China

• The Chinese economy looks weak according to the data from the statistics bureau.
• However, many big Chinese internet companies began to recover in Q2 as we mentioned in August.
• Here we list five recovering companies that investors may not pay attention to.

• Sinopharm’s performance growth in 23H1 was satisfactory, but both gross profit margin and net profit margin decreased, which was mainly related to generic drugs VBP and medical device centralized procurement.
• Profitability could continue to be under pressure in the short term. In the long term, Sinopharm’s business transformation and new value-added businesses are expected to help improve profit margin performance.
• Due to the low base last year, we think Sinopharm Group Co Ltd H (1099 HK) would achieve double-digit growth in 2023. We’re optimistic about its stock price performance accordingly.

China Vanke’s H1/23 results were in line with our expectations, with single-digit growth in overall revenue but ongoing margin pressure. The company realised CNY 201 bn of revenue in the period, up 2.9% y-o-y, while attributable profit fell 19.4% to CNY 9.87 bn. Booked revenue from property development was CNY 171 bn (-4.5%), owing to weakness in settlement area (-5.2%) and settlement gross margin (-1.6 ppts).

LTM adjusted debt climbed 2.3% y-o-y to CNY 347 bn at end-June, leading to weakened credit metrics. That said, the developer managed to optimise its debt structure in H1/23, with less exposure to short-term and offshore debt. The LTM cash balance declined 11% to CNY 120 bn, but covered short-term debt by 2.4x (FYE 2022: 2.0x). The company has no offshore debt due in H2/23 but will have two USD bonds coming due in 2024, with total outstanding principle of USD 1.2 bn.

We believe Vanke faces ongoing destocking and margin pressure. That said, the company appears to have smooth access to external funding, with prudent cash-flow management. We see limited near-term repayment risk. Our fundamental Credit Bias on Vanke is “Stable”. We maintain our “Buy” recommendation on the 2024 bonds, as the yields for these notes appear to be more attractive, but revise our recommendation on the rest of the curve to “Hold” from “Buy”.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• West China Cement

• Money continues to flow into mainland China ETFs taking the total inflows since 18 July to over US$25bn. This has likely helped stabilise the market and prevent a bigger fall.
• The inflows continue to be largest on ETFs tracking headline indices – CSI 300, STAR50, CSI1000, CSI 500, SSE50, ChiNext. Plus there are inflows on some sectoral and thematic ETFs.
• The skew between stocks gaining 20%+ over the period vs those dropping -20% or more has improved significantly over the last week.

• The Brand-Spanking New (three weeks old) A-H Monitor has tables, charts, measures galore. 
• Last week was slightly disappointing but the Recommendations Outperformed the universe.
• New stimulus measures are partly supply side, and a little bit demand side, but they’re not big enough yet to move the needle. Mainland ETF buying smells like National Team.

• We think Kunlun Energy (135 HK) will see its operating momentum accelerate in 2H23, leading by better natural gas sales growth and sustained positive dollar margin performance.
• It has strengthened its financial position in 1H23, with net cash amounting to 36% of market cap. This has demonstrated its cash-generating capability and controlled capex. 
• Its 7.0x and 6.6x PERs for FY23 and FY24 are inexpensive. Its annualised ROE of 10.6% is also attractive. There is room for the other businesses to recover in 2H23.

• KE Holdings (Beike) reported 2Q23 GTV 5.6% lower than our estimate, revenue (2.6%)/0.4% vs. our estimate/consensus, and non-GAAP NI 21.8%/42.9% higher than our estimate/consensus. 
• We think 3Q23 is the trough and expect a rebound in 4Q23 as more substantial supportive policies laying out in China. 
• We maintain the stock as BUY rating and raised TP by US$2 to US$24/ADS

• In this insight we analyze the drivers of a new relationship between SHEIN and Forever 21
• We think SHEIN agreed to the deal in part to become more “mainstream” in the US
• We also believe SHEIN takes seriously the legal and political risks it faces ahead of US IPO

• Aier’s revenue would be up 20%+ YoY in 2023, but one risk is the slowing growth rate of refractive/other consumption upgrading projects in the context of sluggish consumption in 23H2.
• The positive impact of aging on performance would not be able to hedge against the negative impact of declining birth rate, ultimately leading to a decline in overall performance growth.
• When Aier’s external expansion model fails and endogenous growth is lower-than-expectation, we suggest that Aier increase dividends/stock buybacks instead of ineffective expansion. This would make Aier more attractive to investors.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• O-Net Technologies (Group)

• Marginal float helped fuel the VinFast (VFS US) bubble. Then it popped. 
• The Prosus (PRX NA)/Naspers (NPN SJ) Circularity Detour and subsequent unwind created the B-Share construct which means they can maintain the voting control in South Africa without maintaining economic control.
• The backlash against Star CM Holdings (6698 HK) calls into question the broader Chinese entertainment industry, and how it strikes a balance between viewership/profitability and ethical boundaries.

• IPO rules in SSE STAR Market faces adjustments, so investors have lowered expectations, which will affect the fundraising ecology. Recovery of China’s financing environment would be slower than US/Europe.
• The CSRC has issued new policies related to stamp duty, IPO, and reduction of shares held by listed companies, which would significantly affect the capitalization path of pharmaceutical companies.
• Junshi is “an interesting Biotech” that once generated sales/profits in scale, but is losing money again.Since Junshi is outside the first echelon and the gap is widening, we remain conservative. 

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• In the IPO space, we primarily looked at Doosan Robotics, Tuhu Car and VNG (VNG US). 
• There were placements in AIA NZ , Ventia (VNT AU), FIVESTAR IN and Daiwa House Reit. ZOMATO IN also had large blocks post its acquisition led lockup release.

• Back on the 2 June, small-cap fashion wear retailer ENM Holdings (128 HK) received a delisting Offer from major shareholder, Chinachem, at HK$0.58/share, in cash.
• The Scheme Doc is now out after thrice being delayed. The EGM/Court Meeting will be held on the 26 September with expected payment around the 14 November. 
• There’s a whiff of opportunism embedded in the Offer. But being loss-making and illiquid, I’d expect the vote to still get up.

• Review of Q2/H1 results, including impact from international, Kerry Logistics Network
• Refining idea of “internationalization”, which we believe is driving force behind SF’s HK IPO
• Testing thesis: did air and international exposure help or hurt SF margins in H1?

• ENM Holdings (128 HK)‘s scheme document is out, with the vote scheduled for 26 September. The IFA considers Chime Corporation’s HK$0.58 per share offer fair and reasonable.
• The spread of 7.4% reflects vote risk – cash required for the proposal is lower than the net cash, and the offer price is below the IFA’s SoTP valuation (HK$0.658). 
• Shareholder approval of the scheme is aided by no shareholder holding a blocking stake, a low AGM minority participation rate and no visible retail opposition to the offer. 

• China Mengniu Dairy Co (2319 HK) is a good pick for those seeking value in the China consumer sector. 
• The company currently trades at 15x 2024E PE, compared to over 20x forward PE in the last 5 years, as the industry growth stagnated. 
• We can still expect above 10% net profit growth over the next three years, with the company looking to return more cash to shareholders. 

• Despite worsening doubtful, loss loans, the bank opted to lower impairment costs in 2Q23 YoY
• There is almost no profit growth without the bank’s provision cost decline, in 1H23 and 2Q23
• Loans more than doubled since FY19, but against this LLR/loans continues to decline

Seazen’s H1/23 results were in line with expectations, with sustained weakness in contracted sales and revenue, along with weaker margins. The group generated CNY 4.7 bn of investment property income in H1/23 (+10% y-o-y), with a gross margin of 70% (H1/22: 72%). We note positively the growing recurring revenue. The annual gross profit of c. CNY 7 bn now covers interest expense of c. CNY 6.3 bn.

Seazen’s liquidity will be tested by homebuyers’ growing concerns over private developers’ ability to complete properties. This has been exacerbated by lenders’ reluctance to roll over debt. In this regard, we note that the regulatory authorities committed to improve funding access for private firms in late August 2023.

We revise our trade recommendation to “Hold” on the FUTLAN 6 24 and “Not Recommended” on the remaining FUTLAN/FTLNHD notes, from “Hold”.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Country Garden Holdings Co
2. Yankuang Energy Group
3. Health And Happiness (H&H)
4. Xiaomi Corp
5. Anton Oilfield

and more…

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Country Garden Holdings Co
2. Yankuang Energy Group
3. Health And Happiness (H&H)
4. Xiaomi Corp
5. Anton Oilfield

and more…

• Guangzhou R&F Properties Co. Ltd. has 48.1 billion yuan ($6.6 billion) of debt due within a year with less than 10 billion yuan on hand as of the end of June, the southern China property developer disclosed.
• Even though R&F extended some debt last year, its first-half financial report showed that it is still mired in a liquidity crisis. R&F Properties delayed payment of 46.7 billion yuan of domestic and offshore bonds in 2022 for three to four years.
• The developer reported a net first-half loss of 5.1 billion yuan, 26% narrower than a year ago.

Country Garden’s H1/23 results were weak, as expected, and we believe there is a high chance that the company will default. Country Garden also warned in the interim results report about uncertainties associated with its ability to continue as a going concern.

Consistent weakness in contracted sales and deteriorating profitability (both rooted in Country Garden’s significant exposure to lower-tier cities) will likely lead to further liquidity pressure for the developer going forward. We do not foresee a near-term turnaround in profitability, given weak home-buyer sentiment in China and the fact that a majority (>80%) of Country Garden’s land bank is in lower-tier cities. In H1/23, the company recorded a gross loss of CNY 24.3 bn (H1/22: CNY 17.2 bn gross profit) and CNY 45.4 bn in core net loss attributable to owners (FYE 2022: CNY 4.91 bn core net profit).

We believe default risk remains high, even if Country Garden manages to extend the payment deadline for the CNY 3.9 bn (USD 535 mn onshore bonds). The company reported CNY 258 bn of interest-bearing debt as at end-June 2023, of which 42% (CNY 109 bn) will become payable within 12 months. This compared to CNY 101 bn in cash and equivalents, as well as CNY 29.5 bn in restricted cash reported at end-June. External funding access appears very limited, especially considering the deteriorating value of assets that could be used as collateral.

In the event of a default, we believe offshore bondholders will have very limited access to property assets on account of structural and effective subordination. All of the company’s offshore USD notes are trading at distressed levels, pricing at only c. 7-12. We maintain our “Not Recommended” view on the COGARD notes.

China Jinmao’s H1/23 results were in line with projections, with the company reporting robust contracted sales and cash collections despite the industry downturn. The gross margin narrowed to 14% (H1/22: 22%), albeit this was in line with industry trends. We expect the gross margin to remain weak, as Jinmao has to clear existing inventory (with higher land costs) in the subdued market.

We expect Jinmao’s debt to remain largely stable going forward, as the company will likely control land spending to shore up its balance sheet. Positively, the land bank has remained sufficiently large and should provide for 4-5 years of development. We expect Jinmao to continue reducing its offshore borrowings, and to redeem the perpetual securities.

Overall, Jinmao’s credit profile is underpinned by its SOE status, which supports the company’s access to financing. Moreover, the CHJMAO bonds are supported by the presence of cross-acceleration clauses with parent Sinochem Holdings’ offshore notes in the event of default. We move our recommendation to “Buy” from “Hold” on the CHJMAO notes, with a preference for the 2024 and 2025 notes (both yielding close to 15%).

• Huawei Technologies Co. Ltd. launched a new flagship smartphone on Tuesday, in a discreet fashion and ahead of schedule, said to be powered by a self-developed chip that can rival the speed of 5G handsets, as the tech giant tries to shrug off the impact of U.S. sanctions and capitalize on robust quarterly sales growth in China.
• The company began offering the Mate 60 Pro at 6,999 yuan ($962) in its stores and online around noon, without prior advertisement other than an open letter that cited the early launch as a celebration of its Mate series reaching 100 million units in cumulative shipments.
• The company gave no detail about what kind of system-on-a-chip (SoC) the smartphone uses and whether the handset is compatible with 5G wireless networks.

• Alibaba Group Holding Limited managed to exceed expectations in terms of revenue and earnings.
• Their team’s efforts to create a thriving ecosystem and realize technology-driven innovation methods also show promising results.
• The overall sales growth for the Alibaba International Digital Commerce Group was 41%, and the retail division had revenue growth of 60% year over year.

• The electric-vehicle unit of defaulted property developer China Evergrande Group reported that in the first half of 2023 it delivered 760 cars and its net loss narrowed by almost half from a year earlier to 6.87 billion yuan ($942 million).
• China Evergrande New Energy Vehicle Group Ltd.’s revenue jumped more than fivefold to 155 million yuan, mainly from mass production and delivery of its flagship model, the Hengchi 5, starting last October.
• The electric-car company has been plagued by production delays and setbacks since touting its first Hengchi model as early as 2019 and pledging to rival Tesla within three to five years.

• Users are enthusiastic about the return of 5G Huawei smartphones, and thus we expect sales volume of Huawei devices to improve. 
• If the combined share of Huawei+ Honor can reach 30/32% we estimate Xiaomi’s current 12.5% share of the China smartphone market could decline 0.8/1.3ppts, respectively.
• We maintain Xiaomi’s SELL and HK$ 8.2 TP, implying 26x FY23 PE. The increase in CY23 EPS reflects lowered OPEX, improved gross margin due to the impact of IC oversupply.

• DTx industry is still in the early stages of development. The establishment of a matching operation/service system is a very difficult task. There is a long distance from mature commercialization. 
• BrainAurora’s sales scale is small because its products haven’t received widespread recognition from medical system in China. Internationalization is challenging because it requires cross-border transfer of personal or scientific data.
• BrainAurora’s business prospects is still unclear.As the attitude of capital market towards DTx has become more rational, investors have begun to doubt if this field could really bring good return.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Country Garden Holdings Co

• STAR CM Holdings (6698 HK), a variety program intellectual property creator and operator, was listed last December and promptly gained 475% by early August. All good so far.
• Shares cratered on the 18 August (-23.4%) and are currently 76% adrift from its recent high. The reason? A viral clip from late pop diva Coco Lee discussing unfair treatment.
• The music competition show, in which Coco appeared, pushed back on any impropriety; however, its broadcaster has temporarily suspended the program. This is no easy fix.

• PDD reported blowout 2Q results with bottom line beating consensus by 40% thanks to stronger domestic marketplaces business, narrower losses incurred by TEMU and higher other income.
• 2Q results cleared much of our concern around PDD’s bottom line growth and we now see 2Q as the low point of earnings growth in FY23.
• We believe the company will report $9 billion net profit for FY23 and expect rounds of earnings revision by the street will further lift share price. US $120 price target.

Hopson’s H1/23 results were strong as expected, and will likely outperform those of many other POE developers. The top line grew 14% y-o-y to HKD 15.1 bn. Gross profit surged 75% to HKD 5.4 bn, with the gross margin rising by 12 ppts to 36%.

The company also managed to cut net debt by HKD 5 bn. We expect Hopson’s contracted sales and cash collection to be supported in the next 1-2 years by its high-quality land bank and CNY 47 bn of saleable resources. In addition, we believe the company faces low near-term repayment risk, given the limited ST bond maturities.

Our Credit Bias on Hopson is “Stable”. That said, we believe the bond price could be volatile amid the weak market sentiment and poor technicals. We maintain our “Hold” recommendation on the HPDLF curve.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Fosun International

• Weak results at Ping An Insurance across many divisions, with banking most important
• Life and Health negative insurance revenue delta, not offset by insurance cost delta
• Net asset growth is now at 5% YoY, from 9% YoY last year, from ~29% avg for years

• Keep Inc (3650 HK) , the largest online fitness platform in China, announced interim results for the six months ended Jun-23. The overall revenue growth is slowing down. 
• The company completed its Hong Kong IPO of ~10.8M shares at HK$28.92 (bottom of the range) and raised ~HK$192M (~$25M) of net proceeds. CICC led the offering.
• Keep appears well capitalized to outperform despite China’s temporary slowdown in fitness activities. I remain cautious on Keep stock after a downsized IPO, but I like the long-term fitness story. 

• Greentown China (3900 HK) is a high quality China property developer that is unfairly suppressed given the extreme pessimism of the sector. 
• Even though the overall sales of China property industry will likely continue to decline, the market is large enough that some developers could stand to gain massive market share. 
• The company trades at 2.5x 2024E PE, and 71% discount to NAV, with expected growth in net profit in 2023 and 2024. 

• Malo Medical Management (MMM HK) (MMM) is looking to raise around US$100m (estimated) in its upcoming Hong Kong IPO. The deal will be run by Haitong.
• MMM is a dental service provider in China. It ranked ninth among all private dental service providers and second among all premium dental service providers, as per F&S.
• MMM provides dental services to patients through a widespread network of Malo Clinic-branded specialty dental clinics. As of Apr 2023, it owned 29 dental clinics in 13 cities in China.

• PDD reported CY2Q23 top-line and non-GAAP net profit 28% and 58% vs. our est., and 21% and 44% vs. cons., respectively. 
• We raised our 2H23 forecasts for PDD because: 1) GMV growth hasn’t been significantly impacted by the current competitive landscape; 2) take rate could maintain a high level due to 
• Continuous optimization of ad products; and 3) new businesses such as Temu and Kuaituantuan (快团团) have fair growth. We maintain BUY and raise our TP to US$ 107.

• Shareholders of Prosus NV (PRX NA) and Naspers (NPN SJ) approved AGM agenda items late last week to enable the two Capitalisation Issues and Naspers’ Share Consolidation to move forward.
• What Will Happen: Prosus will issue new N shares to its shareholders and Naspers will reject them. Naspers will issue new shares to its shareholders, and Prosus will reject them.
• Naspers will own ~42.9% of Prosus, Prosus will own 0.02% of Naspers. Sales of Tencent shares will continue. Share Buybacks too. But the ouroboros will have spit out its tail. 

• The Hang Seng announces changes along with prospective flows 2wks before the actual change. Capping flows are calculated off the close three days before implementation. That was today.
• There have been some minor movements in the rankings. Nothing major. There is still just over US$1bn to trade, one-way.
• Enclosed are totals for each of the three major indices (Hang Seng, HSCEI, and HS Tech) and then netted flows. The biggest is US$470mm of BABA to sell. Spreadsheet attached.

• The September rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituent weights at 8%. This will lead to large flows.
• The largest passive inflows will be on East Buy (1797 HK), JD.com (9618 HK), Ping An (2318 HK), Sinopharm (1099 HK), BYD (1211 HK), Lenovo (992 HK) and Trip.com (9961).
• The largest passive outflows will be on Alibaba (9988 HK), Li Auto (2015 HK), Meituan (3690 HK), AAC Technologies (2018 HK), Kuaishou (1024 HK), COGARD (2007) and CG Services (6098).

• PDD’s revenue increased by 66% YoY to RMB52 bn, significantly higher than the market consensus RMB43 bn.
• The operating margin declined to 24% in 2Q23 from 28% in 2Q22 due to aggressive expansion outside China.
• We believe the stock still has an upside of 47% for year end 2023. Buy.

• Shougang Fushan Resources (639 HK) shareholders approved the partial offer to acquire a maximum of 125.0 million shares (2.47% of outstanding shares) at HK$2.40 per share and the whitewash waiver.
• The partial offer is now unconditional and will close on 12 September. Considering the irrevocables not to tender, a 100% minority participation rate implies a minimum proration of 2.98%.
• If the partial offer’s acceptance rate mirrors today’s general meeting minorities participation rate of 63.6%, it would imply a minimum proration of 4.69%. 

• Chongqing Hongjiu Fruit (6689 HK) was listed on 5th Sep 2022, where it raised around US$71m in its Hong Kong IPO. Its one-year lockup will expire on 4th Sep 2023. 
• Chongqing Hongjiu Fruit (CHJF) is a multi-brand fresh fruit distributor in China with an end-to-end supply chain. As per CIC, it was the largest fruit distributor by revenue in 2022. 
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• HSI reversal was overdue, but the bounce looks weak: so far it did not even reach Q1 resistance on week 1 and on week 2 (current).
• Resistance level to watch where the current bounce could end is 18874, or any price around that area at Close, at the end of this week. High probability SHORT.
• If some unexpected catalyst pushes the index to rally, look for resistance at 19459 on week 3, we think this won’t happen but a tail is always possible.

• Wuliangye Yibin Co Ltd A (000858 CH), the second largest Chinese liquor company in China, trades at one of the lowest PE multiples in the space. 
• Kweichow Moutai (600519 CH), the largest Chinese liquor company trades at 26x 2024 expected earnings, and most other listed Chinese liquor names trade above 20x 2024 expected earnings.
• Upon closer look, Wuliangye is actually a classic case of value trap – slow growth with no change or slowly deteriorating PE multiples. 

• Solid Q2 results from ZTO, with deep unit cost reductions offseting weak pricing
• But ultimately, Q2/H1 results are merely in-line with guidance — not better, nor worse
• In this environment, it’s difficult to see what will move ZTO out of recent trading range

• Poor 1H23 result at Shenzhen International (152 HK) should have been anticipated, and we believe there is good room for sharp earnings improvement in 2H23.
• Completion of logistics projects, more asset value realisation (through REIT and private equity funds), contribution from Yicheng Qiwanli and lower finance costs should underpin outlook.
• SZI is an asset play with significant upside and this is reflected in the undemanding 0.42x P/B. Against its historical average of 0.67x, such a level is almost -2SD below. 

• Nearly US$20bn has flowed into mainland China listed ETFs since 18 July and could be driven by the National Team supporting the market.
• Most of the inflows have been focused on large cap indices including CSI 300, STAR50, CSI 500, SSE50, ChiNext and other sectoral and thematic ETFs.
• The largest impact has been on the SSE STAR50 (STAR50 INDEX) constituents, but that has not stopped the slide in the stocks.

• The China Conch Venture Holdings (586 HK)/ Anhui Conch Cement (600585 CH) ratio, and the implied stub, are now at all-time lows.
• Preceding my comments on China Conch/Anhui 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%.

• New results detail from CMB shows divergence with credit quality and actual credit costs
• The bank saw its credit costs decline 25% YoY despite higher Loss and Doubtful Loans YoY
• Property development NPLs surged from 4.1% to 5.5% at 1H23 HoH, to RMB19.6bn in total

• Tuhu Car (2007986D HK) is looking to raise up to US$300m in its upcoming Hong Kong IPO. 
• Tuhu is an integrated online and offline platform for automotive services in China.
• We have looked at the firm’s past performance in earlier notes. In this note, we discuss the PHIP updates.

• SF Holding’s HK listing document provides added details of current international revenue 
• Two recent moves show SF’s intent to raise international sales (and reduce China exposure)
• As SF Holding courts a global investor base, its comps will become the global express names

Greentown China has released H1/23 results that were in line with expectations. Contracted sales rose 16% y-o-y, driven by higher ASP (+19%), but offset to a degree by less GFA sold (-1%). The company added CNY 57 bn saleable resources with total GFA of 2.57 mn sqm. Revenue fell 12% to CNY 57 bn, primarily due to a CNY 7.9 bn slide in revenue from property development. Gross profit also decreased 12% to CNY 9.92 bn, with a largely stable margin (16% vs. 16.5% in H1/22).

We believe Greentown will continue its strategy of clearing inventories and delivering homes through H2/23. The company’s ability to deleverage will be impacted by the scale of its land acquisitions. In this regard, Greentown could expend up to 40% of its sales proceeds on acquisitions. That said, the level may be tempered by any further deterioration in the residential housing market.

• In 23H1, Tigermed’s net profit attributable to shareholders has changed from a negative growth trend in 2022. However, net profit growth brought by its main CRO business was not impressive.
• With the reform of domestic new drug approval policies, domestic CRO demand would decrease. Since Tigermed mainly provides early-stage CRO services, it’s more susceptible to negative changes of financing environment.
• Tigermed’s performance growth would slow down in 2023. Although valuation is in the bottom range, we recommend investors to take profits in time for any rebound in the stock price.

Yuexiu Property’s (YXP) H1/23 results were largely in line with expectations. Overall revenue climbed 2.6% y-o-y to CNY 32.1 bn, driven by strong growth in property management, rental income and real estate agency & decoration services. However, sales from property development remained stagnant at CNY 29.8 bn (H1/22: CNY 29.8 bn). The company encountered ongoing margin pressure, largely due to falling profits and margins for the property development business, which we believe is in line with the overall industry trend.

We note positively YXP’s CNY 221 bn in unrecognised sales, which could have positive implications for steady revenue growth in the near to medium term. The company appears to have resilient access to capital markets. Liquidity was boosted as at end-June 2023, by a c. 39% y-o-y increase in cash to CNY 30.3 bn. The debt structure improved, with exposure to ST debt narrowing to 12% of total debt.

The 2023 notes are trading near par (yielding 7-8%). The YUEXIU 2.8 26 are quoted at c. 90.6 (yielding 6.9-7.2%), while the 2031 notes are trading at c. 80 (yielding c. 7.5%). We view the pricing as fair, and maintain our “Hold” recommendation on the YUEXIU curve given the current weak market technicals.

• As expected, the index committee has used a 6-month minimum listing history and that results in two changes to the SSE STAR50 (STAR50 INDEX) in September.
• Piotech (688072 CH) and Hwatsing Technology (688120 CH) will replace Suzhou Nanomicro Technology (688690 CH) and Zhuhai CosMX Battery (688772 CH) in the index.
• One-Way turnover is estimated at 2.83% and will result in a one-way trade of CNY 3,562m. There does not appear to be a lot of pre-positioning on the stocks.

• We like the 17.7% core earnings growth for CIMC Enric Holdings (3899 HK) as this has demonstrated its operating strengths under a challenging environment in 1H23. 
• With orders on hand of Rmb20.6bn (+18.8% YoY), we see forward earnings well-covered. Also, management has turned even more positive on earnings and margin outlook in 2H23. 
• The hydrogen energy business maintains solid momentum with order backlog surging 116.9%. The spin-off of CIMC Safeway Technologies on the ChiNext Board is a near-term catalyst.

• Playmates Toys (869 HK) reported strong 1H23 results on the back of initial demand for TMNT toys. Revenues were up 30% and operating profits increased 3x.
• Management remains optimistic for 2H23 on the back of continued excitement for TMNT movie and follow-up series on Paramount+.
• Playmates Toys trades at 5x FY23 P/E and >1x P/E on an ex-cash basis. The company also declared another 2c interim dividend.

• The 1H23 result of Sinotrans (598 HK) is unexciting as recurring profit contracted 9.8%. The decline has also accelerated to 13.5% in 2Q23, from just 4.6% in 1Q23. 
• Weak export (-14.5% YoY in Jul) and poor airfreight price (-45% YoY in Jul) did not bode well for profitability. The flattening of DHL-Sinotrans’ contribution also limits earnings upside.
• Valuations are inexpensive at 5.3x PER and 9% yield for FY23, but growth outlook is not encouraging. We think it is a good time to take money off the table.

• NetEase’s 2Q rev. miss cons. by (3.08%) and non-GAAP net income beat cons by 50.6%.
• We anticipate that former legacies will continue to be under pressure. However, the 3Q23 is expected to show strong performance with new titles like “Justice Mobile” and “Racing Master.”
• We have raised our annual revenue expectations for “Justice Mobile” and maintain an optimistic view of NetEase’s upcoming pipeline. We increased to TP US$ 105, implying 17x PE in 2023

• Meituan reported CY2Q23 rev./non-IFRS net income in-line/70% vs. cons., and in-line/28% vs. our estimate. Increased spending on in-store competition was offset by abundant rider supply that lowered food delivery cost. 
• We raise our 3Q net margin est. by 3ppts as (1) the in-store counterattack against Douyin has been a success, (2) CGB spending to counter Duoduo Maicai has remained restrained.
• Initial results of the in-store counterattack showed positive results, while FD margin continues to benefit from ample riders. We maintain Meituan’s BUY rating and HK$ 165 TP.

• 1H23 results missed our expectation because stronger-than-expected revenue was outweighed by surge in operating costs as company took from its parent the overall operation of Phase I and II.
• We expect slow recovery in duty-free sales and elevated cost base will continue pressuring its bottom line in 2H23 and see possibility to return to profitability by 1H24.
• While recent share price correction has priced in the weak outlook somehow, we can’t rule out further volatility post results. We are now neutral on the stock.

• Compared to depressed traffic from last year, outbound travel in July was up dramatically; strong M/M growth versus June suggests the outbound recovery still has legs 
• Does China’s relaxation of group travel to Japan and Korea matter? We offer context and conclude the change is helpful, but not a “game-changer” for overall travel demand
• We also review July domestic traffic and preview Trip.com’s Q2 results (out Sept 4th)

• The market is clearly satisfied with WuXi Bio’s interim results. Growth of both non-COVID revenue and new projects were beyond expectations. This makes us look forward to 2023 full-year result.
• There’s a significant strength gap between WuXi Bio and Lonza/Samsung Biologics in undertaking commercial-stage orders, which puts WuXi Bio at a disadvantage in competition,making it more vulnerable to financing environment.
• It’s not impossible to restore the high growth before COVID,but WuXi Bio needs to meet two conditions.Instead of betting on a V-shaped reversal, it’s wiser to take profits in time.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Anton Oilfield
• Meituan
• Vedanta Resources

• This week it is changed from H/A Discount to A/H Premium, by popular demand. Some Northbound data is added. We kept the unicorn.
• Last week saw a win/loss ratio of 21:13. Average recommended pair on the week earned 0.9% if Sunday recos executed Monday close, 1.35% if executed Monday VWAP. 
• 6 Unwinds and 3 new trades recommended this week. As always, feedback desired to make this even better.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – ARM Holdings (1822695D US), Integral Corporation (5842 JP) and S.F. Holding (002352 CH) IPOs.
• Event-Driven developments – Boustead Plantations (BPLANT MK), UMW Holdings (UMWH MK), Eoflow (294090 KS), Golden Eagle Retail (3308 HK), Costa Group Holdings (CGC AU), Metro Pacific Investments Co (MPI PM). 

• Anti-Corruption campaign has affected healthcare companies’ IPO. It’s crucial for companies to explain the compliance of selling expenses in IPO approval process. Investors need to be aware of potential risks.
• Roche posts interim TIGIT OS data after “inadvertent disclosure”, which seems to give investors a glimmer of hope. But for now, we remain cautious about TIGIT based on our analysis.
• We updated our views on Neusoft Xikang. We still hold a conservative view towards whether Xikang can successfully IPO this time, mainly due to some negative factors and gloomy outlook.