HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Event-Driven

<ul>
<li>Baosteel’s SOE background helps bring more advantages- This deal is a consolidation of assets under SASAC, which may involve some strategic intent at national level. Baosteel has an upper hand. </li>
<li>ORG cannot afford to fail considering the strategic significance of CMPC for ORG. Major shareholder of CPMC Zhang Wei has picked ORG side, making it maintain the hope of winning.</li>
<li>For arbitrageurs, the good news is CPMC would be acquired by either Changping Industrial or ORG, with high certainty.Baosteel is also worth watching since it could be a new leader. </li>
</ul>


Baosteel’s SOE background helps bring more advantages- This deal is a consolidation of assets under SASAC, which may involve some strategic intent at national level. Baosteel has an upper hand. 
ORG cannot afford to fail considering the strategic significance of CMPC for ORG. Major shareholder of CPMC Zhang Wei has picked ORG side, making it maintain the hope of winning.
For arbitrageurs, the good news is CPMC would be acquired by either Changping Industrial or ORG, with high certainty.Baosteel is also worth watching since it could be a new leader. 


CPMC Holdings (906.HK) - ORG Can't Afford to Lose, But Baosteel Is a Step Ahead

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>With ORG offering a 4.9% higher price and securing Zhang Wei's acceptance, the ball is now back in Baowu's hands. Good reasons exist for Baowu to raise its offer price. </li>
<li>Baowu's subsidiary <a href="https://www.smartkarma.com/entities/shanghai-baosteel-packaging-a" target="_blank" data-smartkarma-citation="entities:25102:1" rel="noopener">Shanghai Baosteel Packaging-A (601968 CH)</a> needs <a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a> more than ORG, given its smaller market share and weaker profitability.</li>
<li>At ORG's offer price, CPMC's PERs for FY24 and FY25 of 15.4x and 14.2x are cheaper than Baosteel Packaging's 22x and 18.7x. This gives additional justifications for a higher offer. </li>
</ul>


With ORG offering a 4.9% higher price and securing Zhang Wei's acceptance, the ball is now back in Baowu's hands. Good reasons exist for Baowu to raise its offer price. 
Baowu's subsidiary Shanghai Baosteel Packaging-A (601968 CH) needs CPMC Holdings (906 HK) more than ORG, given its smaller market share and weaker profitability.
At ORG's offer price, CPMC's PERs for FY24 and FY25 of 15.4x and 14.2x are cheaper than Baosteel Packaging's 22x and 18.7x. This gives additional justifications for a higher offer. 


CPMC Holdings (906 HK): Will Baowu Raise the Offer Price After ORG?

<ul>
<li>We are convinced that both bids for <a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a> will go ahead, as they are progressing well. The downside risk is minimal, in our view.</li>
<li>The strong underlying result justifies a high price for the stock. Excluding distortions from non-recurring items in FY22, earnings have increased by 32.7% in FY23 and 26.8% in 2H23.</li>
<li>The stock now trades on 13.8x and 12.8x PERs for FY24 and FY25, in line with sector average; but below that for <a href="https://www.smartkarma.com/entities/shanghai-baosteel-packaging-a" target="_blank" data-smartkarma-citation="entities:25102:1" rel="noopener">Shanghai Baosteel Packaging-A (601968 CH)</a>. </li>
</ul>


We are convinced that both bids for CPMC Holdings (906 HK) will go ahead, as they are progressing well. The downside risk is minimal, in our view.
The strong underlying result justifies a high price for the stock. Excluding distortions from non-recurring items in FY22, earnings have increased by 32.7% in FY23 and 26.8% in 2H23.
The stock now trades on 13.8x and 12.8x PERs for FY24 and FY25, in line with sector average; but below that for Shanghai Baosteel Packaging-A (601968 CH). 


CPMC Holdings (906 HK): All Eyes on the Bids, but Underlying Still Solid

<ul>
<li>
<a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a> may potentially receive another takeover proposal from <a href="https://www.smartkarma.com/entities/org-technology-co-ltd-a" target="_blank" data-smartkarma-citation="entities:17510:1" rel="noopener">ORG Technology Co., Ltd. A (002701 CH)</a> which has a 22% market share in the industry.</li>
<li>ORG has every reason to launch such a proposal and given its operational and financial performance, it looks to have the capability to realise good synergy.</li>
<li>CPMC still looks inexpensive relative to the industry based on its PER valuations. No matter what, the 4th largest player <a href="https://www.smartkarma.com/entities/sunrise-group-company-limited" target="_blank" data-smartkarma-citation="entities:25257:1" rel="noopener">Sunrise Group (002752 CH)</a> will now become interesting.</li>
</ul>



CPMC Holdings (906 HK) may potentially receive another takeover proposal from ORG Technology Co., Ltd. A (002701 CH) which has a 22% market share in the industry.
ORG has every reason to launch such a proposal and given its operational and financial performance, it looks to have the capability to realise good synergy.
CPMC still looks inexpensive relative to the industry based on its PER valuations. No matter what, the 4th largest player Sunrise Group (002752 CH) will now become interesting.


CPMC Holdings (906 HK): Another Potential Contender

<ul>
<li>
<a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a> is currently suspended from trading. We think the announcement is likely to involve China Baowu Steel acquiring all stakes from its largest shareholder COFCO.</li>
<li>There are benefits to be realised as Baowu also owns a packaging A-share <a href="https://www.smartkarma.com/entities/shanghai-baosteel-packaging-a" target="_blank" data-smartkarma-citation="entities:25102:1" rel="noopener">Shanghai Baosteel Packaging-A (601968 CH)</a>. CPMC's 1H23 result is very solid with good margin expansion.  </li>
<li>Despite a 61.5% rally YTD, CPMC does not look expensive at 10.9x and 9.9x PERs for FY23 and FY24. These are levels at discounts to peers which are mostly A-shares.</li>
</ul>



CPMC Holdings (906 HK) is currently suspended from trading. We think the announcement is likely to involve China Baowu Steel acquiring all stakes from its largest shareholder COFCO.
There are benefits to be realised as Baowu also owns a packaging A-share Shanghai Baosteel Packaging-A (601968 CH). CPMC's 1H23 result is very solid with good margin expansion.  
Despite a 61.5% rally YTD, CPMC does not look expensive at 10.9x and 9.9x PERs for FY23 and FY24. These are levels at discounts to peers which are mostly A-shares.


China

Sunrise Group Company Limited is a metal containers manufacturer. The Company produces cans and other metal packaging products.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Sunrise Group (002752 CH)

CPMC Holdings (906.HK) - ORG Can't Afford to Lose, But Baosteel Is a Step Ahead

Baosteel's SOE background gives it an advantage in acquiring CPMC, while ORG offers a higher price and has major shareholder support in bid for...

Xinyao (Criss) Wang

CPMC Holdings (906 HK): Will Baowu Raise the Offer Price After ORG?

Baowu has good reasons to raise the offer price as getting CPMC is of high value. Baosteel Packaging can enhance market share and profitability...

Osbert Tang, CFA

CPMC Holdings (906 HK): All Eyes on the Bids, but Underlying Still Solid

Both bids for CPMC are progressing well, protecting its downside. Higher bid valuations are justified by strong underlying earnings growth. It...

Osbert Tang, CFA

CPMC Holdings (906 HK): Another Potential Contender

CPMC may receive a takeover proposal from ORG, which has a 22% market share. ORG can achieve synergy and CPMC is still undervalued against the...

Osbert Tang, CFA

CPMC Holdings (906 HK): What's Brewing?

CPMC is likely to be acquired by China Baowu Steel, and it will benefit from synergy with A-share Shanghai Baosteel Packaging. CPMC 1H23 results...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

CPMC Holdings (906.HK) - ORG Can't Afford to Lose, But Baosteel Is a Step Ahead

​Baosteel's SOE background gives it an advantage in acquiring CPMC, while ORG offers a higher price and has major shareholder support in bid for...

Xinyao (Criss) Wang

CPMC Holdings (906 HK): Will Baowu Raise the Offer Price After ORG?

​Baowu has good reasons to raise the offer price as getting CPMC is of high value. Baosteel Packaging can enhance market share and profitability...

Osbert Tang, CFA

CPMC Holdings (906 HK): All Eyes on the Bids, but Underlying Still Solid

​Both bids for CPMC are progressing well, protecting its downside. Higher bid valuations are justified by strong underlying earnings growth. It...

Osbert Tang, CFA

CPMC Holdings (906 HK): Another Potential Contender

​CPMC may receive a takeover proposal from ORG, which has a 22% market share. ORG can achieve synergy and CPMC is still undervalued against the...

Osbert Tang, CFA

CPMC Holdings (906 HK): What's Brewing?

​CPMC is likely to be acquired by China Baowu Steel, and it will benefit from synergy with A-share Shanghai Baosteel Packaging. CPMC 1H23 results...

Osbert Tang, CFA

Baosteel's SOE background gives it an advantage in acquiring CPMC, while ORG offers a higher price and has major shareholder support in bid for...

Baowu has good reasons to raise the offer price as getting CPMC is of high value. Baosteel Packaging can enhance market share and profitability...

Both bids for CPMC are progressing well, protecting its downside. Higher bid valuations are justified by strong underlying earnings growth. It...

CPMC may receive a takeover proposal from ORG, which has a 22% market share. ORG can achieve synergy and CPMC is still undervalued against the...

CPMC is likely to be acquired by China Baowu Steel, and it will benefit from synergy with A-share Shanghai Baosteel Packaging. CPMC 1H23 results...