Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.</li>
<li>The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.</li>
<li>In this insight, we take a look at the names leading the race to become ADDs and DELs in the June 2024 index rebal event.</li>
</ul>


The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
In this insight, we take a look at the names leading the race to become ADDs and DELs in the June 2024 index rebal event.


Quiddity Leaderboard ChiNext & ChiNext 50 Jun 24: Double Impacts for Some Names

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

Shanghai Tofflon Science A / Equity Bottom-Up

<ul>
<li>Tofflon needs to go through a considerable period of adjustment after experiencing the high point of performance. Its “periodicity” is obvious, which means the performance high growth is not sustainable.</li>
<li>The decline in growth rate of contract liabilities suggests that the future prospects is highly uncertain. Overall margins could continue to drop due to reduction in high margin overseas orders.</li>
<li>Unless there's a major catalyst, it’s difficult to see significant valuation boost in short term. Given the current downward trend in performance, valuation may continue to decline in the future.</li>
</ul>


Tofflon needs to go through a considerable period of adjustment after experiencing the high point of performance. Its “periodicity” is obvious, which means the performance high growth is not sustainable.
The decline in growth rate of contract liabilities suggests that the future prospects is highly uncertain. Overall margins could continue to drop due to reduction in high margin overseas orders.
Unless there's a major catalyst, it’s difficult to see significant valuation boost in short term. Given the current downward trend in performance, valuation may continue to decline in the future.


Shanghai Tofflon Science (300171.CH) 2022/23Q1 - It's Better Not to Go Against the Trend

Equity Capital Markets

Shanghai Duoning Biotechnology / Equity Capital Markets

<ul>
<li>The logic of Duoning’s business layout is that self-produced upstream products reduce the cost and increase customer stickiness, then lock in the purchase of future customers from the source.</li>
<li>Although lagging behind imported enterprises in product performance, the upstream production cost control is one of the driving forces for the localization of pharmaceutical supply chain. Duoning has growth potential.</li>
<li>A slow-down or reversal of trend related to life sciences industry growth could have an adverse effect on Duoning’s business. Overseas sanctions and policy risks are also the concerns. </li>
</ul>


The logic of Duoning’s business layout is that self-produced upstream products reduce the cost and increase customer stickiness, then lock in the purchase of future customers from the source.
Although lagging behind imported enterprises in product performance, the upstream production cost control is one of the driving forces for the localization of pharmaceutical supply chain. Duoning has growth potential.
A slow-down or reversal of trend related to life sciences industry growth could have an adverse effect on Duoning’s business. Overseas sanctions and policy risks are also the concerns. 


Pre-IPO Shanghai Duoning Biotechnology - The Industry, the Business and the Concerns

Shanghai Tofflon Science A / Equity Capital Markets

<ul>
<li>We analyzed three main factors to drive high performance growth of Tofflon in recent years, but these factors have become untenable. The remaining opportunity mainly lies in import substitution.</li>
<li>Every explosive growth of Tofflon benefits from positive industry trend, whose periodicity is obvious. It’s not a good investment opportunity for long run,but a staged investment opportunity in short term.</li>
<li>Tofflon is in the transition from explosive growth to steady growth. The change in industry demand would suppress valuation system. Buy low and sell high,rather than hold for long time.</li>
</ul>


We analyzed three main factors to drive high performance growth of Tofflon in recent years, but these factors have become untenable. The remaining opportunity mainly lies in import substitution.
Every explosive growth of Tofflon benefits from positive industry trend, whose periodicity is obvious. It’s not a good investment opportunity for long run,but a staged investment opportunity in short term.
Tofflon is in the transition from explosive growth to steady growth. The change in industry demand would suppress valuation system. Buy low and sell high,rather than hold for long time.


Shanghai Tofflon Science Placement (300171.CH)-Industry Periodicity May Put Valuation Under Pressure

Thematic (Sector/Industry)

<ul>
<li>The driving force for the big performance growth of domestic culture medium companies mainly come from the logic of import substitution. We think there are investment opportunities in this industry.</li>
<li>Due to soaring costs of electricity prices, raw material prices and transportation costs, European pharmaceutical plants are facing difficulties in sustaining production. Chinese API enterprises could face expansion opportunities.</li>
<li>For industries that have been recognized by investors,the market begins to think in terms of long logic from a broader perspective rather than simply tracking the performance of individual companies.</li>
</ul>


The driving force for the big performance growth of domestic culture medium companies mainly come from the logic of import substitution. We think there are investment opportunities in this industry.
Due to soaring costs of electricity prices, raw material prices and transportation costs, European pharmaceutical plants are facing difficulties in sustaining production. Chinese API enterprises could face expansion opportunities.
For industries that have been recognized by investors,the market begins to think in terms of long logic from a broader perspective rather than simply tracking the performance of individual companies.


China Healthcare Weekly (Nov4)-Opportunity in Culture Medium, European API, Long Logic of Investment

China

Shanghai Tofflon Science and Technology Company Limited develops, designs, produces and markets pharmaceutical freeze dryer and related systems. The Company's main products include in-place sterilisation, in-place lyophilization cleaners, laboratory freeze dryers, production freeze dryers, liquid nitrogen freeze dryers and freeze drying systems and equipments.

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Shanghai Tofflon Science A (300171 CH)

Quiddity Leaderboard ChiNext & ChiNext 50 Jun 24: Double Impacts for Some Names

I see four ADDs/DELs for the ChiNext index and three ADDs/DELs for the ChiNext 50 index. Collectively, I expect these changes to cause US$259mn one...

Janaghan Jeyakumar, CFA

Shanghai Tofflon Science (300171.CH) 2022/23Q1 - It's Better Not to Go Against the Trend

Tofflon is clearly in a downward cycle, with unclear outlook. It may take a long time for the next peak to occur. 2023 is difficult for Tofflon as...

Xinyao (Criss) Wang

Pre-IPO Shanghai Duoning Biotechnology - The Industry, the Business and the Concerns

Upstream cost control is major driving force for the localization of pharmaceutical supply chain. So, Duoning has big potential. A slow-down...

Xinyao (Criss) Wang

Shanghai Tofflon Science Placement (300171.CH)-Industry Periodicity May Put Valuation Under Pressure

Tofflon is in the transition from explosive growth to steady growth. The periodicity of pharmaceutical equipment industry is obvious. The change in...

Xinyao (Criss) Wang

China Healthcare Weekly (Nov4)-Opportunity in Culture Medium, European API, Long Logic of Investment

Culture medium will have a rapid growth period. Due to high costs, EU Pharma face difficulty in sustaining production.Mr Market begins to think...

Xinyao (Criss) Wang

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