China

• LI Auto (LI) reported C2Q24 top line, non-GAAP operating profit and GAAP net income 5.0%, (5.2%) and (20%) vs. our estimates, and in-line, 53% and 6.8% vs. consensus.
• We believe the market has oversold the company.But in our view,the key question is LI’s next product entry under the backdrop of Xiaomi consolidating its position in the EV sector. 
• We believe LI should continue to explore its “family car” brand niche in entering the sedan market. If so, volume and margin can co-exist.

• 2Q-2024 results is within ours and consensus expectations. Competition is tough, but LiAuto managed to remain profitable   
• Management is boosting R&D expenditure and boost spending on  expanding number of charging stations, all for the benefit of its customers. 
• Our fair value of USD25 implies 16x FY25 PE – average for auto growth stock. A bargain with 3-year CAGR of 38%, net cash, and churns high free cash flow.

• Meituan reported C2Q24 revenue 1.4%/2.3% higher than our estimate/consensus and adjusted net income 17%/28% higher than our estimate/consensus, thanks to lower rider cost and less subsidies to users;
• Although poor economy has plunged Meituan’s merchant base to the loss-making zone, we expect Meituan’s take rate to persist as take-out order represents incremental revenue to offset merchants’ fixed cost.
• We reiterate BUY rating and raise TP to HK$165/share. Catalysts are reduced competition, expansion of Pinhaofan, and overseas expansion.

• ORG Technology Co., Ltd. A (002701 CH) has received SAMR clearance, the key regulatory hurdle, for its HK$7.21 voluntary offer for CPMC Holdings (906 HK).
• SAMR approval paves the way for the ORG precondition to be satisfied in September. Changping Industrial’s HK$6.87 offer first close is on 3 September.
• Changping Industrial has little choice but to revise its terms. It has a short window to seize the initiative by bumping its offer before ORG’s competing and higher offer opens. 

• Total revenue increased by 26% in 2Q24, as sales volume grew strongly after March.
• We believe the operating margin will be stable due to the ability of battery production.
• We also believe the tariff penalty from Europe is not a concern in the long run, as BYD’s products have expanded to 77 countries.

• Shenzhen International (152 HK) reported 1H24 net profit of HK$653m. While toll road and other segments are under pressure, the logistics segment has benefited from REIT issuance.
• In 2H24, it may book profit from the initial land appreciation gain from the South China Logistics Park transformation and profit from the 50%-owned Yicheng Zhenwanyue.
• SZI seeks to realise the value of its assets. At 0.4x P/B or 1SD below the 5-year average, the stock, with a 7.5% yield, is deeply undervalued. 

• ORG Technology (002701 CH), via the Offeror Huarui Fengquan Development Limited, has announced SAMR has given its approval. ORG still requires MOFCOM, NDRC, and SAFE to sign off. 
• Interestingly, SASAC/NCSSF-backed Champion Holdings, the competing/initial bidder for CPMC (906 HK), secured MOFCOM, NDRC, and SAFE before SAMR clearance. Champion’s regulatory pre-conditions took a little over seven months to secure.
• What now? SAMR is China’s primary antitrust regulator (overlapping with NDRC). So this is positive for ORG. However, I’d still stick to ORG’s pre-condition long stop in terms of timing. 

Health and Happiness International’s (H&H) H1/24 results were in line with expectations. The company reported weaker earnings and margins from its main Baby Nutrition & Care (BNC) business in Mainland China, amid structural industry challenges stemming from low birth rates in the country. That said, the weakness in BNC was partly offset by growth in the Adult Nutrition & Care (ANC) and Pet Nutrition & Care (PNC) segments. We note that ANC is now H&H’s largest revenue contributor, eclipsing BNC’s numbers. Going forward, we expect the company to continue expanding the ANC and PNC segments in Mainland China and beyond, while seeking to contain the revenue decline at BNC and maintain stable margins for the segment.

H&H has reduced inventory days and generated a small working-capital inflow, which led to positive FCF generation and net debt reduction. The company has adequate liquidity, following its successful refinancing activities in July.

• The valuation of Huawei Technologies Co. Ltd’s smart car unit has surged to 115 billion yuan ($16 billion) only seven months after its launch, following a recent investment.

• Yinwang Intelligent Technology Co. Ltd., a wholly-owned subsidiary of Huawei founded in January, has agreed to sell a 10% stake to Avatr Technology Inc., an electric vehicle (EV) startup backed by China’s state-owned automaker Chongqing Changan Automobile Co. Ltd. (000625.SZ -1.54%) and battery giant Contemporary Amperex Technology Co. Ltd. (CATL). 

• Avatr agreed to pay 11.5 billion yuan for the stake, with the payment to be made in three installments, contingent on conditions such as the introduction of Huawei’s smart car technologies and talent to Yinwang.

Anton Oilfield’s H1/24 numbers were softer than expected in our view, with profitability growth lagging revenue improvement. Positively, there was a surge in new orders. This is the third consecutive quarter showing a significant rise in new orders. We expect the business’ positive momentum to continue in FY 2024. The large (3x revenue) and growing backlog support revenue visibility. The financial risk profile remains stable.

• Chinese parcel volume growth slowed in July (+22%) vs firmer pace in Q2 (+32%)
• At company level, there are signs the steep price declines from H1 are moderating
• If worst of price declines is in rearview mirror, beat down names are worth a look

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.

• MGM China Holdings
• New World Development
• Nickel Industries
• Tata Steel Thailand

• If the System or this treatment method is really effective and accepted by hospitals/doctors, under the coverage of medical insurance catalog already, why BrainAurora’s revenue scale is still so small?
• CSRC questioned BrainAurora’s high selling expenses. Since either SG&A or R&D expenses already exceed revenue, BrainAurora would continue to suffer from losses. The Company hasn’t established a solid profit model.
• BrainAurora completed a total of 7 rounds of financing, with a post investment valuation of RMB2.7 billion. However, it is difficult for BrainAurora to match this high valuation after IPO.

• Huafa Property (982 HK) shareholders overwhelmingly approved (99.52% [of shares present and/or via proxy] FOR; 0.48% AGAINST) the Scheme yesterday. This part was expected. The headcount test was less certain.
• The final headcount tally, on a look-through basis into HKSCC Nominees by CCASS Participants, was 111 FOR, 14 AGAINST. Again, a pretty clear pass.
• Normally a Scheme Vote, if approved, wouldn’t warrant a full note. But when the headcount test is involved, it is worthwhile understanding the mechanics.

• Despite a negative share price reaction following its 1Q2025 earnings report, Alibaba Group Holding (9988 HK) seems to have entered an earnings upgrade cycle due to improved profitability expectations.
• Despite recent share price pressure, due to negative industry readthroughs from peers, Alibaba Group’s near-term momentum indicators are displaying bullish signals.
• Alibaba Group trades at more than one standard deviation below its 5-year historic average forward PE ratio, and near the lowest level it has ever been.

• PDD Holdings (PDD US) shares fell 28% on Monday after a 3% revenue miss, with shares dropping an additional 4% yesterday.
• The results themselves weren’t bad enough to justify such a sharp price reaction.
• However, management’s comments on slower growth and a potential drop in profits triggered a significant sell-off.

• July outbound travel (and seat capacity) fnally approached pre-Covid19 levels
• Domestic air travel demand also showed modest Y/Y improvement in July 
• We still like Trip.com on improving profitability, BUY with US$55 target

• PDD reported C2Q24 top line, non-GAAP operating income and GAAP net income (3.9%), (1.2%) and (4.4%) below our estimates, and (2.9%), 12% and 16% above consensus. 
• We believe PDD’s upgrade in its ecosystem and infrastructure is long overdue. Such investment would support its growth, especially in overseas. 
• Trading at 6.4x 2025 PE, we believe PDD is undervalued. We reiterate BUY and place it as TOP PICK of China’s e-commerce sector.

• TCOM reported C2Q24 revenue in-line with our est./cons., non-GAAP operating income also in-line with our est./cons., and non-GAAP net income beat our est./cons. by 18%/40%,mainly due to rising equity income
• Robust int’l growth offset weakness in domestic. With services possibly included in the government consume subsidy in C2H24/1H25 and Rmb’s appreciation.
• We feel it is time to buy TCOM again, TP to US$50 from US$42.

• The stock has declined for three years and a half, from HK$460 to HK$100.
• Revenue grew by 21% YoY and the operating margin improved significantly in 2Q24.
• We conclude the stock has an upside of 131% and a price target of HK$237. Buy.

• The “non-business factors” mentioned in PDD Holdings (PDD US) ‘s earnings call likely refer to potential political and policy risks in the U.S. due to the upcoming presidential elections.
• Temu, PDD Holdings’ global online shopping platform, has become the most downloaded shopping app in the U.S., significantly disrupting the local retail market.
• PDD’s rapid and disruptive growth has already led to litigation in the US, and political pressure could increase if Donald Trump wins the presidential election.

• Xinhua Winshare (811 HK)‘s 4.4% YoY decline in recurring profit in 1H24 is due to a 6.6x increase in taxation. Its pre-tax profit has still increased 5.8%.  
• We expect XW to maintain its textbook franchise and overall gross margin to stay stable. Growth in general book publication and distribution will supplement the textbook business.
• Net cash equals 70% of the share price, while its listed equity investments had appreciated 3.6x. It stands on a 5% dividend yield but this is a potential upside.

• Geely Automobile Holdings Ltd announced that it is to raise its 2024 export target to 380,000 units from 330,000 units, after reporting a 67% year-on-year growth in vehicle exports in the first half of this year.
• Gan Jiayue, Geely Auto Group’s CEO, highlighted the company’s impressive export performance, saying it was driven by aggressive expansion into emerging markets such as Africa, where sales surged over 400%.
• There had also been significant growth in Central Asia, Mexico and other regions such as the Middle East, Eastern Europe and Southeast Asia, with Geely targeting further expansion in these markets, Gan said.

• Ahead of Huafa Property Services Group (982 HK)‘s Scheme Meeting tomorrow, the 28th August, 42.57% of shares outstanding moved out of CCASS on the 8th July.
• One argument for Huafa trading wide-ish to terms is due to “suspicious” CCASS moves between the Offer announcement and the vote. 
• Some investors even cite the Golden Throat Holdings (6896 HK) debacle. This is not a Golden Throat situation. Not even close. It is decidedly less interesting and benign.

• PDD Holdings (PDD US) stock price nosedived 28.5% yesterday wiping away more than USD55 billion in market cap following Management’s call with investors.
• During the call, the management guided towards weakening profits in the next quarters and stated that high revenue growth was unsustainable in the long term.
• Investors however seemed to be spooked not by negative guidance on profitability/growth but by comments on impact of non-business factors and need to adapt to changing times etc.

• In 2Q24, total revenue increased by 14% YoY and hotel booking revenue increased by 20%.
• We believe the company has been riding on the recovery of the travel market and will see historical high quarter in 3Q24.
• We also believe the stock still has an upside of 18% after one day’s surge.

• 1H24, Nongfu’s revenue growth rate fell to 8% YoY, because Wahaha launched a propaganda against Nongfu.
• We believe the revenue growth will rise in 2H24 and 2025, as it seems that the public do not like the way Wahaha use.
• We set an upside of 26% and a price target at HK$38 for the end of 2025.

For our next Corporate Webinar, we are glad to welcome RemeGen’s Chief Financial Officer, Mr. Tong Shaojing.

In the upcoming webinar, Tong will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Eric Wen . The Corporate Webinar will include a live Q&A session.

The Corporate Webinar will be hosted on Thursday, 19 September 2024, 09:00 SGT.

About RemeGen

RemeGen was cofounded in 2008 by Mr. Wang Weidong, founder of Rongchang Pharmaceuticals, a leading traditional Chinese medicine company in China and Dr. Fang Jianmin, a Canadian-American scientist. Headquartered in the coastal city of Yantai Shandong Province of China, RemeGen has research labs and offices throughout China and the United States. RemeGen is committed to the discovery, development, and commercialization of innovative and differentiated biologic drugs of significant clinical value in the key therapeutic areas of autoimmune oncology and ophthalmic diseases.

• ETF flows in the Asian region continued their positive momentum during August with Southbound Connect positive again for the week.
• Stella International (1836 HK) will increase its dividends and buybacks after positive earnings surprise. AIA Group Ltd (1299 HK) saw a surge in new policies from mainlanders in HK.
• Lufax Holding (6623 HK) reported an earnings miss with declining loan volume. Yancoal Australia (3668 HK) reported a decline of 57% in earnings which was below analysts’ estimates.

• BIDU reported C2Q24 top line, non-GAAP operating profit and GAAP net income inline, 5.6% and 7.6% vs. our estimate and inline, 10% and 8.4% vs. consensus. 
• Weak economy is only part of the problem. Weak monetization exists across the entire product line. 
• We cut the TP to US$80 and reiterate SELL rating.

• Backed by strong US demand, spot container rates remain very firm
• On top of higher average freight rates, carriers now enjoying lower fuel prices
• Dispersion of returns on carrier shares is eye-opening, only a few performed

• Bilibili (BILI) reported C2Q24 revenue, GAAP operating profit, and GAAP net income in-line, 7.9%, 9.9% vs. our estimates and in-line, 12%, 18% vs. consensus. 
• BILI’s unique, urban user base and video format give it strong competitive advantage. Further, revenue from <Three Kingdom> game will be significant.
• We raise our TP to US$20 and reiterate 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.

• AAC Technologies Holdings
• China Jinmao Holdings
• Greentown China
• JSW Infrastructure
• Citicore Renewable Energy

• A state-owned Offeror pitching a lifetime high Offer Price – with a solid premium –  for an illiquid company? Sounds like a slam dunk.
• Yet  property manager Huafa Property Services Group (982 HK) has perennially traded wide to Huafa Industrial Co., Ltd. Zhuhai (600325 CH)‘s terms. This is not justified. 
• The Scheme Meeting/SGM is tomorrow (28 August), with payment on (or before) the 30 September. Or a gross/annualised return of 4%/46%. Buy here. Then buy some more. 

• The stock plunged today after the announcement of excellent performance for 2Q24.
• In 2Q24, revenue grew by 86% YoY and the operating margin improved 10 percentage points YoY.
• We believe investors should buy, as it is just a tactic from major stock sellers.

• SOUTHBOUND was a net seller this past week for HK$1.5bn, the first week in 29 where SB was a net seller. It was all ETFs. Stocks were a net buy.
• Gross volumes remain very low. Net volumes de minimis. Very August-ish. No sectors stood out. 
• The largest net buy was CSPC Pharmaceutical Group (1093 HK) where the net buying was the same size as the fifth largest net sell (Tencent (700 HK)) 

• Hong Kong’s unusual trading channel pattern may be coming to an end and short selling declines.
• Alibaba Group Holding (9988 HK) broke a falling triangle pattern and now trades above near term support levels.  The company’s dual listing announcement and large buyback program are near-term positives.
• GDS Holdings (9698 HK) has broken out of its rounding bottom pattern with a positive earnings announcement.  China Ruyi Holdings (136 HK) has broken out from its triangle pattern.

• Kunlun Energy (135 HK) posted a healthy 2.6% earnings growth for 1H24. If not for the expiry of two oilfields last year, its earnings growth would have reached 6.8%. 
• Natural gas sales pre-tax margin contracted 0.5pp YoY, but has recovered significantly HoH. Other businesses have all seen good margin expansion. 
• The company has further accumulated net cash which increased 8.3% in the last six months. At HK$2.76/share, this equals 35% of the share price.

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.

• ABM Investama
• Nickel Industries
• Road King Infrastructure

Longfor Group’s H1/24 results were acceptable. Earnings declined in line with expectations, driven by lower revenue and margins in the Property Development segment. That said, earnings growth from rentals and services remained robust, with LTM profit from recurring income covering interest expense by 1.6x (FY 2023: 1.4x).

Negatively, net debt increased marginally in H1/24, even though total debt declined. Going forward, we expect the company to continue reducing debt using OCF and refinance its maturing debt using additional operating loans backed by its investment properties. Overall, we believe near-term default risk for Longfor remains low, as the company’s pipeline of new malls should continue to support its access to secured bank loans for refinancing.

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 Oil And Gas
• First Pacific Co

Greentown’s H1/24 results were acceptable, given the above-industry sales and top-line growth. While gross profit declined, the property development gross margin was stable from FY 2023, and remained robust relative to peers. In addition, net debt was stable from FYE 2023. More importantly, the company’s access to onshore financing appears healthy, and liquidity is adequate.

The company remains active in land acquisitions and has a good quality land bank, mostly in high-tier cities in the Yangtze River Delta. Although Greentown is considered a pure-play developer (as its recurring income businesses are small), the company appears to have navigated the industry downturn well, thanks to its cautious approach towards land investments and operating efficiency to support a fast-churn model.

• Minth Group Ltd (425 HK) revenue went up by 14% (almost 3x of China’s passenger vehicle market, which grew 5%) and net income by 20% on 1H 24
• It has developed environmentally friendly collision aluminum, with a carbon emission of less than 2.5 kg CO2 /Kg.AL while typically it produces 16 CO2/kg.AL
• Battery housing business contributed 21% instead of 18% of total revenue with OPM expanded from 18% to 20%. 

• The Huafa Property Services Group (982 HK) vote on Huafa Industrial Co., Ltd. Zhuhai (600325 CH)’ HK$0.29 offer is on 28 August. However, shares trade wide ahead of the vote.
• Several readers have enquired about the unusually high spread ahead of the vote of a seemingly clean deal. The conversations raised several concerns. 
• The concerns are unwarranted, and this remains a clean deal. At the last close and for the 30 September payment, the gross/annualised spread was 5.5%/68.9%. 

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Canvest Environmental Protection Group (1381 HK), Malaysia Airports Holdings (MAHB MK), Capitol Health (CAJ AU). 
• Lowest spreads: Tohokushinsha Film (2329 JP), Fuji Soft Inc (9749 JP), Descente Ltd (8114 JP), Second Chance Properties (SCE SP), Fancl Corp (4921 JP), C.I. TAKIRON Corporation (4215 JP).     

• Roughly six weeks ago, Shanghai Henlius Biotech (2696 HK) announced the scrip option condition was met. Just that Shanghai Fosun Pharmaceutical (2196 HK) (the Offeror) was weighing its options
• This situation mirrored L’Occitane (973 HK)‘s (eventual) scrip option. And in place of Pleasant Lake in that transaction; Henlius has Loyal Valley Capital (5.8309% shareholder) behind the scenes.
• Late Friday, Henlius updated the terms of Fosun’s Offer to now include the scrip option alternative. We expected nothing less. 1H24 results will also be out later today. 

• Tencent reported a softer set of results for Q2 relative to Q1. Revenue for the quarter was up 1% QoQ and 8% YoY.
• Since our last discount update mid-August, the discounts of both Naspers and Prosus have continued to narrow.
• Naspers’ discount is trading well off the lows reached at the end of July (~45%). 

• The 1H result was poor due to the inventory clearance from the new product standards, which rendered older products less desirable. 
• Management has proven to be able to manage costs carefully during a down cycle. 
• Yadea Group Holdings (1585 HK) used to trade around 35x PER; now it is only 10x PER. 

• The Share Alternative is necessary to improve success rate of privatization. Our guess is Henlius Biopharmaceuticals/Lin Lijun would vote for this privatization, but we’re not sure about Qatar Investment’s decision.
• Due to its “flaws”, undervaluation of Henlius is difficult to fundamentally change. So, those conservative and cautious investors would choose the Cash Alternative considering the risks behind the Share Alternative.
• Even if there’re plans of re-listing, it may be based on a new entity formed after integrating Henlius and other assets within Fosun Pharma. So, the value of Rollover Entities/Securities remains uncertain.

• China Power International (2380 HK) kicked off FY24 with an impressive 51.5% surge in 1H24 net profit. All business segments improved YoY, with hydropower being the best. 
• Both volume growth and cost reduction are the key drivers, supporting a 7.2pp gross margin expansion. The 5pp increase in the proportion of hydropower sold also lifted profitability.
• CPI will grow its capacity to 52GW by end FY24, a 15.5% YoY and 7.8% HoH increase. Moreover, the upside will come from more asset injection from its parent.

• Pop Mart’s total revenue increased by 62% YoY due to the promising overseas market.
• Tongcheng’ revenue grew by 48% YoY in 2Q24, as new businesses are successful.
• Alibaba’s Freshippo plans to set up frontline warehouses, which is a way back to online.

• Welcome to Consumer Tales & Trends, your weekly roundup of the latest corporate developments, investment reports and sector events in the consumer industry.
• With fewer young people and a growing number of older adults, the target market for alcoholic beverages is shrinking in many markets including China.
• Upsides from vertical integration could give Ola Electric (OLAELEC IN) a significant cost advantage over local competitors. Strong pricing power can allow it to decide whether to prioritize growth or margins.

• CIMC Enric Holdings (3899 HK)‘s 1H24 result is below expectations, but the growth outlook is promising. Management also guided for a solid recovery in 2H24.
• Backlog and new orders rose 42.5% and 29.4%, respectively, with chemical and environmental orders rebounded sharply QoQ. The overall margin will be better in 2H24.
• Hydrogen revenue should reach Rmb1bn in FY24 (1H24: Rmb450m). New coke oven gas (COG) to hydrogen projects may generate Rmb10bn revenue by FY27, or 43% of FY23 revenue.

• I tally 45 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal 
• Two new deals were discussed this week: Alimentation Couche-Tard (ATD CN)‘s non-binding proposal for Seven & I Holdings (3382 JP).; and EQT’s Offer for PropertyGuru (PGRU US).
• Key updates took place on APM Human Services (APM AU), TCM (570 HK), GaPack (468 HK), Alps Logistics (9055 JP), Fancl Corp (4921 JP), and Jeisys Medical (287410 KS).

• A media outlet that Reports on Deals reported that the consortium will offer HK$14.50 per share, a 22.1% and 61.8% premium to the last close (HK$11.88) and undisturbed price (HK$8.96).
• While not a knockout offer, the consortium’s impending binding proposal suggests confidence that the offer price and structure would gain the support of the substantial shareholders. 
• The downside to a deal break is low as ESR’s valuation is undemanding. Its forward EV/EBITDA multiple is at a 30% discount to the median peers’ multiple.

• Shanghai Fosun Pharmaceutical (Group) (2196 HK) announced the Shanghai Henlius Biotech (2696 HK) share alternative offer, subject to proration due to a cap of 8% of outstanding shares. 
• The share alternative offer was necessary to facilitate the vote as the HK$24.60 offer is half the HK$49.60 IPO price. 
• The co-founders, HenLink and LVC, will likely tender some or all their shares for scrip. At the last close and for the December-end payment, the gross/annualised spread is 7.4%/17.9%.

• China Traditional Chinese Medicine (570 HK)‘s profit warning suggests weaker-than-expected 2024H1 results, but the interim report is needed for clarity. This is unlikely to negatively affect the company’s privatization plans.
• In 24H1, healthcare investment and financing activities have slowed, and it will take time for investors’ confidence in the sector to recover.
• Giant Biogene (2367 HK)‘s 24H1 results exceeded expectations, leading management to raise its 2024 guidance. However, the profit margin declined, and we remain cautious about long-term growth prospects.

• Alibaba Group’s June Quarter 2024 financial report showcases a blend of growth, challenges, and strategic advancements.
• The group reported steady growth in its core e-commerce businesses, Taobao and Tmall Group, with an increase in Gross Merchandise Volume (GMV) and order volumes.
• Particularly, the company’s focus on enhancing user experience and AI-driven strategies appears to be bearing fruit, assuring an upward trajectory in retaining and attracting customers, which is crucial in a competitive e-commerce landscape.

• JD.com reported its second quarter and interim 2024 earnings, presenting a mixed performance amid challenging market conditions.
• The company achieved record non-GAAP net profit for a single quarter, indicating strong profitability and effective cost management.
• However, revenue growth was modest, reflecting the competitive and dynamic nature of the market JD.com operates in.

• Tencent Music Entertainment (TME) demonstrated a strong performance in the second quarter of 2024, anchored by significant growth in its online music services and a robust increase in adjusted net profit.
• The company reported a 28% year-over-year growth in online music services and a 26% increase in adjusted net profit, signaling robust operational health and profitability.
• The addition of over 10 million music subscribers in the first half of 2024, combined with an increase in average revenue per paying user (ARPPU), underscores the company’s effective market penetration and pricing strategy.

• Xiaomi reported CY2Q24 revenue, non-IFRS EBIT and non-IFRS net income 5.6%, 32.2%, and 40.0% vs. consensus. 
• Despite the limited scale and numerous incentives offered at launch, Xiaomi reported an EV gross margin of 15.4%. Greater scale and reduced incentives provide further margin upside in C2H24;
• Xiaomi’s smartphone and IoT market share gain have accelerated amid the halo-effect stemming from the SU7. We reiterate our BUY rating, and raise  TP to HK$27.0, implying 28.3x CY25 P/E.

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
• GMR Hyderabad International Airport

• We have correctly forecasted a August rally for the Hang Seng Index in previous insights, here and then here – the rally is on, but a pullback is coming.
• The pullback may come in this week or the next, but it’s probably behind the corner, the index can continue higher after the pullback.
• In this insight we want to expose what are the levels to buy LONG to benefit from a highly probable continuation of the rally in September.

• Kuaishou reported C2Q24 revenue, IFRS operating profit, and IFRS net income in-line, in-line, and 5.7% vs.  our estimates; and in-line, 9.0% and 14% vs. the consensus. 
• The bright spot was strong growth in its advertising and stabilization in the regulation-affected live streaming. Our BUY case of AI empowering mid-sized traffic platforms is intact;
• We cut TP to HK$75 to reflect the sustained damage of weak consumption. The stock is trading at only 8.5x PE for 2025.

• Data from Bank of East Asia (23 HK) is just out with poor 1H24 results YoY
• Notable in its release are its Hong Kong overdue exposure by over three months
• Hong Kong region income is the worst affected by credit costs, this does not seem to be over

• XPeng (XPEV) reported C2Q24 top line, non-GAAP operating loss and GAAP net income in line, 5.4% worse and 7.5% better than our estimate. 
• We raised our MONA forecast by 13% but still significantly below XPEV’s guidance. We believe management guidance is overly optimistic;
• We maintain a SELL rating on the stock and TP unchanged.

• Dupert, a drug for the special treatment of non-small cell cancer has been approved by the NMPA.
• In 2022, China recorded the highest number of new cancer cases, and their exceptional high incidence of smoking is of particular concern.
• Innovent’s portfolio of nine oncology drugs is very attractive in the biggest cancer market.

• SITC International (1308 HK)‘s management guided for a promising outlook for 2H24, with strong load performance in Jul-Aug, and better long-term contract rates YoY.  
• Gross margin expanded 4.5pp in 1H24 despite a 5.3% drop in average freight rate, thanks to good cost control with lower chartered-in costs and more self-owned vessels.
• Net cash increased 195% from end-FY23, and we are confident that its 70% payout ratio can be maintained. Its P/B is still below the 5-year average.

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.

• Sunny Optical Technology Group
• Xiaomi Corp

• Another set of strong results from YMM, revenue and core earnings both up
• Need to monitor orders per MAU; reason for decline in Q224 unclear
• Maintain US$9.45/ADS target price, ADSs are attractive closer to US$7

• Legend Biotech, during their second quarter 2024 earnings call, presented a detailed insight into its operations, financial health, and the strides it’s making in the pharmaceutical space, particularly regarding CARVYKTI, their FDA-approved treatment for multiple myeloma.
• The company reported an 18.5% quarter-over-quarter revenue growth amounting to $186 million for CARVYKTI, which marks a robust 60% increase year-over-year.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• Vipshop reported C2Q24 revenue and profit were in-line vs. the street, but the mid-point of C3Q revenue guide missed by 8% due to soft apparel demand;
• VIPS has been post growth for some time. However, its healthy cash flow ensures a 75% dividend payout ratio as promised by the company. 
• We cut our CY24 EPS estimate by 8.4% due to soft apparel demand, leading to a US$ 14.5 TP, but maintain BUY on a post-subsidy recovery. 

• Media reports indicate that Walmart (WMT US) is looking to sell 144.5m shares of JD.com (JD US) to raise up to US$3.74bn. That would be substantially all of its stake.
• There will be passive buying from global index trackers at the time of settlement of the placement shares and could absorb around 12% of the placement shares.
• There will be no passive buying from HSI, HSCEI, HSTECH and HSIII trackers in the short-term. An increase in CCASS holdings should result in passive buying in December.

• China Traditional Chinese Medicine (570 HK) profit warning notes that the 1H24 net profit would decrease by 60%-70% YoY due to pricing pressure, higher impairment losses and remedial taxes. 
• The profit warning could pose a risk to the scheme, as the consortium can withdraw if there is an adverse material change in China TCM’s profits or prospects.
• If there were a danger of triggering the MAC clause, the consortium would not have made the regulatory submissions. The flip side is that the warning helps the shareholders vote. 

• Excluding the new business electrical vehicle, total revenue increased by 23% YoY in 2Q24.
• Smartphone shipments grew faster than Samsung and Apple in 2Q24.
• We believe electrical vehicle will bring significant gross profit in following two years.

• China Traditional Chinese Medicine (570 HK) flagged a 60-70% drop in its 1H24E net profit versus 1H23, due to reduced sales/profit of TCM concentrate, bad debt provisions, and remedial taxes. 
• MAC triggers? No – Sinopharm won’t exercise such right, even if one was ostensibly triggered. I’d be surprised if Sinopharm wasn’t fully aware of TCM’s underlying operations. 
• Get involved on any dips today. Trading wide at a 11.7%/38.7% gross/annualised spread, assuming Dec-end payment.

• Headline numbers for ZTO in Q224 were +10% Revenue, +12% EBITDA
• But gross margin in core express segment fell, as did Operating Cash Flow
• ZTO left guidance unchanged for FY24; we recommend investors AVOID it

• China East Education (667 HK)‘s 1H24 result is impressive with a 58% YoY increase in adjusted net profit. Good cost control is a key contributing factor. 
• Profitability has improved in all business segments. Its strategy to focus on higher-value courses has led to further improvement in annualised tuition per student. 
• The 1H24 result equals 68% of the full-year consensus, implying an upside in market expectations. Its net cash, at 35% of market capitalisation, is unmatched by peers.

• Chinese airports are enjoying a steady passenger traffic growth of 5% YTD; Shenzhen and Shanghai airports are growing much faster.  
• Shanghai International Airport (600009 CH)is our top pick given its size, liquidity, strong balance sheet, and its strong earnings growth potential.  
• Our target price for Shanghai International Airport (600009 CH) is CNY44, pegged to global airport peer average FY25 EV/EBITDA of 12x.