors. We believe it will complement PARP inhibitor (+)</li>
<li>LKNCY: COTTI Coffee opened its No.4k store，but may lack sustainability(/)</li>
<li>002202CH/601615CH：Siemens Gamesa’s wind turbine suffers quality recall, may benefit Chinese vendors (-)</li>
</ul>


ZLAB: Laekna Therapeutics IPO’ed in HK with two AKT inhibitors. We believe it will complement PARP inhibitor (+)
LKNCY: COTTI Coffee opened its No.4k store，but may lack sustainability(/)
002202CH/601615CH：Siemens Gamesa’s wind turbine suffers quality recall, may benefit Chinese vendors (-)


China TMT Update July 3-ZLAB/LKNCY/002202CH/601615CH: Laekna Therapeutics IPO’ed in HK

<ul>
<li>PDD/1024.HK/700.HK: PDD adds an entrance that is dedicated to viewing live broadcasts (+/-/-)</li>
<li>Luckin Coffee: Luckin Coffee cooperate with OneContract Cloud to develop internal contract management system, which is intended to improve the efficiency of franchise store opening.</li>
<li>BILI: Bilibili Will Change Video Display Metrics to Measure Watch Time Instead of View Counts (-)</li>
</ul>


PDD/1024.HK/700.HK: PDD adds an entrance that is dedicated to viewing live broadcasts (+/-/-)
Luckin Coffee: Luckin Coffee cooperate with OneContract Cloud to develop internal contract management system, which is intended to improve the efficiency of franchise store opening.
BILI: Bilibili Will Change Video Display Metrics to Measure Watch Time Instead of View Counts (-)


China TMT Update-PDD/1024.HK/700.HK/Luckin/BILI: PDD Adds Live Broadcasts;Bili Changes Video Display

<ul>
<li>NTES/700.HK: China’s NPPA publishes list of 89 domestic game code approval</li>
<li>9995HK/1801HK：RemeGen explored ADC-PD1 combination theray for its RC88 and RC108 with Innovent (-)</li>
<li>LKNCY/2150HK/ATAT/3690HK: Tourism spending maintain stable growth during Dragon Boat Festival, indicating sustainable recovery in service oriented consumption in China.(+)</li>
</ul>


NTES/700.HK: China’s NPPA publishes list of 89 domestic game code approval
9995HK/1801HK：RemeGen explored ADC-PD1 combination theray for its RC88 and RC108 with Innovent (-)
LKNCY/2150HK/ATAT/3690HK: Tourism spending maintain stable growth during Dragon Boat Festival, indicating sustainable recovery in service oriented consumption in China.(+)


China TMT Update-NTES/700.HK/9995HK/1801HK/LKNCY/2150HK/ATAT/3690HK:Game Code,ADC-PD1, Tourism Spend

Equity Bottom-Up

<ul>
<li>We expect Luckin to report 2Q23 rev. at 75.0% YoY and 30.1% QoQ to RMB5,771mn. We expect GPM, non-GAAP OPM, non-GAAP NPM to decline 3.7ppt, 3.6ppt, and 3.9ppt QoQ .</li>
<li>Luckin is putting scale ahead of profitability, surpassing 10k total stores in 2Q23 and heading to 12k total stores in 2023, while maintaining a decent margin. </li>
<li>We maintain the stock as BUY rating and cut TP by US$3.5 to US$37.5 (36x PE in 2024) to factor in the margin dilution effect from sales promotion.</li>
</ul>


We expect Luckin to report 2Q23 rev. at 75.0% YoY and 30.1% QoQ to RMB5,771mn. We expect GPM, non-GAAP OPM, non-GAAP NPM to decline 3.7ppt, 3.6ppt, and 3.9ppt QoQ .
Luckin is putting scale ahead of profitability, surpassing 10k total stores in 2Q23 and heading to 12k total stores in 2023, while maintaining a decent margin. 
We maintain the stock as BUY rating and cut TP by US$3.5 to US$37.5 (36x PE in 2024) to factor in the margin dilution effect from sales promotion.


Luckin Coffee (LKNCY US, BUY, TP US$37.5) TP Change:Promotion and Expansion Are the Main Theme

<ul>
<li>Luckin Coffee: Luckin Coffee sold 39mn cups of coffee in the first week of full launch of RMB9.9 per cup.</li>
<li>Nayuki: Media report that Nayuki may begin the franchise business in July</li>
<li>3690.HK/Douyin app is currently creating independent "entrances" and a "mall" for food delivery.</li>
</ul>


Luckin Coffee: Luckin Coffee sold 39mn cups of coffee in the first week of full launch of RMB9.9 per cup.
Nayuki: Media report that Nayuki may begin the franchise business in July
3690.HK/Douyin app is currently creating independent "entrances" and a "mall" for food delivery.


China TMT Update June 14-Luckin/Nayuki/3690.HK:Luckin Sold 39mn Cups of Coffee in the First Week

China

Luckin Coffee Inc. provides non-alcoholic beverages. The Company offers various types of coffee. Luckin Coffee serves customers in China.

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Luckin Coffee (LKNCY US)

China TMT Update July 3-ZLAB/LKNCY/002202CH/601615CH: Laekna Therapeutics IPO’ed in HK

ZLAB: Laekna Therapeutics IPO’ed in HK. complement PARP inhibitor (+)；LKNCY: COTTI Coffee opened its No.4k store(/)002202CH/601615CH：Siemens...

Blue Lotus Research Institute

China TMT Update-PDD/1024.HK/700.HK/Luckin/BILI: PDD Adds Live Broadcasts;Bili Changes Video Display

PDD/1024.HK/700.HK: PDD adds an entrance dedicated to viewing live broadcasts (+/-/-);Luckin Coffee: Luckin Coffee cooperate with OneContract...

Blue Lotus Research Institute

China TMT Update-NTES/700.HK/9995HK/1801HK/LKNCY/2150HK/ATAT/3690HK:Game Code,ADC-PD1, Tourism Spend

NTES/700.HK: 89 domestic game code approval；9995HK/1801HK：RemeGen explored ADC-PD1 combination theray；LKNCY/2150HK/ATAT/3690HK: Tourism spending...

Blue Lotus Research Institute