China

In today’s briefing:

Trip.com (9961 HK, TCOM US): 4Q23, Revenue Up by 105%, But Reached Our Last Price Target
[NetEase, Inc. (NTES US, BUY, TP US$118) TP Change]: Strong In-House Game Performance Drives Margins
Trip.com (9961 HK): Looks to Reap More Recovery Benefits
StandChart Is Likely to Have More China Bohai Impairment
[Miniso Group (MNSO US, BUY, TP US$33) Company Update]: CNY Foot Traffic Growth Support Decent C1Q24
Xiaocaiyuan International Holding Pre-IPO – Strong Network Expansion and Same Store Sales Growth

Trip.com (9961 HK, TCOM US): 4Q23, Revenue Up by 105%, But Reached Our Last Price Target

By Ming Lu

The main businesses, hotel and air ticket bookings increased by 131% YoY and 86% YoY in 4Q23.
The Chinese traveling market continued its recovery after the lift of the lockdown at the end of 2022.
The stock price is close to our last price target – Downgrade to Hold.

[NetEase, Inc. (NTES US, BUY, TP US$118) TP Change]: Strong In-House Game Performance Drives Margins

By Ying Pan

We expect NetEase to report C4Q23 revenue, GAAP op. profit and GAAP net income 4.9%, 5.7% and 8.5% vs. consensus.
The robust topline growth was mainly contributed by revenue recognition of <Justice Mobile> in the peak summer season.
The grossing of legacy titles like <FWWJ> is also growing steadily due to the low-price strategy. We raise our TP to US$118 to reflect the rich and diversified pipeline…

Trip.com (9961 HK): Looks to Reap More Recovery Benefits

By Osbert Tang, CFA

Trip.com Group (9961 HK) has a remarkable 4Q23 with adjusted net profit surged 437.1% YoY. Higher volume and better market efficiency have resulted in massive margin expansion.
Net cash has ballooned to about 15% of its share price, and this has allowed it to carry out a massive US$300m Capital Return Program in 2024.
Business has outperformed the industry in CNY, with domestic hotel and air business volume increased by 60% and 50% YoY. Its overseas platform also saw double-digit growth.

StandChart Is Likely to Have More China Bohai Impairment

By Fern Wang

StandChart may need to take further impairment hit on China Bohai Bank
VIU model is used to justify the higher carrying value compared to fair value of the holdings. There is zero headroom between the VIU model and the carrying amount.
We looked at VIU model assumptions for HSBC and StandChart. A declining NIM is likely put further pressure on the VIU model output for StandChart.

[Miniso Group (MNSO US, BUY, TP US$33) Company Update]: CNY Foot Traffic Growth Support Decent C1Q24

By Eric Wen

Intra-Urban mobility in major cities and foot traffic in leading shopping malls in China have demonstrated decent growth during 2024 CNY holiday period.
We estimate Miniso domestic store sales increased 35% yoy during CNY-holiday and 11% yoy during Jan to mid-Feb 2024. We expect Miniso total revenue to increase 26% yoy in 1Q24.
We maintain the stock as BUY and maintain TP at US$33/ADS.

Xiaocaiyuan International Holding Pre-IPO – Strong Network Expansion and Same Store Sales Growth

By Ethan Aw

Xiaocaiyuan International Holding (XCY HK) is looking to raise up to US$200m in its upcoming HK IPO.
Xiaocaiyuan is a Chinese home-style cuisine restaurant operator. It prices its menus’ items to achieve average spending per consumer between RMB50 and RMB70 for its dine-in customers at its restaurants.
In this note, we talk about the company’s historical performance.

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Feb 22

Daily Brief China: China Traditional Chinese Medicine, HSBC Holdings, Numans Health Food Holdings and more

In today’s briefing:

China Traditional Chinese Medicine (570 HK): Sinopharm-Led Pre-Conditional Offer at HK$4.60
TCM (570 HK): Sinopharm’s $4.60/Share Offer
HSBC – The Narrative Seems to Be Missing Many Points of the Reality
Pre-IPO Numans Health Food Holdings – Due to Flawed Business Model, Future Growth Is Uncertain

China Traditional Chinese Medicine (570 HK): Sinopharm-Led Pre-Conditional Offer at HK$4.60

By Arun George

China Traditional Chinese Medicine (570 HK) announced a privatisation offer from the Sinopharm-led consortium at HK$4.60 per share, a 47.4% premium to the undisturbed price.
The pre-condition relates to various Chinese regulatory approvals. As SOE entities own the offeror, regulatory approvals will be a formality. The offer price is final.
Ping An Insurance (H) (2318 HK), which holds a blocking stake, will be supportive. The offer is fair when the previously (higher) rumoured offers are adjusted for the market downturn.

TCM (570 HK): Sinopharm’s $4.60/Share Offer

$4.60/Share. That’s the number – by way of a Scheme – that only matters. Below the recently rumoured $6/share, and $5.10/share a little over three years ago. Terms are final.
As widely expected, the Offeror is SASAC-managed China National Pharmaceutical Group Corporation (CNPGC), indirectly owning 32.46% in China Traditional Chinese Medicine (570 HK) (TCM) via Sinopharm Group Hongkong,
Optically, the Offer price appears light. But this should still get up. TCM is trading rich to peers. No other competing bidder will emerge. Expect regulatory pre-cons to be fast-tracked.

HSBC – The Narrative Seems to Be Missing Many Points of the Reality

By Daniel Tabbush

In the most recent quarters HSBC saw its NIM decline from around 1.7% to 1.5%
As the bank de-risks its CRE lending it is left with a greater proportion of bad CRE loans
There can be more significant impairment charges on BoCom, the USD3bn done was small

Pre-IPO Numans Health Food Holdings – Due to Flawed Business Model, Future Growth Is Uncertain

Numans values light asset model, which helps reduce cost/expenditures, and thereby increase profits. However, such business model has flaws – no R&D/production, only terminal sales/brand operation, no control over upstream.
Revenue growth of core business Algal oil DHA products declined.Numans attempts to change its monotonous product line and enter milk powder industry, but the results weren’t ideal. Numans suffered losses.
If Numans only plays the role of a “porter” of finished products from abroad and lacks core competitiveness/technological content, it will face multiple challenges to achieve sustained high performance growth.

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Feb 21

Daily Brief China: Cosco International Holdings, CIMC Vehicle Group Co Ltd, Hang Seng China Enterprises Index, Cathay Pacific Airways, Tencent, China Traditional Chinese Medicine, PDD Holdings and more

In today’s briefing:

COSCO Shipping (517 HK) Is Still Cheap
CIMC (1839 HK): Justification For Unjust Offer Price?
HSCEI Dividend Futures: Shrinking OI; Fair Value Estimates Show Upside
Cathay Pacific (293 HK): Taking off with Momentum
[Blue Lotus Technology Sector Update]: LLM Advances Give China and US Both Opportunities
China Traditional Chinese Medicine (570.HK) – New Information on Privatization
Pinduoduo, Inc: Rotation Continues

COSCO Shipping (517 HK) Is Still Cheap

In More Hong Kong Stocks Priced For Liquidation, I flagged thirteen stocks the market is all-but implying are priced for liquidation.
One of the cut-off points in that analysis was a requirement for stocks to trade at least US$1mn/day. Removing that constraint uncovers shipping services play COSCO International Holdings (517 HK) (CSI).
CSI’s market cap accounts for ~86% of its 1H23 net cash position. Earlier this month, CSI announced another positive profit warning. Those numbers should be out late-March.

CIMC (1839 HK): Justification For Unjust Offer Price?

On the 28 November 2023, SOE-backed CIMC Vehicle Group Co Ltd (1839 HK) announced a conditional H-share buyback at a $7.00/H-share, a forgettable 8.6% premium to last close.
This Voluntary Offer followed by a Merger by Absorption requires shareholder approval and SAFE signing off. The SAFE condition was satisfied on the 26th Jan.
Last night, CIMC announced the CBP investigation into the evasion of U.S. anti-dumping and countervailing duties was extended. There is no mentioned in interim accounts or HKEx of this investigation.

HSCEI Dividend Futures: Shrinking OI; Fair Value Estimates Show Upside

The open interest of the HSCEI 2024 dividend futures is less than half that of the HSCEI 2023 and HSCEI 2022 open interest at the same time of the year.
Market volatility and the fallout of the losses faced by Korean investors (and the scrutiny of Korean ELS-issuing banks) are among the primary reasons for the low open interest.
Our fair value for the HSCEI 2024 dividend futures is higher than the current market but there is a lot of sensitivity to bank dividends and special dividends.

Cathay Pacific (293 HK): Taking off with Momentum

By Osbert Tang, CFA

There is room for FY23 result of Cathay Pacific Airways (293 HK) to beat market expectations on stronger traffic volume and better yield performance.
Resumption of more capacity, from 70% of the pre-pandemic level at end-FY23, will drive FY24 earnings with ROE at 12-13%, putting it on an inexpensive 0.65x P/B.
Its associate Air China Ltd (H) (753 HK) will also benefit from the release of pent-up demand in the domestic market and the recovery in international travel.

[Blue Lotus Technology Sector Update]: LLM Advances Give China and US Both Opportunities

By Ying Pan

On February 15, OpenAI, Google and Amazon launched respective AI advances in video LLM (SORA), long text (Gemini 1.5), and text-to-speech (BASE) abilities. The evolution speed of AI inspired awe;
We estimate rival equivalent of SORA, delivered over cloud, will appear in 4-6 months of time but on-device version will take years.
We suggest 2C AI applications, especially video, will be the prime beneficiary

China Traditional Chinese Medicine (570.HK) – New Information on Privatization

Since China TCM doesn’t deny the rumors so far after the trading halt, privatization is becoming likely this time.Rumor said formal negotiations may not begin until after the Lantern Festival.
CNPGC may not want to pay high prices on privatization.Weak sentiment/share price may help with the negotiations.But the key is to obtain the consent of other shareholders, especially Ping An.
There’s underlying logic for Taiji Group to drive this privatization. A price of higher than HKD5.1 is possible. If the price could reach HKD6 (or higher), it has exceeded expectations.

Pinduoduo, Inc: Rotation Continues

By Steven Holden

Ownership levels among Asia Ex-Japan funds hit record highs as funds continue to add exposure.
13% of the funds in our analysis opened new positions over the last 6-months, with average weights increasing by 0.57%
New positions added by Invesco Asia Opportunities (4.3%), LO Funds High Conviction (3.6%) and Allianz Asian Equity (2.9%) over the period.

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Feb 20

Daily Brief China: Hygon Information Technology C, Tencent, Yankuang Energy Group, Auntea Jenny (Shanghai) Industrial, Hutchmed China Ltd and more

In today’s briefing:

Offshore China ETFs Rebalance Preview: Big Price Moves Could Lead to Four Changes
Tencent (0700.HK): Revisiting Wechat Channels
FXI Rebalance Preview: Three Potential Changes as Big Moves Unfold
Auntea Jenny (Shanghai) Industrial Pre-IPO Tearsheet
Hutchmed China Ltd (13.HK/HCM.US) – 2023 Results Preview and Catalysts in 2024

Offshore China ETFs Rebalance Preview: Big Price Moves Could Lead to Four Changes

As of the review cutoff date of 19 February, there could be four changes for the iShares A50 China (2823 HK) / CSOP China A50 (HKD) (2822 HK) in March.
Shaanxi Coal Industry, Hygon Information Technology, CGN Power and China Everbright Bank could replace Aier Eye Hospital Group, Bank Of Ningbo, WuXi AppTec and Jiangsu Yanghe Brewery.
CGN Power (1816 HK) is a potential iShares China Large-Cap (FXI) (FXI US) inclusion while Hygon Information Technology C (688041 CH) is an inclusion to a global index in March.

Tencent (0700.HK): Revisiting Wechat Channels

By Eric Chen

One year ago, we published a note valuing Wechat Channels at US$29 billion by applying 25xPE to RMB8 billion net profit out of RMB37 billion revenue by 2024.
Fast forward to today, the platform’s priority has been further elevated by Tencent management in its attempt to pursue high quality growth.
We review our thesis on Wechat Channels based on recent channel checks and now believe that the platform could represent ~35% of Tencent’s total incremental profit from 2024 to 2026.

FXI Rebalance Preview: Three Potential Changes as Big Moves Unfold

With the review period complete, there could be 3 changes for the iShares China Large-Cap (FXI) (FXI US) in March.
CGN Power (1816 HK), Yankuang Energy (1171 HK) and China Coal Energy (1898 HK) could replace Wuxi Biologics (2269 HK), China Resources Beer (291 HK) and China Vanke (2202 HK).
Short interest on China Vanke (H) (2202 HK) and Yankuang Energy Group (1171 HK) is higher than the other stocks and there could be covering on implementation day.

Auntea Jenny (Shanghai) Industrial Pre-IPO Tearsheet

By Clarence Chu

Auntea Jenny (Shanghai) Industrial (AJI HK) is looking to raise US$300m in its upcoming Hong Kong IPO. The bookrunners on the deal are CITIC Securities, Haitong, and DFZQ.
Auntea Jenny (Shanghai) Industrial (Auntea) is a freshly-made beverage producer.
As per CIC, the firm operates the fourth largest network of freshly-made tea shops in China as of Sept 23, with an extensive reach into the lower-tier markets

Hutchmed China Ltd (13.HK/HCM.US) – 2023 Results Preview and Catalysts in 2024

HUTCHMED’s 2023 results are relatively certain. Fruquintinib had a strong start after obtaining approval in the US, with sales of about US$13-15 million in just more than a month.
Oncology/Immunology consolidated revenue would be in line with management’s performance guidance (US$450 to US$550 million) in 2023. There are promising data readout/NDA submission this year, which would be potential catalysts.
HUTCHMED has sufficient cashflow and does not require external financing. From 2024 to 2026, it will enter a period of accelerated growth in product revenue. Breakeven is achievable in 2025.

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Feb 19

Daily Brief China: UBTech Robotics, Tongcheng Travel Holdings , East Buy Holding , Citic Ltd, BeiGene , Trip.com and more

In today’s briefing:

HSCI Index Rebalance: 25 Adds, 29 Deletes & Changes to Southbound Stock Connect
HSTECH Index Rebalance: Tongcheng (780 HK) In; GDS (9698 HK) Out; Round Trip Trade US$1bn
Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise
Citic Limited – A Deeply Discounted Conglomerate in the Hang Seng Index
BeiGene (6160.HK/BGNE.US/688235.CH) – 2023 Results Preview and Undervaluation Concerns
China Consumption Weekly (19 Feb 2024): Ant Group, Great Wall Motor, JD.com, Baidu, Autohome

HSCI Index Rebalance: 25 Adds, 29 Deletes & Changes to Southbound Stock Connect

There are 25 adds and 29 deletes for the Hang Seng Composite Index (HSCI) at the March rebalance to take the number of index constituents down to 514.
We expect 21 of the 25 HSCI inclusions to be added to Stock Connect while we expect 27 of the 29 HSCI deletions to be removed from Southbound Stock Connect.
Since the start of the year, shares held though Southbound Connect have increased on 22 of the 29 HSCI deletions and there could be some unwinding in the weeks ahead.

HSTECH Index Rebalance: Tongcheng (780 HK) In; GDS (9698 HK) Out; Round Trip Trade US$1bn

As expected, Tongcheng Travel Holdings (780 HK) will replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 March.
Estimated one-way turnover is 3.9% leading to a round-trip trade of HK$7.74bn (US$988m). There is nearly 14x ADV to buy in Tongcheng Travel Holdings (780 HK).
Positioning in Tongcheng Travel (780 HK) does not appear to be very high, while positioning in GDS Holdings (9698 HK) is very high with a couple of deletions coming up.

Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise

There will be 3 changes for the Hang Seng Internet & Information Technology Index (HSIII) at the March rebalance. There are some surprises.
Estimated one-way turnover at the rebalance is 5.6% resulting in a round-trip trade of HK$3.26bn (US$416m). 6 stocks will have over 1x ADV to trade.
There is huge short interest on East Buy Holding (1797 HK) and there could be some short covering ahead of the inclusion of the stock in the index.

Citic Limited – A Deeply Discounted Conglomerate in the Hang Seng Index

By Rikki Malik

Citic Ltd (267 HK) is a well-managed conglomerate trading at a big discount to its constituent parts
Earnings should move up from here and pays a decent dividend while you wait.
A member of both the the Hang Seng Index (HSI INDEX) and the HSCCI and will attract inflows once institutional money returns

BeiGene (6160.HK/BGNE.US/688235.CH) – 2023 Results Preview and Undervaluation Concerns

Since Imbruvica’s sales continued to decline and Calquence hadn’t shown much growth in US since 23Q2, either Zanubrutinib gained more market share or the entire BTK inhibitors market is shrinking.
BeiGene’s recent sluggish share price could be related to geopolitical conflicts/weak market sentiment.However, innovative drugs don’t involve supply chain security issues. There’s no need for US to sanction China’s biotech.
We are relatively optimistic about BeiGene’s 23Q4 sales growth. In our view, BeiGene’s reasonable market value is at least about US$18 billion. BeiGene (6160 HK) is undervalued.

China Consumption Weekly (19 Feb 2024): Ant Group, Great Wall Motor, JD.com, Baidu, Autohome

By Ming Lu

Overseas traveling revenue recovered strongly in China during the Chinese New Year.
Great Wall Motor’s vehicle deliveries increased by 69% in January 2024.
JD.com plans to raise the salaries for customer service employees by 30% in 2024.

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Feb 18

Daily Brief China: HSBC Holdings, China Unicom Hong Kong, Jacobio Pharmaceuticals, Alibaba (ADR) and more

In today’s briefing:

Hang Seng Index (HSI) Rebalance: Idling at 82 Members; 100 Members in 2025 at the Earliest
HSCEI Index Rebalance: Third Time Unlucky for Zhongsheng (881 HK) As China Unicom (762 HK) In
China Healthcare Weekly (Feb16)-Innovative Drug Is “Innocent” In Geopolitics, BeiGene’s BTK, Jacobio
Alibaba Group: Revitalization of Taobao and Tmall Group

Hang Seng Index (HSI) Rebalance: Idling at 82 Members; 100 Members in 2025 at the Earliest

In a surprise, the Hang Seng index committee has decided not to make any constituent changes to the Hang Seng Index (HSI INDEX) at the March rebalance.
We now see the index reaching its 100-member target in 2025 at the earliest, though we would not be surprised to see it spill into 2026 as well.
Free float and capping changes will result in one-way turnover of 1.2% resulting in a round trip trade of HK$4.54bn. HSBC Holdings (5 HK) is the biggest sell.

HSCEI Index Rebalance: Third Time Unlucky for Zhongsheng (881 HK) As China Unicom (762 HK) In

After narrowly avoiding deletion at the last two index reviews, Zhongsheng Group will be deleted from the HSCEI INDEX in March and replaced with China Unicom (762 HK).
Zhongsheng Group (881 HK) is down 25% for the year while China Unicom Hong Kong (762 HK) is up 10%.
There appears to be positioning on both stocks though the increase in shorts and jump in cumulative excess volume on Zhongsheng Group (881 HK) point to higher positioning.

China Healthcare Weekly (Feb16)-Innovative Drug Is “Innocent” In Geopolitics, BeiGene’s BTK, Jacobio

Due to the US Draft Bill against CXOs, stock prices of the entire pharmaceutical industry plummeted. But in reality, there’s no impact on innovative drugs, which is just “emotional suppression”.
The future BTK inhibitors market pattern predicted by GlobalData is very close to our estimate. This actually indirectly verifies the peak sales level that BeiGene may reach in the future.
Setbacks on KRAS/SHP2 projects discourage investors’ confidence on Jacobio. We wouldn’t recommend projecting too high expectations on BET inhibitor just yet. Share price performance could continue to be under pressure.

Alibaba Group: Revitalization of Taobao and Tmall Group

By Baptista Research

Alibaba Group’s latest report for the December Quarter 2023 reflected steady growth despite necessary organizational adjustments.
The call highlighted an overall focus on a more aggressive approach towards competition to win growth, reigniting the growth in their two core businesses: e-commerce and cloud computing.
The healthy year-over-year Gross Merchandise Volume (GMV) growth in the e-commerce segment is attributed to the effective execution of user-first and competitive pricing strategies in Taobao and Tmall Group (TTG).

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Feb 17

Daily Brief China: Alibaba (ADR), MGM China Holdings, ZJLD Group , China Vanke , Hang Seng Index and more

In today’s briefing:

[Alibaba (BABA US, SELL, TP US$66) TP Change]: What It Takes for Us to Be More Positive on BABA?
StubWorld: Union Stikes Impact MGM; MGM China Tops Pre-Covid Numbers
ZJLD Group (6979 HK): Fundamentals Intact; Share Price Wrongfully Punished
Vanke Offloads Shanghai Mall at Discount
EQD | HSI Rally: Possible Brief Stop This Week

[Alibaba (BABA US, SELL, TP US$66) TP Change]: What It Takes for Us to Be More Positive on BABA?

By Ying Pan

BABA reported C4Q23 top line, non-GAAP operating profit and GAAP net income in-line, 3.8% and (71)% vs. our estimates.
The discrepancy between non-GAAP operating and GAAP net is due to restructuring charges;
A few clients asked what it would take to be more positive on BABA. To us, grasp of its situation and alignment of the organization must happen first…

StubWorld: Union Stikes Impact MGM; MGM China Tops Pre-Covid Numbers

MGM China Holdings (2282 HK)‘s FY23 top line surpasses pre-Covid levels. MGM Resorts International (MGM US) figures hit by union strike at MGM Grand Detroit.
Preceding my comments on MGM are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

ZJLD Group (6979 HK): Fundamentals Intact; Share Price Wrongfully Punished

By Steve Zhou, CFA

Many China consumer stocks, including ZJLD Group (6979 HK), have been sold off heavily in the past 6 months, primarily driven by a fear of deflation and weak consumer sentiment.
ZJLD Group is one of the exceptions, with fundamentals intact while share price heavily sold off.
Shares look attractive vs. its high growth rate and strong management team, and especially with the return of Southbound connect post holidays.

Vanke Offloads Shanghai Mall at Discount

By Caixin Global

China Vanke Co. Ltd. is selling its entire stake in a Shanghai retail complex to Link Real Estate Investment Trust (Link Reit) at a discount, as the indebted developer offloads assets to ease liquidity crunch.
Hong Kong-listed Link Reit, Asia’s largest real estate investment trust, said in a Friday filing that it agreed to acquire a 50% stake in Qibao Vanke Plaza from Vanke at 2.38 billion yuan ($334 million).
Link Reit already owns the remaining 50% stake in the plaza after a 2.77-billion-yuan purchase from Vanke’s partner GIC Pte. Ltd. in April 2021.

EQD | HSI Rally: Possible Brief Stop This Week

By Nico Rosti

The Hang Seng Index is rallying as anticipated in a previous insight, but it could stop this week and pullback a bit.
3 possible trades available: go SHORT and hold to profit from a re-start of the downtrend, go SHORT and close after 1 week, wait the pullback and go LONG.
It’s unclear at the moment if the index will go lower or rebound after the upcoming pullback.

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Feb 16

Daily Brief China: S2C Limited, CSPC Innovation Pharmaceutical-A, AECC Aviation Power, Cloudbreak Pharma, Greenland Technologies Holdi and more

In today’s briefing:

CICC-Backed Chinese Chip Design Firm Fined Over Fraudulent IPO Application
Quiddity Leaderboard ChiNext & ChiNext 50 Jun 24: US$313mn One-Way, Four Names with Double-Impacts
Quiddity Leaderboard SSE50/180 Jun 24: US$1.5bn Index Flows One-Way
Pre-IPO Cloudbreak Pharma – The Business, the Concerns and the Outlook
Greenland Technologies Holding Corp. – Another HEVI Product Win

CICC-Backed Chinese Chip Design Firm Fined Over Fraudulent IPO Application

By Caixin Global

A semiconductor company sponsored by China International Capital Corp. Ltd. (CICC), one of the country’s top investment banks, has been fined over IPO application fraud, the China Securities Regulatory Commission (CSRC) said in a statement Friday.
S2C Ltd., which specializes in electronic design automation, has been fined 4 million yuan ($563,095) for fraudulent activities in its attempt to list on Shanghai’s tech-heavy STAR Market.
The move marks the CSRC’s latest effort to enforce strict information disclosure requirements and tough penalties for market violations under its registration-based IPO mechanism.

Quiddity Leaderboard ChiNext & ChiNext 50 Jun 24: US$313mn One-Way, Four Names with Double-Impacts

By Janaghan Jeyakumar, CFA

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 SSE50/180 Jun 24: US$1.5bn Index Flows One-Way

By Janaghan Jeyakumar, CFA

SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
In this insight, we take a look at our expectations for potential index changes for SSE 50 and SSE 180 during the June 2024 index rebal event.
Since my last insight, there have been a couple of changes to our expected ADDs basket and a couple of changes to our expected DELs basket for the SSE180 index.

Pre-IPO Cloudbreak Pharma – The Business, the Concerns and the Outlook

Surgery is doctors’ first choice in many cases. Ophthalmic medical devices are also popular. Compared to the market size of ophthalmic surgeries/medical devices, market size of ophthalmic drugs is small.
Although CLOUDBREAK’s pipeline has the potential to become first-in-class/best-in-class therapies to address unmet medical needs, considering fierce competition, the real market opportunities for its drug candidates may be smaller-than-expected
In last funding round before the IPO, CLOUDBREAK was valued at US$469 million.Valuation of CLOUDBREAK should be lower than Ocumension Therapeutics. So, premium space for IPO pricing may be limited.

Greenland Technologies Holding Corp. – Another HEVI Product Win

By Water Tower Research

HEVI to be a standalone pure-play industrial EV company.
The company announced plans to spin off its drivetrain systems business into a separate, independently managed, and publicly traded company on the OTC market.
Shareholders will receive shares in the new drivetrain company (expected to be tax-free), leaving Greenland Technologies to focus on the industrial EV market through its HEVI brand.

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Feb 15

Daily Brief China: Xinjiang Tianshan Cement A, Beijing Yuanxin Technology Group Co Ltd, Octillion Energy Holdings and more

In today’s briefing:

Quiddity Leaderboard CSI 300/500 Jun 24: SHORT CSI 300 Direct DELs Vs the Index
Pre-IPO Beijing Yuanxin Technology Group (PHIP Update) – Risk of Overvaluation and Poor Profit Model
Octillion Energy Holdings Pre-IPO – Over-Reliance on Top Customer and Lack of Competitive Edge

Quiddity Leaderboard CSI 300/500 Jun 24: SHORT CSI 300 Direct DELs Vs the Index

By Janaghan Jeyakumar, CFA

CSI 300 represents the 300 largest stocks by market capitalization and liquidity from the entire universe of Shanghai and Shenzhen Stock Exchanges. CSI 500 represents the next largest 500 names.
In this insight, we take a look at the potential ADDs/DELs for the CSI 300 and CSI 500 rebalance in June 2024.
I currently see 11 changes for the CSI 300 index and 50 changes for the CSI 500 index.

Pre-IPO Beijing Yuanxin Technology Group (PHIP Update) – Risk of Overvaluation and Poor Profit Model

The essence of Yuanxin’s business is selling drugs.Although Yuanxin is backed by Tencent, it’s difficult to come up with more outstanding advantages to compete with Alibaba Health and JD Health.
We have doubts about Yuanxin’s core competitiveness and sustainable profitability, which are also far behind its peers. In our view, the market/investors may find it difficult to accept such stories.
Pre-IPO valuation level of Yuanxin has greatly exceeded the valuation of its drugstore business model. Yuanxin’s valuation should be lower than peers, or for example, P/S ratio of below 1x.

Octillion Energy Holdings Pre-IPO – Over-Reliance on Top Customer and Lack of Competitive Edge

By Ethan Aw

Octillion Energy Holdings (OE HK) is looking to raise US$400m in its upcoming Hong Kong IPO.
Octillion’s main revenue driver has been its EV battery systems with battery cells over the track record period, with a healthy balance sheet to support its cash burn.
However, its revenue growth fell off a cliff in 1H23 due to its heavy reliance on a single customer, which doesn’t appear sustainable, in our view.

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Feb 14

Daily Brief China: Zhejiang Taimei Medical Technology Co Ltd, I-Mab and more

In today’s briefing:

Zhejiang Taimei Medical Technology Pre-IPO Tearsheet
I-Mab to Divest Chinese Assets and Business Operations for up to $80M – An Escape by Crafty Scheme

Zhejiang Taimei Medical Technology Pre-IPO Tearsheet

By Clarence Chu

Zhejiang Taimei Medical Technology Co Ltd (1482194D CH) is looking to raise >US$100m in its upcoming Hong Kong IPO. The bookrunners on the deal are Morgan Stanley and CICC.
Zhejiang Taimei Medical Technology (ZTMT) is a digital solution provider for the life sciences R&D and commercialization sector.
As per the CIC report in the application proof, the firm was the largest digital solution provider for life sciences R&D and commercialization in China in terms of 2022 revenue.

I-Mab to Divest Chinese Assets and Business Operations for up to $80M – An Escape by Crafty Scheme