Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

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.

Equity Bottom-Up

<ul>
<li>In 3Q23, total revenue surged by 94% YoY, as Temu started operations in nine European countries in August.</li>
<li>Operating profits increased by 60% YoY in 3Q23, so we believe overseas businesses have made profits.</li>
<li>The stock price reached our last target, but we believe there is still an upside of 40% for 2024.</li>
</ul>


In 3Q23, total revenue surged by 94% YoY, as Temu started operations in nine European countries in August.
Operating profits increased by 60% YoY in 3Q23, so we believe overseas businesses have made profits.
The stock price reached our last target, but we believe there is still an upside of 40% for 2024.


PDD (PDD US): 3Q23, Grew Dramatically Overseas, Still Upside After Reaching Our Last Target

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>We remain positive on PDD Holdings’ (PDD) long-term growth prospect, mainly given: 1) domestic business could maintain healthy revenue and earnings growth in 2023, aided by the incorporation of more branded products and high ASP products, as well as the increase in monetization, aided by the increase in percentage of paid traffic volume;</li><li>2) Temu, the overseas e-commerce business operated under the “fully-entrusted” model, leveraging strong domestic supply chain and PDD’s strong execution capability, has seen robust GMV and revenue growth, which is on track to support PDD’s long-term revenue and earnings growth, and will likely propel a further valuation rerating, in our view.</li><li>We lift our DCF-based TP by 21% to US$131.8 (was US$109.0), to factor in potentially stronger-than-expected domestic business monetization expansion, and betterthan-expected development of Temu business. Maintain BUY.</li></ul><p><em>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.</em></p>

We remain positive on PDD Holdings’ (PDD) long-term growth prospect, mainly given: 1) domestic business could maintain healthy revenue and earnings growth in 2023, aided by the incorporation of more branded products and high ASP products, as well as the increase in monetization, aided by the increase in percentage of paid traffic volume;2) Temu, the overseas e-commerce business operated under the “fully-entrusted” model, leveraging strong domestic supply chain and PDD’s strong execution capability, has seen robust GMV and revenue growth, which is on track to support PDD’s long-term revenue and earnings growth, and will likely propel a further valuation rerating, in our view.We lift our DCF-based TP by 21% to US$131.8 (was US$109.0), to factor in potentially stronger-than-expected domestic business monetization expansion, and betterthan-expected development of Temu business. Maintain BUY.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.

PDD Holdings (PDD US) – Rapid Overseas Business Expansion

Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

<ul><li>PDD Holdings Inc. delivered a solid result and managed an all-around beat in the quarter.</li><li>The company experienced a substantial 66% year-on-year increase in revenue, signaling a growing trust in its products and services.</li><li>This surge in consumer confidence has led to increased demand across various product categories, a testament to the company's continued success.</li></ul>

PDD Holdings Inc. delivered a solid result and managed an all-around beat in the quarter.The company experienced a substantial 66% year-on-year increase in revenue, signaling a growing trust in its products and services.This surge in consumer confidence has led to increased demand across various product categories, a testament to the company's continued success.

PDD Holdings Inc.: Breaking the Mold with Tech-Driven Farming Innovations and Skyrocketing Revenues! - Major Drivers

Greater China Equity Long/Short Analyst

Eric Chen

<ul>
<li>We reviewed our PDD investment thesis trying to incorporate and make sense of various channel checks and sell-side’s research which are often inconsistent and even conflicting.</li>
<li>While there are many unknowns and ambiguities, we are convinced the street still significantly underestimates PDD’s growth outlook for 2H23, and fails to see a slowdown in FY24.</li>
<li>Our price target remain unchanged as lower target P/E multiple (to reflect slowdown prospect) is offset by higher FY23 earnings which flow to outer years.  </li>
</ul>


We reviewed our PDD investment thesis trying to incorporate and make sense of various channel checks and sell-side’s research which are often inconsistent and even conflicting.
While there are many unknowns and ambiguities, we are convinced the street still significantly underestimates PDD’s growth outlook for 2H23, and fails to see a slowdown in FY24.
Our price target remain unchanged as lower target P/E multiple (to reflect slowdown prospect) is offset by higher FY23 earnings which flow to outer years.  


Pinduoduo (PDD US): Growth Cadence Matters

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Event-Driven

<ul>
<li>Grizzly Research's track record, especially with accusations against well-known Chinese ADRs like <a href="https://www.smartkarma.com/entities/nio-inc" target="_blank" data-smartkarma-citation="entities:27399:1" rel="noopener">NIO (NIO US)</a>, <a href="https://www.smartkarma.com/entities/zto-express-cayman-inc-bc4e7cc1-66e0-4426-a8f1-edc72f314237" target="_blank" data-smartkarma-citation="entities:23628:1" rel="noopener">ZTO Express Cayman (ZTO US)</a>, and <a href="https://www.smartkarma.com/entities/gaotu-techedu-inc" target="_blank" data-smartkarma-citation="entities:28069:1" rel="noopener">Gaotu Techedu (GOTU US)</a>, hasn't been successful lately.</li>
<li>Despite past setbacks, the company has recently targeted another renowned Chinese ADR, <a href="https://www.smartkarma.com/entities/pdd-holdings-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">PDD Holdings (PDD US)</a>.</li>
<li>Grizzly Research alleges that Pinduoduo's shopping app, "TEMU," is a harmful malware/spyware secretly extracting user data.</li>
</ul>


Grizzly Research's track record, especially with accusations against well-known Chinese ADRs like NIO (NIO US), ZTO Express Cayman (ZTO US), and Gaotu Techedu (GOTU US), hasn't been successful lately.
Despite past setbacks, the company has recently targeted another renowned Chinese ADR, PDD Holdings (PDD US).
Grizzly Research alleges that Pinduoduo's shopping app, "TEMU," is a harmful malware/spyware secretly extracting user data.


Pinduoduo: Short Seller, Grizzly Research Raises Spyware Concerns About TEMU

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.

Alibaba Group Holding Limited provides online sales services. The Company provides internet infrastructure, electronic commerce, online financial, and internet content services through its subsidiaries. Alibaba Group Holding offers its products and services worldwide.

Prosus N.V. provides internet based services. The Company focuses on investments in internet, digital media, e-commerce retailing, and consumer internet companies. Prosus serves customers worldwide.

Hainan Island Construction Co Ltd.  is a property development company. The Company also operates regional malls and hotels.

Guangzhou Friendship Group Co., Ltd operates supermarkets and department stores in Guangzhou, China.  The Company sells a variety of consumer products, including apparel, food and beverages, electronics, jewelry, cosmetics, and electric appliances.  Guangzhou Friendship also leases real estate properties.

Guangzhou Friendship Group Co, Ltd. (000987 CH)

Golden Eagle Retail Group Limited operates department stores in China. The Company's stores target mid-range and high-end market segments in China, and contain various functions and amenities such as dining, entertainment, beauty and personal care, cinemas, and preschool education in addition to their core function as an international department store.

Tianjin Quanye Bazaar (Group) Co., Ltd. owns and operates department stores and supermarkets, as well as sells general merchandise on a wholesale basis. Tianjin Quanye also provides storage and cargo delivery services, and invests in real estate and interior decoration businesses.

Xian International Medical Investment Co Ltd is principally engaged in the medical services industry.

Xian International Medical Invest (000516 CH)

Wangfujing Group Co., Ltd. owns and operates department stores in Beijing, Guangzhou, Chengdu, Wuhan, and other cities in China.  The Company also develops residential real estate.

Dollar General Corporation operates a chain of discount retail stores located primarily in the southern, southwestern, midwestern, and eastern United States. The Company offer a broad selection of merchandise, including consumable products such as food, paper and cleaning products, health, beauty, pet supplies, and non-consumables such as seasonal merchandise.

Trent Limited operates a chain of retail stores that sell fashion apparel, cosmetics, perfumery products and toiletry items. The Company sells apparel for men, women and children. Trent sells its cosmetics products under the "Westside" and "Trent" brand names.

Dollar Tree, Inc. operates a discount variety store chain in the United States. The Company sells an assortment of everyday general merchandise at the $1.00 price point.

Pan Pacific International Holdings Corporation operates discount stores which sell consumer electronics, daily necessities, groceries, watches, and sporting goods. The Company mostly operates small scale stores based in Tokyo.

Pan Pacific International Holdings (7532 JP)

Target Corporation operates general merchandise discount stores. The Company focuses on merchandising operations which includes general merchandise and food discount stores and a fully integrated online business. Target also offers credit to qualified applicants through its branded proprietary credit cards.

Naspers Limited operates in the technology industry. The Company invests in global internet companies across the world.

Next Plc conducts retailing, home shopping, and customer services management operations.  The Company's retail stores sell ladies wear, mens wear, childrens wear, and housewares.

Avenue Supermarts Ltd. (ASL) owns and operates hypermarkets and supermarkets. The Company offers products such as garments, footwears, toys and games, bed and bath linen, stationery, grocery, household, and electronic products. ASL operates throughout India.

Dollarama Inc. operates as an online marketplace. The Company offers cleaning, school, office, home, kitchen, food, health, beauty, hardware, electronics, toys, and pets products, as well as provides delivery services. Dollarama serves customers in Canada.

MercadoLibre, Inc. operates an online trading site for the Latin American markets. The Company's website allows businesses and individuals to list items, conduct sales, and purchases online in either a fixed-price and auction format. MercadoLibre offers classified advertisements for motor vehicles, vessels, aircraft, and real estate, as well as online payment services.

PDD Holdings Inc. is a multinational commerce group that owns and operates a portfolio of businesses. The Company focuses on digital economy so that local communities and small businesses can benefit from the increased productivity and new opportunities. PDD Holdings has built a network of sourcing, logistics, and fulfillment capabilities for its underlying businesses.

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PDD Holdings (PDD US)

PDD (PDD US): 3Q23, Grew Dramatically Overseas, Still Upside After Reaching Our Last Target

In 3Q23, total revenue surged by 94% YoY, as Temu expanded in Europe. Operating profits increased by 60% YoY in 3Q23. The stock price reached our...

Ming Lu