China

• The gross margin improved 5 pp (percentage points) YoY and the operating margin improved 7 pp YoY in 2Q24.
• In 2Q24, total revenue grew by 12% YoY, with the main business up by 22% YoY.
• Three cross-sectional comparisons reach similar stock upsides about 100%. Buy.

• Stock valuations for China’s top beer players are near historical lows, but is a recovery on the horizon? Will it ever return to the heady valuations of 2019-2020?
• China Resources Beer Holdings (291 HK) and Budweiser Brewing APAC (1876 HK) have reported 1H2024 results showing a decline in sales volumes, attributed to several short term factors.
• We highlight long-term factors, including an aging population and shifting consumer habits, that could limit sustained growth in China’s alcoholic beverage market.

• Tongcheng Travel Holdings (780 HK) is still suffering from cost pressure, with adjusted net profit increased by 10.9% in 2Q24, despite a 48.1% revenue growth.
• Both GMV and MPU growth rates have slowed in 2Q24 when compared with 1Q24, and revenue may also decelerate in 2H24 given the higher base for comparison.
• The market will need some time to see if the moderating earnings trend will sustain, negatively affecting investor interests. Potential earnings downgrade is also a challenge.

West China Cement (WCC) has released softer than expected H1/24 numbers. The company’s revenue and profitability in Mainland China continued to decline amid the real estate slump, while its performance in Africa was mixed. ​FCF remained negative and leverage continued to deteriorate. That said, liquidity appears manageable, as we expect WCC to refinance its short-term loans. The main debt maturity wall is in July 2026, when the USD 600 mn notes will come due.

In our view, the key risk is uncertainty over the extent of WCC’s overseas expansion. The company stated that it has no plans for capacity expansion in FY 2024, other than the ongoing developments in Ethiopia and Uzbekistan. However, this contradicts media reports on WCC’s investments in Rwanda, Uganda and Zimbabwe. Hence, we are unsure about the level of the company’s planned overseas capex. Going forward, cement demand in Mainland China is likely to remain weak, due to the slowdown in infrastructure investment (with lower growth) and continued decline in real estate investment.

• Hong Kong’s watch and jewelry sales were weak in Q2 CY24 (-24% YoY) as dampened sentiment continues to plague overall retail sales across regional sectors. 
• However, Oriental Watch (398 HK), with its Rolex and Patek Phillipe portfolio, is expected to be more resilient than the rest of the watch industry. 
• The company is still a very good dividend play, trading at 7.6x FY25 PE, with 60% of the market cap in cash and a 13.5% dividend yield. 

• Tong Ren Tang’s performance growth is mainly driven by M&As. Its organic growth and operation management capability are not strong, leading to the concerns on the sustainability of future growth.
• Profit margin is disappointing.If Tong Ren Tang fails to balance the interests of different parties and control costs/expenses,low profit margins will be the norm despite the growth of revenue scale.
• From the perspectives of revenue scale, profitability, operational efficiency, business model, there’s still a gap between Tong Ren Tang and Gushengtang. Tong Ren Tang’s valuation should be lower than Gushengtang.

• J&T Global Express this week reported a strong Y/Y improvement in EBITDA
• The most dramatic improvement came at the company’s China operation
• But the drivers of this improvement appear odd, even contradictory; AVOID

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.

• Tata Motors ADR
• Yankuang Energy Group

• Key 2Q24 takeaways include: 1) revenues likely to step function higher in the near term (4Q24 launch of Apple’s iPhone 16) and beyond reflecting building recycling volumes and rising demand for pre-owned products, particularly in light of ongoing government support 2) management remains focused on increasingly tapping into recycling activity beyond consumer electronics (luxury goods, gold, jewelry, premium liquor), as well as further expanding the company’s store footprint and upgrading existing locations to better showcase multi-category products and 3) we look for further margin expansion looking out to 2H24 and 2025 given a more favorable product/distribution mix.
• From a stock perspective, we see further upside for RERE, as awareness and appreciation of the company’s business model, growth prospects, competitive positioning, and valuation disconnect increasingly take hold.

• China Literature’s revenue increased by 28% YoY in 1H24, because four novel copyrights for movies brought box office hits.
• KE revenue increased by 20% YoY in 2Q24 compared with a 19% YoY decrease in 1Q24, as government policies supported existing home transaction.
• Alibaba announced that it will recruit 1,000 fresh graduates for tech positions in 2025.

• With the review cutoff done, we expect just one change for the iShares China Large-Cap (FXI) (FXI US) ETF in September.
• China Tower (788 HK) is a high probability inclusion while China International Capital Corporation (3908 HK) is a high probability deletion.
• There has been an increase in cumulative excess volume for both stocks in the last few months, but the pace has slowed noticeably in the recent past.

• 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.
• The key stocks mentioned in this regular insight include: Swire Pacific (19/87 HK)/Swire Properties (1972 HK) and Hang Lung (10 HK)/Hang Lung Properties (101 HK).

• With the review cutoff done, there should be two changes for the CSOP FTSE China A50 (HKD) (2822 HK) / iShares FTSE/Xinhua A50 China (2823 HK) ETFs in September.
• Huaneng Lancang River Hydropow (600025 CH) and China National Nuclear Power (601985 CH) should replace China Tourism Group Duty Free Corp (601888 CH) and Yihai Kerry Arawana (300999 CH).
• China Tourism Group Duty Free (1880 HK) will be deleted from a global index later this month and there could be some opportunities to trade the A/H arb.

• Wharf REIC reported 2% yoy core earnings growth, the first earnings increase since 2019. The results also show Hong Kong retail business is more resilient than expected
• The upcoming catalysts include 1) lower interest rates, 2) weakening currency environment and 3) bottoming out of HK retail market
• Market is forward-looking and we think the worst is behind us.  Valuation is very compelling.  The stock is a beta play.  BUY

• Even after the 28% surge in share price since the 1H24 result, JD Logistics (2618 HK) still deserves a look as fundamentals have improved, especially with better cost control.
• JDL is riding on scale economies with higher asset utilisation. Quarterly margins have sustained an uptrend, reaching the highest levels since 1Q21 and it will continue.
• We like its lower reliance on JD.com (9618 HK) and net cash of HK$2.83/share (28% of the share price). There is a massive upside in consensus forecasts too.

• The company’s strategy of premiumisation continues to be executed to plan
• Despite the derating, investors will wait until seeing concrete signs of a turn in the Chinese consumer
• Continues to be a liquid proxy for Chinese consumption with no technology regulation risk

• Medtide relies heavily on limited number of customers to contribute performance. If there is any significant reduction in demand by its major customers, Medtide’s performance growth would be materially/adversely affected.
• Due to geopolitical conflicts, pharmaceutical companies are becoming more cautious about their reliance on China CXO. So, the development of Medtide’s overseas business would become more uncertain in this context.
• Medtide’s business scale is still small and its position in the global peptide CXO industry is not as strong as described. Valuation of Medtide should be lower than peers.

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.

• Continuum Green Energy
• Melco Resorts and Entertainment (Philippines)
• West China Cement

• There will be 3 changes for the Hang Seng Internet & Information Technology Index (HSIII) at the September rebalance. There are some surprises.
• Estimated one-way turnover at the rebalance is 3.4% resulting in a round-trip trade of HK$2.04bn (US$262m). 7 stocks will have over 1x ADV to trade.
• Weimob Inc. (2013 HK) is a surprise add. There is 6x ADV to buy from passive trackers and shorts are 12% of shares out and 24x ADV to cover.

• As expected, ASM Pacific Technology (522 HK) will replace Ping An Healthcare and Technol (1833 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 6 September.
• Estimated one-way turnover at the rebalance is 3.2% resulting in a round-trip trade of HK$6.5bn. Passives need to buy over 7x ADV in ASM Pacific Technology (522 HK). 
• Positioning appears light in both stocks. Expect ASM Pacific Technology (522 HK) to move up and Ping An Healthcare and Technol (1833 HK) to move lower near-term.

• The Hang Seng Index Committee its slow move (lack of movement) towards 100 names and sector rebalancing to tech and healthcare. This is really disappointing.
• This time? We get nothing. No name changes. Some capping flows. 6 FAF changes. 
• Minimal flows on the HSI rebalance to be effective on 9 September. 

• The HSCEI is famous but has less AUM tracking it passively than you’d think. Nevertheless it is well-known and well-watched.
• J&T Global Express (1519 HK) and New Oriental Education & Techn (9901 HK) were ADDs. JD Logistics (2618 HK) and SenseTime Group (20 HK) are DELETEs. 
• PICC Property & Casualty H (2328 HK) was NOT included. This was a surprise. We may see some disappointment this week from pre-positioning getting sold.

• In a surprise (maybe should not have been!), there are no constituent changes for the Hang Seng Index (HSI INDEX) in September. However, there are float and capping changes.
• Estimated one-way turnover is 1% and estimated round-trip trade is HK$3.73bn (US$478m). There are no stocks with over +/-0.5x ADV to trade but flows could add to/offset other index flows.
• We remain at 82 index constituents and the road to 100 constituents appears to be a long drawn out torturous one. At this glacial pace, could be an eternity away.

• BABA reported C1Q24 top line, adjusted EBITA and non-GAAP net profit (2.7%), 5.5% and in-line vs. consensus. 
• E-Commerce GMV recovery is the most positive of all. TTG ad-revenues (CMR) trailed GMV growth but we see the two closing the gap in C2H24
• Besides stabilizing e-commerce, BABA is on track of transforming itself from China’s eBay to China’s Microsoft. AI-related cloud revenue grew 100% YoY. 

• HSTECH sees one ADD, one DELETE and several capping and re-capping actions. One of the re-caps is already an un-recap (i.e. a new capping), to be updated.
• The ADD is ASM Pacific Technology (522 HK), as expected, with significant ADV impact to buy. The DELETE is Ping An Healthcare and Technol (1833 HK), also a big sell.
• Across the three major indices, Alibaba Group Holding (9988 HK) is the big dollar sell and HSTECH changes are the biggies in terms of ADV impact.

• Gold breaks above MONTHLY bull flag suggesting possible move to 3000.
• Is China ready to duplicate prior move we witnessed in Nikkei?
• BABA looks technically attractive and could reach par by year-end.

• 1H 24 net profit is expected to grow by 54%, a similar amount to FY 23 with a consistent message that revenue growth helps and cost control is in place. 
• Wasion Group Holdings (3393 HK) benefits from the One Belt One Road policy as many of the EM countries do not have smart power meters yet. 
• Wasion’s holding on Willfar Information Technology (688100 CH) is worth around USD 970 million, double the current market capitalization of Wasion.

• 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), JTower (4485 JP), China Traditional Chinese Medicine (570 HK), Canvest Environmental Protection Group (1381 HK), Capitol Health (CAJ AU). 
• Lowest spreads: Fuji Soft Inc (9749 JP), Descente Ltd (8114 JP), Second Chance Properties (SCE SP), C.I. TAKIRON Corporation (4215 JP), Fancl Corp (4921 JP), Alps Logistics (9055 JP). 

• I tally 46 – 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: JTower (4485 JP) and BusinessOn Communication (138580 KS)‘s Tender Offers. Orora (ORA AU) approached by Lone Star. Ramsay Health Care (RHC AU) Offer also rumoured.
• Key updates took place on China Traditional Chinese Medicine (570 HK), Namoi Cotton Co Operative (NAM AU), APM Human Services (APM AU), and CPMC Holdings (906 HK).

• SOUTHBOUND was again a net buyer, for HK$16.6bn this week (now 28wks in a row of net buying), on VERY LOW two-way volumes. 
• Gross volumes were very low. Net volumes were decent. There were three ETFs in the top 5 SOUTHBOUND net buys this past week suggesting position unwinding.
• Top net buys other than the ETFs were China Mobile and Tencent (now 14 out of 15 days seeing net SOUTHBOUND buying)

• J&T Global Express (1519 HK) and New Oriental Education (9901 HK) will replace JD Logistics (2618 HK) and SenseTime (20 HK) in the HSCEI at the close on 6 September.
• The inclusion of J&T Global Express (1519 HK) is a big surprise and the stock could move higher over the next couple of weeks.
• The non-inclusion of PICC Property & Casualty H (2328 HK) is another surprise since we had the stock highly ranked in the universe.

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net SELL RMB 5.0bn of A-shares. NORTHBOUND volumes were very, very low overall.
• HK large caps again outperformed Mainland large caps generally. Tech (HSTECH vs Star50 and ChiNext) saw even better HK outperformance.

• SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
• In this insight, we take a look at the names leading the race to become ADDs and DELs during the December 2024 index rebal event.
• Some of our index change expectations have changed since our last insight.

• The Aussie Tax-Loss Selling Baskets worked very well on the sell side from 30 April through end-June 2024. What now?  Unwind.
• CK Infrastructure Holdings (1038 HK) has now submitted an application for a secondary listing, not a dual-primary listing, on the London stock exchange. Admission expected on the 19th August. 
• The right trade is to buy JTower (4485 JP) below terms. The really right trade is to already be an owner. IF you’re an arbitrageur, you know what to do.

• Tencent reported C2Q24 revenue, IFRS operating profit, and IFRS net income in-line, in-line, 10% vs. our estimates and in-line, in-line, 19% vs. consensus;
• Weak fintech revenue, due to weak consumption, dragged down overall growth. But we see structural revenue acceleration and margin leverages in advertising, game and AI;
• We raise TP to HK$485 and keep Tencent as our TOP PICK.

• CSI 300 represents the 300 largest stocks by market cap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500.
• In this insight, we take a look at the potential ADDs and DELs leading the race for the semiannual index rebal event in December 2024.
• Our expected ADDs and DELs baskets have changed slightly since our last insight.

• There are 38 adds and 29 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents up to 518.
• We expect 33 of the 38 HSCI inclusions to be added to Stock Connect while we expect 27 of the 29 HSCI deletions to be removed from Southbound Stock Connect.
• Since the start of the calendar year, shares held though Southbound Connect have increased in 22 of the 27 HSCI deletions that will also be removed from Stock Connect.

• Mixed June quarter results at first glance suggest corporate overhaul strategy is working, with clear evidence Taobao/Tmall is stabilizing in terms of market share and profitability.
• Better platform monetization and clear timetable for achieving break-even by non-e-commerce business segments mean double-digit earnings CAGR by FY26 in our view.
• We expect Alibaba’s upswing business cycle and moderating headwind of housing market slump are paving the way for the stock’s re-rating in the next 12-24 months. 

• Profitability of the business surprised on the upside, as the net profit margin of JD.com increased from 3% in 2Q23 to 5% in 2Q24.
• Share buyback accelerated in 2Q24, as the company bought USD2.1bn worth of stock in the quarter, up from USD1.2bn in 1Q24. 
• The stock is trading at 7x 2024 PE, with a yield of >10% through dividend and buyback.

• Alibaba logistics arm CaiNiao’s revenue growth slowed in the June quarter
• Our main takeaway is that Chinese X-border eComm continues to slow
• We believe all of the large X-border eComm platforms may be affected

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.

• Lenovo
• Citicore Renewable Energy
• Vedanta Resources

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.

• Lenovo
• Citicore Renewable Energy
• Vedanta Resources

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.

• Lenovo
• Citicore Renewable Energy
• Vedanta Resources

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.

• Lenovo
• Citicore Renewable Energy
• Vedanta Resources

• China Traditional Chinese Medicine (570 HK)’s monthly update reinforces the bull case. The gross spread has remained uncomfortably high since falling on no news on 26 June. 
• The monthly update will relieve the bulls, as the consortium has finally made the regulatory submissions. The update stresses that the filing delay is due to an unwieldy consortium. 
• Potential stumbling blocks remain, which should not be an issue. Nevertheless, the risk (17.7% downside to the undisturbed price)/reward (21.4% gross spread) remains attractive. 

• A 14.8% gain month-to-date, including this past Monday’s 6.5% pop – you just knew something positive was taking place behind closed doors. And leaking its way into the public.   
• So it was no real surprise to read in the latest monthly update announcement on the HKEx that various regulatory approvals are almost, but not quite, satisfied.
• The wording in the announcement strikes a positive tone. Even remaining conservative on the timeline, this could be wrapped up before year-end. 

• Alibaba’s revenue grew by 4% YoY in 1Q25 due to the stagnancy in e-commerce.
• However, many expansion plans follow, including overseas market, physical stores, and fresh food wholesale.
• We set an upside of 51% and a price target of HK$115 for March 2025.

• Midea Group Co Ltd A (000333 CH) has got approval to list on the HKEX (388 HK) and reports are that the listing could be up to US$3bn.
• That issue size is around half of the maximum that the company can issue. But it would still need cornerstone investors and a nice discount on the H-shares.
• The stock will still get included in some indices even with the scaled down size, and inclusion in Southbound Stock Connect is a given.

• KE Holdings (BEKE) reported C2Q24 revenue 12%/9% higher than our estimates/consensus, and non-GAAP NI 19%/49% higher than our estimates/consensus, due to market share gain and take rate hike.
• We particularly like its business scalability, as its agent efficiency kept stable despite growing connected agents.
• We maintain the stock as BUY rating and raise TP to US$24 to reflect the better growth outlook from market share gains.

• Jiangsu Zenergy Battery Technologies (JSZENERGY CH) is looking to raise up to US$300m in its upcoming HK IPO. The deal will be run by CICC, and CMB International.
• Jiangsu Zenergy Battery Technologies (Zenergy from hereon) is an EV and energy storage system (ESS) battery manufacturer in China. 
• It provides integrated battery solutions, encompassing battery cells, modules, packs, racks, and battery management systems dedicated to large-scale applications of electrochemical products to interconnect omni-scenarios of land, sea and air.

• Total revenue increased by 8% YoY in 2Q24, lightly higher than 1Q24 and 4Q23.
• The gross margins of all business lines Improved significantly YoY.
• We set the upside at 35% and the price target at HK$506 for the end of 2025. Buy.

• Tencent (700 HK) reported 2Q2024 results today which beat consensus. Domestic gaming resumed growth driven by the successful launch of DnF Mobile which continues to dominate charts in China.
• All three business segments saw improvement in margins driven by Tencent’s high-margin businesses incl. mini-programs, video accounts, short-videos, etc.
• We expect continued recovery in Tencent’s earnings, however, remain cautious given slowdown in consumption spending and macroeconomic uncertainties.

• Midea Group Co Ltd A (000333 CH) one of the world’s largest home appliance producers, aims to raise up to US$3bn in its H-share listing.
• Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
• We have covered the company and deal background in our previous notes. In this note, we talk about the updates since then.

• According to the management, the performance of 24H1 should be better than that of 21H1, but Fu Shou Yuan’s performance in 2024 full year may still fall short of expectations.
• In the future, the development strategy of Fu Shou Yuan would rely more on endogenous growth. Without aggressive M&A, long-term revenue growth rate could fall to single digit.
• Special dividends will continue in the future. However, one major risk for Fu Shou Yuan is policy risk. The bottom line is the demand for the funeral industry always exists.

• TAL Education Group delivered a robust set of results in its fiscal first quarter of 2025, showcasing significant revenue growth and strategic expansions in both its learning services and content solutions sectors.
• These outcomes reflect the company’s focused execution on its operational strategies and its adaptability to the evolving educational needs.
• Financially, TAL Education Group reported a net revenue of USD 414.2 million, a substantial increase of 50.4% from the previous year, paralleled by a 56.9% increase in RMB terms.

• The constituent changes for the Hang Seng China Enterprises Index (HSCEI INDEX), Hang Seng TECH Index (HSTECH INDEX) and HSIII Index will be announced after market close on Friday.
• We forecast 2 changes for the Hang Seng China Enterprises Index (HSCEI INDEX), 1 change for the Hang Seng TECH Index (HSTECH INDEX) and 3 changes for the HSIII Index.
• With same-way and opposing flow on stocks from different passive trackers, the one-way trade is currently estimated at HK$5.2bn (US$672m). That will change with final capping done on 3 September.

• The CPMC Holdings (906 HK) Board recommends that shareholders accept Changping Industrial’s HK$6.87 offer, which the IFA opines is fair and reasonable.
• The Board’s carefully crafted and suitably caveated recommendation acknowledges that shares continue to trade through terms and ORG Technology Co., Ltd. A (002701 CH)’s HK$7.21 offer is higher but preconditional. 
• Based on ORG’s shareholding/irrevocable and volume traded above terms, Changping Industrial’s offer has little chance of success. It remains a question of when, not if, Changping Industrial will bump.

• The connection between Newjf and Greatview is deep. Newjf expressed an interest in acquiring Greatview early on, but the two parties didn’t reach an agreement. Greatview is not entirely “innocent”.
• Newjf’s decision to forcibly acquire Greatview at this moment should be made after careful consideration. Mengniu may not necessarily oppose this merger. Mengniu is likely to take a neutral stance. 
• Newjf’s Offer is attractive. In the absence of a more realistic action by Greatview to make a higher Offer, we advise investors not to walk away from Newjf’s Offer easily.

• The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
• There could be one index change during the September 2024 index rebal event. The official results will be announced after market close on 16th August 2024.
• In this insight, we take a look at our latest flow expectations based on closing prices on Monday 12th August 2024.

• Last night, MSC published index changes due at the August rebalance. There will be no changes to SA constituents.
• The rebalance is set to take place at the end of the month on Friday the 30th.
• Tomorrow after the HK close, Tencent is expected to report results for 2Q FY24.

• The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
• The index changes and indicative weights for the September 2024 index rebal event is expected to be announced after market close on Friday 16th August 2024.
• In this insight, we take a look at our latest expectations for capping flows based on current prices.

• WeRide (WRD US) is looking to raise US$119m in its US IPO.
• WeRide provides autonomous driving products and services from L2 to L4 of driving automation.
• We had looked at the firm’s past performance in our earlier notes. In this note, we discuss our thoughts on valuation.

• WeRide, a pure-play autonomous driving company with operations in 7 countries, may raise up to $120M in upcoming IPO in the United States.
• WeRide is expected to IPO this week. The company’s amended prospectus puts the price range per ADS at $15.50 to $18.50, implying a market cap of ~$4.6B at the midpoint.
• The company has raised ~$1.4B in equity financing to date and was backed by Qiming Venture Partners and the venture capital fund of the Renault Nissan Mitsubishi Alliance, among others.

• Bearish sentiment in Hong Kong declined during the carry trade sell off.
• Low Volatility, High Dividend and Value factors have continue to be profitable strategies in Hong Kong.
• Pop Mart International Group L (9992 HK) , Techtronic Industries (669 HK) and Giant Biogene (2367 HK) all reported solid operating and financial news leading to BUY recommendations.

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
• JSW Steel Ltd
• Yuexiu Property

• We believe total revenue will grow by 9% YoY and game revenue began to rise in 2Q24.
• We believe the operating margin will continue to improve YoY in 2Q24 after the seven-year high in 1Q24.
• We set the upside at 35% and the price target at HK$496 for the end of 2025.

• The epicenter of the Asian ETF selloff last week was Japan, recording an outflow of nearly $100B from equity funds taking the net flows back to breakeven for the YTD.
• Seazen (Formerly Future Land) (1030 HK) and Swire Properties (1972 HK) had positive announcements while New Oriental Education & Techn (9901 HK) and Yum China Holdings (9987 HK) announced earnings.
• China Unicom Hong Kong (762 HK) shares are under pressure as the telco sector goes through a price war in cloud services and investors take profits from high dividend names.

• Post market close on Friday, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 6 September.
• With no constituent changes in March and 1 add/1 delete in June, there could be more changes in September with Health Care stocks among the potential inclusions.
• Changes to the Hang Seng Industry Classification System (HSICS) will be implemented from the September rebalance and that will alter industry coverage.

• SOUTHBOUND was again a net buyer, for HK$15.2bn this week (now 27wks in a row of net buying), on smallish two-way volumes. Better than the previous month but still low.
• Bank net buying, which had spiked the previous week, didn’t follow through.
• There were three ETFs in the top 15 SOUTHBOUND net buys this past week, reversing last week, which reversed the week before’s flows.

• On the 30th July 2024, packaging play CPMC Holdings (906 HK) dispatched the Composite Document for the HK$6.87/share, in cash, Offer from SASAC/NCSSF-backed Champion.
• The Response Document, including the IFA opinion (with a fair & reasonable conclusion) has now been dispatched. 
• However, the focus remains on ORG Technology Co., Ltd. A (002701 CH)‘s superior HK$7.21/share Offer, which is currently negotiating the necessary regulatory approvals. 

• Delayed this week because of the long (Japanese holiday, which I took for myself) weekend, as were the SOUTHBOUND and NORTHBOUND monitors. 
• SOUTHBOUND inflow strong. Tencent strong inflows. Net buying every day for two weeks. NORTHBOUND outflows large. Record foreign investor outflows from China’s capital markets this year.
• As expected (with AH 20d Premia returns at multi-year highs last week), AH Premia fell slightly, with narrow premia falling more than wide premia. I’d expect more H-vs-A gains.

• WeRide (WRD US), a provider of autonomous driving products and services, seeks to raise up to US$119 million through a Nasdaq IPO and US$321 million through a concurrent private placement.
• In WeRide (WRD US) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The bear case rests on a volatile revenue profile, high customer concentration risk, widening losses that raise doubts on the path to profitability, elongated cash collection cycles and cash burn.

• We believe revenue will increase by 8% YoY in 1Q25, as most business lines have been growing.
• We believe the operating margin will be stable, as cost cut plans came to an end.
• We set an upside of 94% for March 2025, as we believe the stock is overly impacted.

• The retail deliveries of NEV (new energy vehicle) increased by 37% YoY in July.
• One of Alibaba’s supermarket chains, Freshippo, will sell its OEM goods, on Lazada.
• Tencent will formally start the game, Arena Breakout: Infinite, in August.

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net SELL RMB 14.8bn of A-shares. It was a big net sell week in relatively low gross NORTHBOUND volume.
• HK large caps outperformed Mainland large caps generally. Tech (HSTECH vs Star50 and ChiNext) saw even better HK outperformance.

• 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), Asia Cement China (743 HK). 
• Lowest spreads: Fuji Soft Inc (9749 JP), Second Chance Properties (SCE SP), Descente Ltd (8114 JP), C.I. TAKIRON Corporation (4215 JP), Fancl Corp (4921 JP).

• Swire Properties (1972 HK) was trending lower on expectations of deletion from a global index in August. Short interest has jumped a lot over the last few months.
• The announcement of the buyback last week took the stock higher. The increased real float from the index deletion will be offset by the buyback.
• Swire Pacific (A) (19 HK)‘s ownership of Swire Properties (1972 HK) will increase from 82% to 83.5% following the buyback and cancellation of the shares. Privatisation at some point?

• We summarized the varieties that would miss 2024 NRDL negotiation and have to wait until 2026 to enter medical insurance coverage. This however means competing products would have more advantages.
• As the NRDL negotiation becomes more transparent/reasonable, there will be a balance point among companies’ profits, patient affordability and medical insurance budget. So, there’s no need to be overly pessimistic.
• The approval process of CanSino’s PCV13i could be faster than expected. 2024 is the best time to bottom-fish this stock. Reasonable market value is at least RMB5 billion.

• We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
• Our top picks are Perfect Medical Health (1830 HK), The Keepers Holdings (KEEPR PM), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and Ginebra San Miguel (GSMI PM).
• We provide updates on recent results for Plover Bay Technologies (1523 HK) and upcoming H1 results for the Philippines names. 

• BeiGene’s 24Q2 results far exceeded expectations. Sales of BRUKINSA may exceed that of Calquence for the first time next year. Breakeven in 2024 becomes possible if effective cost control continues.
• BeiGene’s 2024 revenue could exceed Hengrui, marking the official transition of China’s innovative pharmaceutical industry from the old generation to the new one. Reasonable market value for BeiGene is US$19-27.5bn.
• Current valuation cannot reflect strong fundamentals.As BeiGene has established a convincing profit model, the market turmoil actually provides investors with a good opportunity to buy the stock at low price.

• Pacific Basin Shipping (2343 HK) may realise at least US$60m of revenue, or around 10% higher total TCE, in 2H24, based on its solid forward vessel coverage.  
• Sustained re-routing of vessels due to Middle East tension and higher demand from China due to fixed asset spending are supportive of rates. FFA is now 3-4% higher than spot.
• The stock is inexpensive at 9.7x PER and 0.8x P/B, and its 7.6% dividend yield is attractive. A solid balance sheet also means an upside on the payout ratio. 

• Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
• On the IPO front, the prior week witnessed a number of listings with divergent results.
• Given the market volatility, there was only one large placements in the prior week.

• Zylox is a beneficiary of VBP and it has turned losses into profits. 2024 full-year revenue could be up 40-50% YoY. Net profit could be close to RMB100 million.
• Whether in terms of the number of products on the market or the efficiency of R&D, Zylox’s performance is superior to peers.Its valuation is expected to be higher than peers.
• We’re in a bear market, together with weak liquidity, Zylox’s valuation doesn’t fully reflect its strong fundamentals. So, while this is a good company, investors may need to be patient.

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.

• Adani Green Energy
• New World Development
• Rakuten
• Shui On Land

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.

• Adani Green Energy
• New World Development
• Rakuten
• Shui On Land