China

• We expect Miniso to report C1Q23 revenue, operating profit, and net income 3.6%, 18.3% and 16.7% higher than consensus. 
• We think the strong foot traffic to offline stores post CNY bodes well for Miniso’s domestic store sales in 2023;
• We maintain the Buy rating, and raise TP by US$1 to US$25 to factor in the sales recovery from higher foot traffic and ARPU.

• Atour reported its 4Q22 revenue/non-GAAP operating profit/non-GAAP net income 8.0%/78.3%/114.6% higher than our estimate. 
• We adjust Atour’s hotel expansion estimate from 2.4k to 1.9k until 2025 due to its low appetite in expanding midscale segment.
• We raise our 2023 earnings estimate due to better operating efficiency, but trimmed its hotel network expanding pace in 2023-2025, leading to TP cut by US$2.5 to US$34.

• Nayuki reported C2H22 top line 0.9% below our estimate but 18% below consensus，due to deteriorating cost ratios; 
• Company chose to drastically expand store count by ~600 in 2023. Our concern is that Nayuki stores now are drastically different from its past.
• The company is abandoning its premium teahouse position, which begets unknown consequences in our opinion; We keep the TP unchanged at HK 3.1 and maintain SELL.

• Xiaomi Corp (1810 HK) ’s share price has been down more than 10% over the last 12-months with weakening of the company’s earnings particularly the smartphone business.
• Xiaomi’s entry into premium segment has not much helped its smartphone biz as it faces stiff competition from Apple and Samsung in the premium segment.
• The company spends aggressively on EVs to drive growth, however, with EV subsidies not renewed and intense competition, this may not help Xiaomi in the near term.

• Sinopharm Group Co Ltd H (1099 HK) reported strong 2022 results, with annual revenue exceeding RMB550B and net profit achieving 10% YoY growth. Growth was driven by pharmaceutical distribution business.
• EPS increased 10% YoY to RMB2.73, ahead of consensus of RMB2.64. The company has increased its final dividend to RMB0.82 per share from RMB0.75 per share in the prior year.
• With favorable industry tailwind and China reopening, consensus expects Sinopharm to report double-digit revenue and EPS growth through 2025.

• This is our first report on Prudential, a major provider of life and health insurance.
• Prudential had a very strong quarter with 19% sales growth.
• Despite slower revenue recognition in the life insurance market, the company has been witnessing strong cash flows and returned over $800 million to shareholders in the latest quarter.

• Sino Biopharm’s 2022 performance isn’t satisfactory, but the Company is gradually getting rid of the negative influence of VBP. We expect Sino Biopharm to achieve faster performance recovery than Hengrui.
• Most of Sino Biopharm’s innovative drugs are biosimilars and Me-Too products, which will face fierce competition once approved for listing. The revenue target of HK$100 billion by 2030 looks challenging. 
• Corporate governance deficiencies and lack of the next big variety are the reasons why the market is reluctant to offer high valuation. The new CEO needs time to prove his ability. 

• The June 2023 index review results for the Hang Seng index can be expected after the close on 12th May 2023.
• In Quiddity Leaderboard for Hang Seng Index Mar 23: Healthcare Names Could Dominate, we expected some healthcare names to be added but there were no index changes in March 2023. 
• Although the index methodology is highly subjective and predicting index changes is extremely tricky, the HSI is an important index in the region and here are our thoughts for June. 

• 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 the industry dynamics and undertake a peer comparison.

• 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.
• This week’s decline is deemed counter-trend and is in stark conflict with the bullish MT and LT triggers detailed in our bullish publication on 29 March 2023.
• Key support levels often combine a number of important moving averages.  92.00/94.50 combines the 20/50 week MA’s / 12/26 week EMA’s. High risk MT bottom at 92.00/94.50. Target 118.50.

• While we like Sinotrans (598 HK) in the long term, we are caution that 1Q23 result may be disappointing. Its 4Q22 earnings already showed 49.1% YoY and 73.3% QoQ decline.
• Indicators including China’s PMI new export orders, export growth, container shipping freight rates (SCFI) and airfreight rates all showed that the recovery trend is weak. 
• 9% of FY22 profit is from exchange gain as Rmb depreciated, and this may not happen again. Consensus forecast of just 10% decline in FY23 net profit seems overly optimistic. 

• JD Health’s 2022 results were more optimistic than expected. We think the past three-year pandemic as well as the broadening of service scenarios are main drivers for rapid performance/user growth.
• If turning losses into profits is “a phased victory”,striving for higher profit margins and healthier revenue structure is the key task in next stage,but JD Health may fail this transformation. 
• After China reopens, JD Health’s user scale could be difficult to maintain such rapid growth in 2023 and onwards. Without breakthrough in service revenue, its valuation expansion potential could be limited. 

• Lalatech Holdings Co Ltd (LALA HK) is looking to raise about US$1bn in its upcoming HK IPO. The deal will be run by BofA, JP Morgan and Goldman Sachs.
• Lalatech operates via a marketplace model serving merchants and carriers. Its platform facilitates closed-loop transactions from online shipping order booking to intelligent order matching, and automated dispatching to after-sale services. 
• In 2022, Lalatech facilitated over 427.5m fulfilled orders with a global freight GTV of US$6.7bn, with approximately 50.4m merchants served and business brought to approximately 2.3m carriers. 

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.

• Adaro Energy
• Country Garden Holdings Co
• Gajah Tunggal
• NagaCorp Ltd
• Yuexiu Property

• ZJLD Group (ZJLD HK), a baijiu company in China, is pre-marketing an HKEx IPO to raise up to US$400 million, according to press reports.
• In ZJLD Group IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The key elements of the bear case rest on the sharpest revenue slowdown, lowest operating margin and FCF margin vs peers along with a deterioration in lead growth indicators.

Central China Real Estate’s (CCRE) FY 2022 results were much weaker than expected, as revenue declined 43% y-o-y and the gross margin contracted to a low of 8% (FY 2021: 16%). EBITDA turned slightly negative, and we estimate CFO (after interest and tax) at negative CNY 4.0 bn. Net debt increased due to the negative cash flows, contrary to our expectations of deleveraging. Liquidity is poor, and the company has announced a distressed exchange for USD 897 mn of notes due in 2023.

In our view, CCRE’s poor profitability suggests that its operating challenges are more severe than expected. This could have been exacerbated by the company’s high exposure to lower-tier cities and counties in Henan, despite its established brand position and market share.

We foresee that CCRE’s revenue and gross margin will remain weak in FY 2023. In addition, any improvement in the company’s medium-term prospects would hinge on a recovery in contracted sales and ability to restart land-banking activities in H2, in order to extend its sales pipeline. This is crucial as CCRE is a pure-play property developer. The company’s longer-term prospects could depend on the development of synergies with SOE minority investor Henan Railway, to obtain new business and financing opportunities.

• Growatt is a distributed energy solution provider with the #1 market share for PV inverters and energy storage inverters, allowing them strong potential to benefit from a growing market.
• The company has filed for an IPO on the HKEx with a placeholder value of US$1bn and following the lapse of its application, has refiled for an IPO.
• In this follow-up insight, we have highlighted and discussed some of the key new data points from the company’s latest IPO filing document which contains full-year 2022 results.

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.

• JD Industrials (2231713D CH) is looking to raise about US$1bn in its upcoming HK IPO. The deal will be run by Bank of America, Goldman Sachs and Haitong International.
• JD Industrials (JDI) is a leading industrial supply chain technology and service provider in China in terms of GMV in each year during the Track Record Period, according to CIC. 
• JDI’s platform offers 48 product categories and approximately 42.5m SKUs as of FY22 (31st Dec 2022). 

Hopson Development’s FY 2022 results were soft as expected, with sustained weakness in contracted sales and revenue, along with a lower gross margin. We note negatively the continued loss in its financial investments, which may point to poor strategy and/or management.

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
• KWG Living Group
• Sino-Ocean Service
• West China Cement

• ClouDr had outstanding performance in 2022, which was mainly due to its unique but effective development model – starting from To B business first and then expanding To C business. 
• ClouDr may become the first company to develop a successful profit model of online medical services. The integration of AI and medical care enables ClouDr to enjoy more policy dividends/catalysts 
• ClouDr Group (9955 HK) has high growth potential with big investment value, and it could even surpass JD Health in the future. The Company is undervalued and deserve investors’ attention.

• Just after Alibaba’s big news of a business split and possible fundraising and IPOs for spun-out entities, JD.com announced that they will list its Properties and Industrials businesses in HK.
• The pre-IPO funding round of $800m, led by Hillhouse and Warburg Pincus valued Jingdong Property (JDP HK) at RMB 7.15 per-share, which valued the company at RMB 46.8bn market cap.
• This implies a price-to-book multiple of 1.1x, which is towards the high side considering that the sector is trading at an average discount of roughly 10% to its book value.

• Time spent on apps increased by 15% in China in 2022.
• In 2022, total advertising market decreased by 9%, but online advertising market increased by 1%.
• We believe online advertising market will grow significantly higher than total advertising market in 2023.

• ZJLD Group (ZJLD HK), a baijiu company in China, is pre-marketing an HKEx IPO to raise upto US$400 million, according to press reports.
• ZJLD is the fourth largest privately-owned baijiu company and ranked third among all baijiu companies with three or more aroma types, in terms of revenue in 2021.
• The key elements of the bull case rest on market share gains, competitive production capacity, premiumization, rising gross margin and inventory days in good shape vs peers.

Agile Group’s FY 2022 earnings were much poorer than expected, as the company reported a 26% y-o-y revenue decline and abysmal gross margin of just 2% (vs. 23% in H1/22 and 26% in FY 2021). The depressed gross margin reflects the company’s operational challenges, as well as aggressive inventory destocking to prioritise cash-flow generation (which has helped Agile avert a default).

The company’s liquidity position remains precarious, though we do not anticipate a default in FY 2023. This considers management’s high willingness to address debt commitments, as well as the industry’s improved financing environment. At FYE 2022, Agile had a CNY 8.5 bn unrestricted cash balance, which was barely sufficient to cover CNY 3.3 bn of short-term onshore bond/ABS and CNY 4-5 bn of interest expense. The company will have to refinance its bank and syndicated loans, with the government’s recent easing policies being supportive. In addition, we expect Agile to continue deferring new land acquisitions, as it still has a relatively large land bank. Still, the company is likely to continue deferring coupons on its perpetual securities, which are subject to a stoppage of dividend payments.

• Lalatech Holdings, one of the largest Asia-based providers of on-demand delivery platform, filed for Hong Kong IPO, with Goldman Sachs, BofA Securities and J.P. Morgan leading the offering.
• I like profitable growth at tremendous scale, hybrid monetization model and leadership position in Mainland China with a 40%+ share, well ahead of its major peers.
• Lalatech Holdings was backed by top-tier VC investors, including Hillhouse Capital Group, Sequoia Capital, Shunwei Capital, MindWorks Capital and Vitruvian Partners, among others. 

Seazen Group’s FY 2022 results were in line with expectations, with sustained weakness in contracted sales and revenue, as well as weaker margins. Total revenue declined 31% y-o-y to CNY 116.5 mn, with contractions in GPM and the EBITDA margin.

Key leverage ratios deteriorated over FY 2022, given the decline in revenue and profitability, despite debt reduction. Revenue/Debt weakened slightly to 137%, from 147% as at FYE 2021. Net Debt/Net Inventory was largely unchanged at a sound 19%. That said, Debt/EBITDA weakened to an aggressive 6.9x, due to the lower profitability. Liquidity was inadequate, with cash covering only 70% of ST debt.

• In Q1 2023, 86 different Hong Kong-listed companies bought back shares either locally or on foreign exchanges. Total buybacks were HK$22.856bn.
• 8 Companies made up 90% of the total. On average, they bought back shares 4 days out of every 10 within the quarter. 
• A lot of the smaller companies doing buybacks were significant portions of their volume.

• No matter how good a story is, it needs to be supported by sales data.If sales of Toumai cannot scale up, the complete closed-loop of surgical robot+consumables+solution/service would be groundless.
• The commercialization dilemma has become “a dark cloud” for Medbot. Before Medbot makes any breakthrough in internationalization or establishes an effective profit model in China, the Company lacks investment logic.
• The catalyst for stock prices from favorable policies is not lasting. Weaker-than-expected financial performance would quickly throw valuations into correction. As things stand, Medbot is only suitable for short-term trade.

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
• Vedanta Resources

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• Alibaba (ADR) (BABA US)‘s restructuring news caused some exiciting in the IPO market this week, with Hong Kong filings picking up as well. 
• On the placements front, all eyes remain on Meituan (3690 HK) and whether Prosus (PRX NA) will do a placement.

• 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 – Rakuten Bank (5838 JP), Trial Holdings (5882 JP), PT Trimegah Bangun Persada Tbk (Harita Nickel) (2230010D IJ) and Merdeka Battery Materials (2012725D IJ) IPOs.
• Event-Driven developments  Aag Energy Holdings (2686 HK), Toshiba Corp (6502 JP), Toyo Construction (1890 JP), Liontown Resources (LTR AU), Mincor Resources NL (MCR AU), Origin Energy (ORG AU). 

• Alibaba (ADR) (BABA US)‘s multi-faceted logistics unit Cainiao Smart Logistics (1437124D HK) may seek an IPO in Hong Kong before the end of 2023, according to media reports
• In this piece we look at why CaiNiao is being spun off now, what the company actually does (and doesn’t do), what its likely comps are, and more
• CaiNiao is unique, but we can begin to understand its position and its valuation by comparing it to JD Logistics (2618 HK) and S.F. Holding (002352 CH)

• Dongfang Electric (1072 HK)‘s 35.1% increase in FY22 recurring earnings demonstrated its healthy operations. Slowdown in 4Q22 (+14.4% YoY) is more a result of pandemic disruption. 
• Record new orders of Rmb65.6bn were signed FY22 (+16.3% YoY), and 4Q22 even saw a 25% growth. End-FY22 backlog is estimated to be enough to cover 1.66x FY22 revenue.
• DEC targets a 35% growth in power generation equipment production volume in FY23. Power storage, including pumped storage, and hydrogen energy are important engines going forward.

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.

• AAC Technologies Holdings
• CIFI Holdings
• Fosun International
• Sands China
• Sino-Ocean Service
• Tata Motors ADR

• Considering DS-8201’s outstanding data and strong competing drugs, RC48 would probably contribute revenue to RemeGen mainly from GC and UC indications in China.Overseas revenue would be mainly from UC indication.
• After Pfizer acquired Seagen, there are concerns that RC48 (a “Me-Worse”) may be returned by Pfizer. If it is the case, only the revenue in China market should be considered.
• Based on 2022 annual results, we think it is time to reassess the outlook and sales forecast of RC48 and RC18, because the story has changed for RemeGen.

• FY22 results announced last week were in line excluding non-recurring items. The results provided latest evidence of monetization potential of its passenger traffic and insights into its cost base.
• We trim 2023 net profit estimate by 10% to RMB520 million and maintain RMB1 billion net profit estimate for 2025.  Expect 25%/150% return by 2023/25 respectively based on 20x P/E.
• Duty-Free concession agreement renewal in 2025 is a key positive catalyst, but we also caution potential follow-on share issuance this year could be an overhang on stock price.  

• One may presume that Prosus (PRX NA) moved their Meituan (3690 HK) shares received from their non-CCASS holdings of Tencent (700 HK). It does not tell us much else. 
• Allocation in the S.M.Entertainment Co (041510 KS) partial Offer was 44.14%. With shares trading ~₩95k, that was a pretty good outcome. 
• Toyo Construction (1890 JP) has asked the Japanese government to investigate YFO’s alleged breaches of FEFTA. Expect YFO to say they did no wrong. Expect Toyo to complain about it. 

• The 8th national VBP released results, with an average price reduction of 56%. On the whole, the peak period of the impact of VBP on pharmaceutical companies has passed.
• VBP document of Chinese patent medicines was released, which would affect a market with scale of RMB300 billion. Enterprises with rich product matrices/new products can better cope with this VBP.
• For AIM, we listed several key points. Since the management are more interested in short term capital gains rather than developing a superior portfolio, AIM doesn’t have long-term investment value.

• 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

• Two days ago, media reported Alibaba Group (9988 HK) / Alibaba (ADR) (BABA US) would split and possibly list several businesses. Last night Cainiao was reported as starting listing preparations.
• Last night, JD.com Inc. (9618 HK) made two announcements it was proposing to spin off and list its JD Property and JD Industrial arms. This is NOT a spinoff war.
• JD raised Series A and B for both companies. These were always going to be spins, like Health, Digits, and Logistics. JD Properties will be biggish.

• While all eyes are on Alibaba splitting its business into six mini-Babas, some were quick to conclude that Tencent could be the next candidate for a similar split.
• Unlike Alibaba (ADR) (BABA US) whose business units have clear divisions and stand on its own, Tencent (700 HK) ’s businesses are interconnected making a similar split very difficult.
• Having looked at Tencent’s business units and past regulatory probe on the company, it seems unlikely for the company to be the next candidate for an Alibaba style separation.

Country Garden has released its FY 2022 results, with revenue and earnings declines as well as margin contraction. Reported debt decreased. EBITDA/Interest and Debt/EBITDA weakened significantly, but Net Debt/Net Property Assets remained sound. In December, the company received HKD 4.74 bn (c. USD 609 mn) from a private placement of 1.78 bn shares, with the funds primarily to be used for offshore debt commitments.

We are not surprised by Country Garden’s poor earnings performance in FY 2022, given that it had been a dire year for the Chinese property industry. We view positively the company’s repayment of debts due in 2022, despite difficulties in property sales and cash collection.

We remain cautious about the likelihood that management can achieve its goal of increasing Country Garden’s market share in higher-tier cities. We also continue to be highly concerned over the recovery trajectory for the group’s margins and property sales in FY 2023, considering the relatively large portion of existing inventory in Tier 3 and 4 cities compared to peers.

• 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.
• PetroChina Co Ltd (857 HK) bottomed in Oct/Nov 2022 around the 61.8% retracement support. The subsequent impulsive multi-month uptrend maintains the bullish LT trend reversal confirmed in 2021.
• March 2023 has delivered new bullish breakouts in price and LT momentum that confirm a sustainable LT uptrend bias. Initial target at 5.28 (+13%). Longer term risk to 6.50/6.80 (+40%).

SCE’s FY 2022 results were as expected, with sustained weakness in contracted sales and revenue, along with weaker margins. Going forward, management’s strategy includes progressing steadily to deal with the volatility in the industry. The delivery of projects will be a key objective, in order to maintain homebuyer confidence.

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. Japfa Comfeed Indonesia
2. Yankuang Energy Group
3. Anton Oilfield
4. China Jinmao Holdings
5. Lifestyle International Holdings

and more…

Sino-Ocean’s FY 2022 results were very weak. The decline in property sales revenue and profitability did not come as a surprise, given the moribund state of the property industry. The CNY 4.8 bn increase in gross debt and CNY 5.2 bn write-down on financial investments were, however, somewhat unexpected. These reflect very poorly on management and, needless to say, there have been no changes of note in this regard.

• Alibaba Group (9988 HK)‘s shares rallied after announcing the business split, with investors believing that the sum of parts could be worth more than the current valuation.
• Our analysis shows that NAV is only 12% higher than the current valuation, contrary to the idea of a significantly higher sum of parts value.
• Therefore, we would be looking to short Alibaba (ADR) (BABA US) yet again once this initial excitement settles.

• 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 include Tian An China Investment (28 HK), CSPC Pharmaceutical Group (1093 HK), and Li Auto (2015 HK).

• 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.
• XPeng Inc (9868 HK) has this week broken above the falling wedge pattern that captured its Dec/Mar correction. The bullish trend breakout in the weekly RSI confirms the uptrend bias. 
• Wedge patterns are commonly referred to as “Half Mast” patterns. They typically occur in the middle of trends, making textbook targets easy to calculate. Target 56.10 (+29%) in Q2 2023.

• Lalatech Holdings Co. Ltd., the operator of on-demand delivery services known as Lalamove in Hong Kong and other global markets and as Huolala on the Chinese mainland, filed for an initial public offering Tuesday on the Hong Kong Stock Exchange.
• The company didn’t disclose a fundraising target or a timeline.
• The startup originally filed an IPO application confidentially in U.S. in June 2021 with an aim to raise at least $1 billion, but it later pulled out of the plan after Beijing’s crackdown on overseas share sales.

• Kuaishou’s 4Q22 top line beat our est. by 3.9%, and non-IFRS net income was higher than our est. by 85% due to cost-saving measures.  
• We raise forecasts for its ads and eCommerce growth due to on-track macro recovery. However, we are still concerned about the intensified competition from WeChat Video Account.
• Maintain SELL for competition scenario, but slightly raise TP to HK$ 58 to reflect macro recovery. Our TP implies 2.1X PS/239X PE in 2023.

• Plunge in net profit, high gearing and slowdown in new projects are market concerns, but should have well reflected in its share price. Its 3.6x PER is just too cheap. 
• FY23 will see profit recovery, backed by decent project pipeline and lack of one-offs like impairment and exchange losses. Consensus forecast of 15% profit growth is too conservative.
• Cash flow will improve over the next two years as collection of national subsidies accelerates, capex moderates and contribution from operating projects increases. 

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.

• Indika Energy
• Meituan

COG’s FY 2022 results were in line with our expectations. The credit profile remains satisfactory, supported by a decrease in borrowings. We view positively that long-term debt and time deposits were lower.

We agree with management that the operating environment is likely to be favourable in 2023. According to the company, volume growth was 15% y-o-y in January and February 2023. COG is keen to reduce financing costs and extend its maturity profile by refinancing a portion of bank borrowings with a syndicated loan. Management said that COG is currently in talks with banks over a syndicated loan.

Management confirmed that the company is not keen on increasing indebtedness for expansions or acquisitions.

China Jinmao’s FY 2022 results were slightly weak, but in line with expectations. The company reported a slight top-line decline, while the gross margin contracted further to 16%. In addition, net debt continued to climb, due to acquisitions. For FY 2023, we expect revenue recognition to improve, although margins could remain weighed down by lower profitability at Jinmao’s city operations projects.

Positively, the company’s access to financing remains strong, as it was able to issue onshore bonds at low interest costs without having to provide credit enhancements. According to Jinmao, its average interest cost fell to a record low of 3.9%, despite the generally poor financing environment for the industry.

In other news, there were onshore rumours over the past week that the company may be merged with China Resources Land, with the energy businesses of China Resources Group to be integrated into Sinochem. All of the companies involved have denied the rumours. Still, we note that the business combination (if it materialises) will be positive for the CHJMAO notes, as China Resources Land is a stronger entity than Jinmao. That said, the merger is unlikely to trigger the Change of Control put, as the put option can only be triggered with a ratings downgrade.

• RemeGen reported C2H22 top line in-line with our estimate but 9.4% below consensus. Gross margin, however, beat our estimate by 21ppt. Net-net, non-IFRS operating income missed our expectation by 15%; 
• The result highlighted RemeGen’s investment case hinging on successful license out. Product revenue itself cannot carry the company to profitability; 
• With WACC of 17%, we have already provisioned for the license out absence. But we still cut TP by HK$6 to reflect the increasing spending going forward.

• Meituan (3690 HK) shares hit accounts on Friday, they showed up in the CCASS data. All but about 2.3mm shares worth. Another 248.8mm shares showed up on Monday. 
• That was the Prosus stake, which was expected as of November 2022 (evidently, they did not convert more Tencent shares in the interim. 
• The data tells us some things. It does not tell us much else. Be careful of the details. 

• Back on the 17 February, AAG Energy Holdings (2686 HK) announced an underwhelming Offer of HK$1.85/share (declared final) by way of a Scheme from major shareholder Xinjiang Xintai (603393 CH).
• Yesterday, Xinjiang Xintai shareholders approved the proposal. This was expected – it’s a total bargain. 
• AAG shareholders will likely get to vote on the Scheme in early May. They should vote it down.

• Sunpower Group (SPWG SP) announced it agreed to a 2-year extension of its CBs with two Chinese P/E funds that have been supporting it since 2017
• The extension is unexpectedly favorable to Sunpower equity holders and removes a major overhang
• After two difficult years with spiking coal prices and rolling lockdowns in China, the company can finally be valued on the merits of its GI business once again

• Core earnings of Kunlun Energy (135 HK) rose 25.2% in FY22, providing solid evidence for its strength against peers. We are delighted to see dollar margin even expanded 4.1%.
• Pace of new project addition has not weakened as it secured 25 new projects in FY22. Collectively, they will increase sales volume by 3.2bn cu.m., 7% of FY22 volume.
• Net cash of Rmb13.6bn equals 28% of share price, making 8.9% ROE look decent. Market earnings forecast is too low; and even so, it trades on just 7.2x FY23 PER.

• Capital Expenditure – New Investment in Mexico Plant in 2023
• The company achieved a solid performance in its Recycled Lead business and Power Solutions business with a revenue growth of 18% and 13%, respectively, as compared to 2021.
• The revenue for Recycled Lead business and Power Solutions business was RMB2,413 million and RMB10,433 million respectively. 

• FY22 is definitely bad for Shenzhen International (152 HK) given the 64.9% profit plunge. However, negative contributors like Shenzhen Airlines and exchange losses will be removed in this year.
• Earnings for Shenzhen Expressway (548 HK) will improve and 1Q23 has witnessed good traffic recovery. Logistics profit will benefit from higher occupancy, REIT issuance and new projects.
• Upside will come from logistics park transformation with profit from Yicheng Qiwanli pre-sale potentially to be booked. Consensus earnings forecast of HK$4.1bn is at low-end of our estimate. 

West China Cement’s (WCC) FY 2022 results were overall acceptable. The company reported slightly weaker earnings for its core business in Mainland China, as lower sales volumes (amid COVID-19-related disruptions and the subdued real estate sector) and increased raw material costs more than offset surprisingly positive ASP growth.

Importantly, WCC’s expansion in Africa is taking shape, as its plant in Mozambique has ramped up quickly and achieved high capacity utilisation in the first two years of operations. The company’s plants in Africa enjoy substantially higher ASP than those in China, which should support the overall gross margin.

We expect WCC’s FCF to remain deeply negative in FY 2023, which will lead to a further weakening of its net leverage (2.6x at FYE 2022). We believe FCF may turn positive in FY 2024, when the bulk of the company’s new projects in Africa are due to complete and commence operations.

• The company declared bonus shares of 40% during the annual results announcement in Mar, with shareholders issued 4 shares for every 10 shares by way of conversion of capital reserve.
• The stock went ex-dividend on 1 June 2018.
• Primarily as a result, we have adjusted our target price for the stock to HKD11.3 (from HKD16.3).

• Growatt Technology (1833969D CH) , one of the largest providers of PV and storage inverters globally, plans to go public and may seek $500M+ through Hong Kong IPO.
• I view Growatt Technology (1833969D CH) as a high-quality growth company with best-in-class products and solutions, and see significant opportunity in international markets.
• The company is well-positioned to benefit from fast-growing PV inverter and energy storage markets. I am bullish on Growatt Technology IPO and like long-term energy storage story.

• Core profits +13% y/y due to contribution from newly acquired infrastructure & utility business
• Recurring income +38%, growing ahead of management target and supporting dividend growth
• Strong balance sheet support further share buyback and acquisition.