China

• After being suspended for 7 months for not publishing its 2020 annual results, Gcl Poly Energy Holdings Limited (3800 HK) resumed trading on 1 November 2021.
• We expect Gcl Poly Energy Holdings Limited (3800 HK) to be added to the MSCI China Index in August and to the FTSE All-World Index in September.
• Passive index trackers will need to buy over US$1.1bn of stock over the next few months. The stock has run-up inline with peers and this demand could keep it supported.

• Meituan is starting to show waning upside momentum as it near key resistance at 220/230 (sell or short zone) ahead of a harder pullback cycle that will be choppy initially.
• Meituan has outperformed its peer group but due for a pullback. Price and RSI rising wedges are maturing and nearing a bearish inflection point to short (watch poor buy volume).
• Tactical rally window in mid July with a better rally cycle slated for August head of a negative September.

• The exposure draft about online drug sales activities on third-party digital healthcare platforms would add uncertainties on JD Health’s business. We analyzed the potential impact and the logic behind.
• Keeping both self-run and third-party business is the optimal option because JD Health cannot afford losing either one. The exact impact will have to wait until policy details are released.
• As main revenue contributor, there are concerns on JD Pharmacy in terms of profitability and policy risks. Before second growth point emerges, expectation on long-term valuation expansion would be discounted.

• Lepu Biopharma (2157 HK) has filed NDA for its lead drug candidate pucotenlimab (HX008) for two indications in China, having a combined estimated market opportunity of RMB8 billion by 2030.
• Overcrowded PD-1 mAb drugs market in China, with 10 marketed drugs, may limit the growth potential of pucotenlimab. However, pucotenlimab has better efficacy than existing drugs.
• Lepu’s other core assets are also progressing and the company has sufficient cash to fund its R&D and commercialization initiatives.

• We continued to be cautious on China Gas Holdings (384 HK) given the challenges faced. It guided for a flat dollar margin in FY23 but we think this is optimistic.
• Connection fees are likely to stay under pressure after a 42.1% decline in FY22. It only projects 2.6-2.9m new residential connections for FY23, compared with 2.9m in FY22.
• Although China Gas is now the cheapest Hong Kong-listed China gas utilities company, it takes time to regain market confidence. At similar valuation, Kunlun Energy (135 HK) looks more interesting. 

• The healthy FY22 result of Bosideng International Holdings (3998 HK) showed its ability to solidify leadership position and ride through higher costs with margin expansion. 
• Management expects double-digit profit growth for FY23 as it pursues targeted “2+13” expansion strategy and increase push for online sales. New spokespersons and flagship store will add to promotional impacts.
• Net cash of Rmb7.8bn and strong FCF generation ability can ensure high dividend payout (FY22: 80.2%) to sustain. Premium valuation over local apparel peers is well justified. 

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 South City
• HPCL-Mittal Energy Ltd

• Hutchison Telecommunications (215 HK)‘s share price is up 33% month to date.
• The average volume in June has been 11.9mn shares per day, compared to 3.8mn shares on average over the past year, and 3mn in the past six months. 
• Of interest, Southbound buying has accelerated in the last two weeks, with a holding of 0.76% of shares out, up from 0.11% at the beginning of the month. 

• Giordano International (709 HK) announced a voluntary conditional offer from the Cheng Yu Tung family at HK$1.88 per share, an 18.2% premium to the undisturbed price.  
• The VGO is conditional on the offeror and concert parties holding more than 50% of the voting rights (currently own 24.57%). The VGO price is underwhelming.
• David Webb’s (the retail activist investor) presence on the shareholder register likely deterred a privatisation bid. We think there is a 50% chance that the VGO becomes unconditional.  

• Sichuan Tianqi Lithium Industries, Inc. (TIANQI HK) is pre-marketing an H Share listing to raise US$1.0-1.5 billion. It was listed on the Shenzhen Stock Exchange in 2010. 
• The H Share proceeds will be used to repay the outstanding Quimica Y Minera Chil-Sp Adr (SQM US) related debt, fund construction costs and working capital
• The fundamentals are strong as Sichuan Tianqi Lithium Industries, Inc (002466 CH) is well-placed to leverage the high lithium prices to deliver growth, margin and cash generation.

• Water Oasis (1161 HK) reported a tepid H1 with profits coming in at 26 mn HKD, down 56.2% YoY.  This was below our expectations as the company received no subsidies.
• No interim dividend was paid as the profit in H1 was minuscule, and business had commenced on the 21st of April, impacting a month of H2.  
• Save for another lockdown in HK, we see a substantial improvement in profitability for Water Oasis (1161 HK) in H2, along with subsidies that are being paid retrospectively.

• Tencent has been actively divesting its investments (mainly in China) given the ongoing regulatory challenges faced by tech platforms in China. Moreover, macroeconomic conditions also have led to these sell-downs.
• The company has explicitly mentioned that it would restructure its investment portfolio to manage risk, this includes divestments and distribution to shareholders.
• The latest sell-down was Tencent (700 HK)  stake in online education platform Koolearn, whose share price more-than tripled this month following its venture into livestreaming.

• The Cheng family has made a voluntary conditional Offer of $1.88/share for Giordano International (709 HK). 
• The Cheng’s (and concert parties) control 24.57%. The Offer is conditional on the family getting to more than 50% via tendering. 
• The intention is to maintain Giordano’s listing. The Offer Price has not been declared final. 

• China A shares has been our top long pick but near 14,700 is due to reverse. Taiwan and Korea were top shorts followed by India (lagging Asia’s decline).
• Near A50 14,700 resistance would bring the HSI back into our top short group. HSI and H shares display slowing upside momentum.
• USD/JPY near our 137 PT is set for a tactical top/pullback while a JGB fade could see the Nikkei jolt lower.

• Oriental Watch (398 HK) profit alert for >350 mn HKD affirms our conviction on the increasing dividend (74 HKD cents for FY22, implying a 15.7% dividend yield). 
• Lockdowns in China (accounting for 67% of the revenue) cast doubt around how H1 2023 will shape up. 
• With cash > 50% of market capitalization, we remain positive on the company maintaining its high dividend payout for FY23 despite weakness in H1. 

• Share price of Beijing Capital International Airport (BCIA) (694 HK) underperformed that for Air China Ltd (753 HK) by wide margin in this year, which we believe is not justified.
• Removal of lockdowns in various districts in Beijing and the revival of international passengers will be the major driver for BCIA to close the valuation gap.
• The gradual relaxation of inbound international passengers at Beijing and the potential for a full border opening in early next years are the catalysts for BCIA’s performance.

• The advantages of NeuroTech are mainly reflected in the comprehensive product portfolio and stable product performance, with higher gross margin, stronger cost control ability and first-mover advantage than its peers.
• The major concerns here are the domestic shrinking market size due to the centralized procurement, the fierce market competition and the pain points on its sales model.
• In terms of valuation, our view is that NeuroTech’s valuation could be higher than that of the peers such as Zylox-Tonbridge, HeartCare Medical, Peijia Medical and Sino Medical.

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

• Country Garden Holdings Co
• Fosun International
• Greenland Holdings Corp
• Guangzhou R&F Properties
• Lippo Malls Indonesia Retail Trust

• Hong Kong’s Link Riet has excellent assets, but the fears of further lockdowns and rising interest rates do not make for a good combination.
• They seem to be leading other mall operators despite higher quality assets (mostly low-end and necessities).
• Globally none of the delivery services has a cost-effective, scalable model, as they hit the regulatory challenges and hiring costs increases for every scaleup. 

• WH Group has sharply outperformed both global peers and HK/China-listed peers since the last bullish insight pounded the table in mid-March 2022.
• Since then, the Pork/Feed ratio has been climbing in China and flat to down in the US, and pork prices in China are particularly robust recently. 
• WH Group (288 HK) remains cheap as chips. And despite gains, still Cheapest in Yonks relatively speaking. 

• ClouDr Group (16897333D CH) is looking to raise around US$100m in its upcoming Hong Kong IPO. 
• The firm is a digital chronic condition management solution provider and is market leader in China in terms of the number of SaaS installations in hospitals and pharmacies in 2020.
• In this note, we will discuss ClouDr’s recent PHIP updates. 

• Without entering NRDL and public hospital markets, Airdoc’s core product Airdoc-AIFUNDUS would be hard to generate solid performance due to its high pricing but limited value to patients and doctors.
• Due to lockdown/pandemic, we lowered our forecast on revenue growth/gross margin in 2022. As competition intensified, Airdoc’s revenue growth and margin could be significantly reduced in the coming years. 
• The biggest concern for Airdoc is the commercialization prospects. The real turning point for AI medical imaging has not arrived. We are not optimistic that Airdoc will end up profitable. 

• Viva China (8032 HK) trades at a large discount to its 10.6% holding in Li Ning (2331 HK). 
• Apart from its Li Ning exposure, Viva has a controlling stake in Bossini International Holdings (592 HK), a sports experience segment, and net cash.
• The current NAV discount of ~46% is unlikely to meaningfully narrow near term given management’s reluctance to pay out a large dividend or undertake a corporate restructuring. 

• Chongqing Hongjiu Fruit (CHF HK) is looking to raise up to US$100m in its upcoming Hong Kong IPO. 
• Chongqing Hongjiu Fruit (CHJF) is a multi-brand fresh fruit distributor in China with an end-to-end supply chain. They have 1.0% market share as China’s second largest fruit distributor.
• While CHJF is already profitable, its long cash conversion cycle has been straining its balance sheet as the company tries to scale up.

• 3SBio Inc (1530 HK)‘s core products have dominant market share in their respective therapeutic areas, lending a favorable financial profile to the company to fund its R&D and commercialization efforts.  
• Flagship drug, TPIAO remained resilient to the COVID-19 and clocked a revenue CAGR of 32% during 2016–2021. Low penetration of TPIAO’s targeted indications leaves further room for its growth.
• Haircare product Mandi has high market share of 70%+ and clocked 64% y/y revenue growth in 2021. 3SBio aims to launch Mandi foam, which will further sharpen its competitive edge.

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

• Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry
• Overall, net inflow was ~US$1.9bn, split US$0.7bn for Shanghai and US$1.2bn for Shenzhen.
• The largest inflows were into CNOOC Ltd (883 HK)and Meituan (3690 HK). The largest outflow was in ICBC (H) (1398 HK).

• Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
• Overall, net inflow over the past week was ~US$3.5bn, split between Shanghai (+US$2.3bn) and Shenzhen (+US$1.2bn).
• The largest inflows were into Inner Mongolia Yili (600887 CH) and Pharmaron Beijing (300759 CH). The largest outflows were in CATL (300750 CH)  (300750 CH) and Qinghai Salt (000792 CH).

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. China South City
2. China Jinmao Holdings
3. Guangzhou R&F Properties
4. Sunac China Holdings
5. Evergrande

and more…

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

In this Insight:

1. China South City
2. China Jinmao Holdings
3. Guangzhou R&F Properties
4. Sunac China Holdings
5. Evergrande

and more…