China

• Anta Sports Products (2020 HK)  aims to raise around US$1.5bn in its top-up placement. 
• Anta hasn’t specified what it aims to do with the money that it’s looking to raise, furthermore, it’s already net cash.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• ZJLD Group (ZJLD HK) is looking to raise around US$811m in its Hong Kong IPO.
• ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu.
• In this note, we will look at deal dynamics and share our thoughts on valuation.

• ZJLD Group (ZJLD HK) has launched its HKEx listing at HK$10.78-12.98 per share to raise up to US$811 million. Books are open from 17 to 20 April.
• We previously discussed the IPO in ZJLD Group IPO: The Bull Case, ZJLD Group IPO: The Bear Case and ZJLD Group IPO: Valuation First Look. 
• Our valuation analysis suggests that the IPO price range is attractive. Therefore, we would participate in the IPO. 

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. 1) Response to key levels. 2) Price action. 3) Momentum confirmation.
• A prominent bottom below 5000 in Q4 2022 set up an impulsive multi-month uptrend and LT uptrend bias. Our 2023 target at 9450/70 reflects this major bottom.
• 2023 has delivered a tangible downward correction. Since mid-February a Head and Shoulders Bottom has formed. A break above the neckline at 7085 targets 7770/80 in Q2 2023.

• ADICON Holdings Limited (ADI HK) is pre-marketing an HKEx IPO to raise up to US$400 million, according to press reports.
• Adicon is the third largest independent clinical laboratories (ICL) service provider in China, with an 8.6% market share of the non-COVID-19 testing market in 2021, according to Frost & Sullivan.
• The key elements of the bull case rest on the growing non-COVID-19 testing addressable market, improving market sentiment, strong non-COVID-19 testing growth, stable EBITDA margin and cash generation. 

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.

• Guangzhou R&F Properties

• Lalatech’s largest segment by revenue — Chinese intra-city on-demand freight — features many of the attributes that are attractive to online logistics intermediaries
• At the top of the list of red flags in its prospectus is Lalatech’s company’s dramatic 71% Y/Y reduction in Sales and Marketing expenses last year
• Although Lalatech appears to be the leading platform for Chinese intra-city on-demand freight matching, the company faces ‘hidden’ competition from several larger groups

• After a poor FY22, 1H23 will stay challenging for Lonking Holdings (3339 HK). However, we expect pick-up in business momentum going forward, and export is a major growth driver.
• Gross margin rebounded HoH and YoY in 2H22, and Lonking maintained good operating cost control. Recovery of equity market suggests potential big positive swing in investment income. 
• Including investment portfolio, 92% of the current market capitalisation is net cash, providing solid downside buffer. Its 6.5x PER, 9.2% yield and 0.52x P/B are very attractive valuations.

• Either vaccines or therapeutic biologics, Luzhu’s clinical progress has no advantages. There have been quite a few competing products on the market or candidates with faster development progress than Luzhu.
• Luzhu applies the low price strategy to open the market. We’re not sure if it works or not, since it still depends on R&D efficiency, product quality and commercialization capabilities.
• We tend to be conservative about the Company’s prospects because its eventual revenue scale and profit margins are likely to be very limited based on our analysis.

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
• Guangzhou R&F Properties
• China Datang Corp Renewable Power
• Shui On Land

• Prosus (PRX NA) moved 96mn shares of Tencent (700 HK) into CCASS. Tencent shares fell hard. If the share price fell because of a block offering, that would be unwarranted. 
• Ecopro (086520 KS) is up an eye-watering 590% in the past three months, primarily on Ecopro BM (247540 KS)‘s outperformance, together with sentiment towards soon-to-be-listed 52.8% held Ecopro Materials. 
• Japan’s Finance Minister said that companies need to improve their PBRs, and that “increasing corporate value of listed companies would allow for Japan to realise sustainable growth.”

• Weekly summary of vol changes and moves across Global Markets
• Analysing ATM volatility and skew changes over the last 5 days
• We suggest a few trades to take advantage of the implied vol surfaces

• Anhui Province publicly solicits pre-bid data for the provincial centralized procurement of Class B large medical equipment, surgical robots included, which is worth investors’ attention.
• No more than five biotech would truly stand out in the future. We suggest investors focus on those biotech in the first echelon, rather than betting on riskier smaller ones.
• For Jafron, we analyzed some key points of the company. Due to the concerns, the temporary rebound in performance in 2023 is not enough to completely reverse the investment logic.

• Shanghai Longcheer Technology is a Chinese company that specializes in providing smart products and services including smart phone ODMs, tablets, VR/AR headbands, smart wearables and smart home products.
• Founded in 2022, the company is one of top three global integrated service providers of smartphone ODMs.
• Longcheer’s previous attempt to go public in 2018 was rejected, however, it has revived its IPO plans and in 2023, expressed its interest in seeking a public listing.  

• We estimate that Baidu’s 1Q23/2023 bottom line would beat cons. by 13.2%/6.5%, mostly driven by better-than-expected recovery of ads business and cost-saving measures. 
• We remain optimistic about Baidu’s AIGC leading position, because Baidu still gains the edge for its first-mover advantage and continuous investment. 
• Maintain BUY rating and raise TP to US$175, implying 17.9X PE in 2023

• IMotion Automotive Technology (1812706D CH) is looking to raise about US$300m in its upcoming HK IPO. The deal will be run by Citibank, Huatai and CCB International.
• The company possesses advanced full-stack R&D capabilities including self-developed algorithms and hardware-software co-design capabilities. It provides two AD domain controller product lines, and the self-designed iDC series. 
• Its solutions and products cover a wide price range of vehicles and all types of driving scenarios, including highways, ring roads, complex urban roads, country roads, and parking areas.

• We expect JDL to report C1Q23 net revenue in-line with cons., and non-IFRS net margin lower than cons. by (0.5ppts). 
• Our FY23 revenue and net-profit forecasts are (5%) and (6%) below consensus, respectively. JDL’s key customers JD and Douyin are pushing new services that favor shipment via logistics competitors; 
• JDL’s key customers JD and Douyin are pushing new services that favor shipment via logistics competitors; We maintain JDL’s SELL rating and cut its TP to HK$ 9.2.

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. Softbank Group
2. Central China Real Estate
3. Sino-Ocean Group
4. Seazen (Formerly Future Land)
5. Vedanta Resources

and more…

• JD.com Inc (9618 HK) has declined heavily in 2023 (-44.5%), producing a new 5 month low of 143.50 on 13 April 2023.
• The 143.50 low was plagued by extreme ST momentum failure and the new low was quick to fail and reverse.
• Our TSS methodology triggered a TSS < 10 at the low and justifies a further 9-18% upswing in the coming 1-2 weeks.

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
• Stocks mentioned in this insight include: Melco International Development (200 HK), CMGE Tech (302 HK), Differ Group Auto (6878 HK), and Sino Biopharmaceutical (1177 HK)

• After declaring a whopping 18% dividend yield in FY22, we expect Shougang Fushan Resources (639 HK)’s generous payments to continue as they could declare another 14% in FY23e.
• The margin of safety is high as there is a cash buffer (55% of the market cap in cash) and 10-year average annual free cash flows of 1.5 bn HKD.
• China’s FAI stimulus and stabilizing the steel margins could be catalysts to drive the share price forward in the short term.

• Guoquan Food (Shanghai) (1786512D CH) is looking to raise about US$500m in its upcoming Hong Kong IPO.
• Guoquan Food (Shanghai) is a home meal solutions provider in China.
• Offering a wide variety of home meal solutions products under its Guoquan Shihui (鍋圈食匯) brand, the firm had a total of 755 SKUs as of Dec 22. 

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.

• Meituan
• Nickel Industries Ltd
• Vedanta Resources

• We expect JD to report C1Q23 top-line and non-IFRS net income (1.7%) and (12%) vs. consensus, respectively. 
• We expect revenue to decline (1%) YoY in 1Q23 and grow just 3% YoY in FY23, due to (1) slow recovery in key product categories like electronics; (2) team restructuring;
• And (3) competitive landscape. We maintain SELL and US$27 TP. Our TP implies 10x 2024 P/E.

• We expect Luckin to report 1Q23 revenue at 77.0% YoY to RMB4,257mn, non-GAAP operating margin and net margin are expected to increase 12.6ppt and 9.1ppt to 16.4% and 13.2%; 
• We think the current moderate competition can bring positive externality to coffee players, whereas it may hurt street tea shops; 
• We maintain the stock as BUY and raise TP by US$1 to US$41.

• ADICON Holdings Limited (ADI HK)  is looking to raise about US$400m in its upcoming HK IPO. 
• Adicon Holdings is one of the top three independent clinical laboratory (ICL) service providers in China in terms of total revenue during the Track Record Period, according to F&S.
• In this note, we talk about our thoughts on valuation. 

• On April 11, Prosus (PRX NA) made an Update on Repurchase Programme that it had repurchased shares in the market from the 3-7 April. They do so every week.
• This one said they would move 96 million shares of Tencent (700 HK) currently held in non-transferrable shares into CCASS so they could be sold. 
• The ADRs dropped in New York time. Tencent shares fell hard today. If the share price fell because of a block offering, that would be unwarranted. 

• With no changes made at the March rebalance, we are still stuck at 76 index constituents. And it’s been a year later than originally planned to reach 80 index constituents.
• We list 10 potential inclusions in June. Adding all 10 stocks will lead to around 5% one-way turnover, so there could be a mix of larger and smaller stocks added.
• There will be at least 1x ADV to trade on nearly all inclusions. Short interest is over 4% of float on some stocks and there has been a recent jump.

• ZJLD Group (ZJLD HK), a baijiu company in China, is set to launch an HKEx IPO to raise US$800-900 million next week, according to press reports.
• We previously discussed the IPO in ZJLD Group IPO: The Bull Case and ZJLD Group IPO: The Bear Case. 
• In this note, we present our forecasts and take the first look at ZJLD’s potential valuation range. 

• Hong Kong is the weak link in Asia to short. Bear wedge set to break lower after the rally failed under the 21,000 sell resistance. Similar fate for the A50.
• ASX met sub 7,400 zone to trim. Korea 327 sell zone, starting to unwind. NKY 28,300-500 sell zone at hand.
• A number of markets are approaching sell levels in Asia and Europe. Does the SPX rise may fall short of 4,200? Third week in April is when bull energy dissipates.

• Founded in 2014, Hangzho Rokid Technology (2004144D CH)  is a Chinese developer of AR glasses and AI robotics software products, and the company operates across 10 countries.
• Rokid’s glasses are mainly used for industrial purposes including in oil & gas, electric power, aviation, rail transport and others thereby creating its own niche in the AR/VR glasses sector.
• The company has just expanded into North America with further global expansion on the cards and may likely to seek an overseas listing.

• ADICON Holdings Limited (ADI HK) is looking to raise about US$400m in its upcoming HK IPO. 
• Adicon Holdings is one of the top three independent clinical laboratory (ICL) service providers in China in terms of total revenue during the Track Record Period, according to F&S. 
• In our previous notes, we looked at the company’s past performance. In this note, we talk about peer comparison.

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.

• Central China Securities
• China SCE
• Sino-Ocean Service
• Softbank Group
• Vedanta Resources

• We continue to view JUNSHI’s Phase III pipeline, consisting of Senaparib (JS109/IMP4297)(PARP), Ongericimab (JS002)(PCSK9), Bevacizumab (biosimilar) and VV116 (COVID)(RdRp) as unexciting; 
• Phase I/II drug Tifcemalimab (TAB004/JS004)(BTLA mAb) is interesting, but may not last to reach product sales;
• We acknowledge the bad news has already been priced in and raise the TP to HK$21, but JUNSHI still has unfavourable risk reward profile in our opinion.

• China Southern Power Grid Co. Ltd. has agreed to pay around $2.9 billion to acquire two Peruvian assets from Italy’s biggest utility Enel SpA, as the Chinese state-owned major deepens its footprint in South America amid a global business expansion.
• Under the agreement, a subsidiary of the Rome-based company will sell its entire 83.15% stake in distribution and supply company Enel Distribución Perú S.A.A. and 100% stake in advanced energy services provider Enel X Perú S.A.C. to China Southern Power Grid International (HK) Co. Ltd
• The deal will further strengthen the Guangzhou-based operator’s presence in South America.

• Binjiang Service Group (3316 HK) reported a solid earnings growth of 28% YoY, with revenue up 41%. Binjiang has outperformed its peers in the PMC space by a long way.
• Net cash on the balance sheet increased to 37% of the current market capitalization, led by the growth of operating profits and payables.
• The PE FY23e/24e now is a modest 11.2x FY23e/9.2x FY24e with dividend yield of 5.4%/6.5% FY23e/24e (assuming a 60% payout ratio).

• Jingdong Property (JDP HK) is looking to raise about US$1bn in its upcoming Hong Kong IPO.
• JD Property (JDP) develops and manages modern infrastructure, consisting primarily of logistics parks, as well as business parks and others in China and in Asia.
• As of Dec 22, the firm’s portfolio of Modern Infrastructure Assets has a total AUM of RMB93.7bn, occupying a total gross floor area (GFA) of 23.3m sqm. 

• Zhejiang Supcon Technology (688777 CH) is looking to raise around US$347m in its Swiss GDR listing. Huatai and CLSA are bookrunners on the deal.
• The firm is offering 12.5m GDRs (1 GDR to 2 ordinary A-shares) for sale, at a 8.1-10.8% discount to last close on the A-share leg.
• The deal is a relatively small one for the firm to digest, representing just 5.9 days of three month ADV on its A-share leg.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• A large triple bottom in 2021/2022 has confirmed a likely multi-year base and evolving multi-year uptrend. Q1 2023 has delivered a correction within the evolving uptrend.
• A bullish weekly reversal pattern last week has confirmed that the 2023 correction is likely complete. Initial target at 23.20 (+11%), the break above which will target 27.35 (+30%).

• ADICON Holdings is one of top three independent clinical laboratories (ICL) in China based on total revenues. The company offers testing services primarily to hospitals and health check centres.
• The company’s application for a HKEx listing has been approved and according to news media outlets, ADICON plans to raise around US$400m through the IPO.
• Over the last three years, most of ADICON Holdings Limited (ADI HK) ’s growth were driven by Covid-19 related testing services which are likely to see huge decline going forward.

• Dongfang Electric (1072 HK)‘s management update suggested that its outlook remains encouraging. Order backlog of Rmb87.8bn well covers the FY22 revenue at 1.57x.  
• It is positive towards pumped storage, alternative power storage and hydrogen energy. Although they may not have significant near-term contribution, DEC is well-positioned in the long term.
• While new A-shares issue will dilute EPS, this should lower gearing (including contract liabilities) to 32.1%, from 49.2%, and is positive to H-share holders as book value will be enhanced.

• China TCM’s concentrated TCM granules business improved significantly in 22H2, and the total revenue in 22H2 also increased by 42% YoY, indicating that the decline trend has been significantly curbed.
• Due to its SOE background+ national standard setters with the largest number of national standards filed, China TCM would be the beneficiary of the industry’s transformation during this dividend period.
• Due to low base last year, China TCM’s performance would rebound this year. Considering favorable policies and large growth potential in TCM granules, we’re optimistic about its share price performance.

• ADICON Holdings Limited (ADI HK) is looking to raise about US$400m in its upcoming HK IPO. 
• Adicon Holdings is one of the top three independent clinical laboratory (ICL) service providers in China in terms of total revenue during the Track Record Period, according to F&S. 
• Adicon’s revenue growth has been driven by its medical diagnostic testing services segment, during the track record period. However, much of its growth appears to be driven by COVID-19 testing. 

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
• Greentown China
• Sino-Ocean Service

• PDD’s small retailers bought out products of direct sales and claimed full refund.
• The story happened to Alibaba more than ten years ago.
• It can be hard for PDD to enter the high quality market.

• Tencent authorized video editing right to Douyin, one of its main competitors.
• Some of Bilibili’s video uploaders cannot survive the hard time.
• Both Alibaba and Baidu launched their ChatGPT-like apps, but Baidu’s app was .

• MTR Corp (66 HK) is the lagging stock in Hong Kong although it is a key beneficiary to more Chinese tourists that will arrive soon.
• HK Government has launched a few initiatives to invite tourists to visit Hong Kong that will boost higher ridership for the company. 
• It is now trading at the level prior to COVID with the potential of higher earnings that will come from the ridership increase. 

• China Communications Construction (1800 HK) is expected to generate higher shareholder return through improvement in profitability/cash flow, spin-off, asset disposal and issuance of REITs.
• Operationally, backlog reached Rmb3.39trn at end-FY22, enough to cover 3.9x FY23F revenue. It expects revenue to grow at least 7% and new contract by no less than 9.8% in FY23. 
• Employee incentive scheme has been adopted with targets including FY21-23 earnings CAGR of at least 8% and FY23 return on net assets of 7.7%. This aligns employee interests with shareholders’. 

• Keep Inc., the sports technology unicorn and the largest fitness app in China, has renewed its application proof in Hong Kong. Goldman Sachs and CICC are leading the upcoming IPO.
• With a mission to make the world move, the fitness app has been making waves in the fitness industry with its innovative approach to online fitness.
• Keep fitness app has been downloaded over 300M times since inception and there were 370M+ fitness users in China in 2022, the world’s largest market globally.

• We expect BABA to report C1Q23 (F4Q23) top-line and non-IFRS net income (5.0%) and (5.9%) vs. consensus, respectively, 
• Due to: 1) weak sales of Taobao, Tmall and 1P sales; 2) the on-going move of a key Cloud client; 
• We maintain US$109 TP as: 1) Taobao and Tmall sales shows recovery trend; 2) near-term benefit of unveiling its LLM AI; and 3) benefit from the new business unit structure.

• Shineway’s 2022 performance was outstanding.Its TCM formula granules business would seize more market share and maintain strong growth momentum, which would continue to be the main performance driver in 2023.
• Considering obvious policy preferences and lower price reduction of TCM in VBP, we recommend investors to leave a place for TCM company in portfolio, and Shineway deserves investors’ attention.
• Shineway is cash rich. Together with promising growth potential and solid financial performance, Shineway’s share price is expected to perform well, which could be a good trading target for investors.

• Huawei Technologies Co. posted its lowest profit margin ever for 2022 but managed a slight revenue gain in the third year of U.S. sanctions that forced the Chinese electronics giant to diversify its business into new sectors from cloud computing to automobiles.
• The company reported net profit of 35.6 billion yuan ($5.18 billion) for 2022, a 69% decline from 2021, on revenue of 642.3 billion, up 0.9% from a year ago.
• Its profit margin fell to a record low of 5.5%.

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.

• China Vanke
• Lenovo
• Sunny Optical
• Times China
• Yanlord Land

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Sino-Ocean’s ESG as “Weak”, in line with its “Weak” Governance score. That said, the company has an “Adequate” Environmental score and a “Strong” score for the Social pillar. Controversies are “Material”, but Disclosure is “Strong”.

• In a dealbreak, ANZ (ANZ AU) will either have enough capital in a downturn or excess capital it could use to buy back stock. If behavioural remedies, SunCorp is cheaper. 
• Jardine Cycle & Carriage (JCNC SP)‘s implied stub value is around its highest-ever level, dating back to 2004.
• There is no good reason to be long Adani names, even if GQG is up 25% on his money so far.

• Markets expect Popmart to deliver fast growth for years to come, yet we are skeptical because the pop toy business, by definition, is a niche market.
• Blaming COVID for Popmart’s weak results risks focusing too much on near-term cyclical recovery but overlooking structural bottlenecks to growth.
• While we are cautious for long term, continued improvement in business and news flow leading to 1H results will likely result in share price rebound and provide tactical trading opportunity.

• ZJLD Group (ZJLD HK) is looking to raise up to US$500m in its upcoming Hong Kong IPO.
• ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu.
• In this note, we discuss our earnings assumptions and share our thoughts on ZJLD’s valuation.

• Weekly summary of vol changes and moves across Global Markets
• Analysing ATM volatility and skew changes over the last 5 days
• We suggest a few trades to take advantage of the implied vol surfaces