In today’s briefing:
- Alibaba (BABA): Shanghai and Its E-Commerce Under Lockdown
- Pacific Basin (2343 HK): Optimistic Outlook Reaffirmed
- Venus MedTech (2500 HK): Overcrowded Market, Margin Pressure, Expanding Loss
- Jinxin Fertility Co Ltd (1951.HK) – The Outlook Is Not Optimistic Even with Policy Support
Alibaba (BABA): Shanghai and Its E-Commerce Under Lockdown
- Shanghai is in lockdown and citizens are finding it hard to get enough food.
- Community group purchase has been taking consumers from e-commerce apps.
- The central government reiterates the zero-COVID policy, but the Omicron variant is spreading with very few death cases.
Pacific Basin (2343 HK): Optimistic Outlook Reaffirmed
- Pacific Basin Shipping (2343 HK) stays positive towards the outlook of the bulk shipping market despite the Russia-Ukraine war, higher inflation and lockdowns in China.
- 1Q22 coverage rates are 117% and 122% higher YoY for its Handysize and Supramax fleet, resepctively, and coverage for 2Q22 is also promising, securing good 1H22 earnings.
- We expect it to turn into net cash by end-FY22, and even with such strong financial position, it will still generate over 30% ROE for the next two years.
Venus MedTech (2500 HK): Overcrowded Market, Margin Pressure, Expanding Loss
- Venus MedTech (2500 HK) is facing competition in China TAVR market and its market share has deteriorated to 70% in 2021 from 79.3% in 2018.
- Due to declining ASP and low pricing power, the company’s gross profit margin has declined to 78% in 2021 from 86% in 2018.
- During 2021, the company’s loss expanded 103% y/y to RMB372 million, mainly due to elevated selling and distribution expenses and R&D costs.
Jinxin Fertility Co Ltd (1951.HK) – The Outlook Is Not Optimistic Even with Policy Support
- IVF penetration rate in China is not high and the rate of improvement is very slow. With public hospitals accounting for over 90% market share, Jinxin’s growth space is limited.
- Jinxin has extended its business scope to support the entire fertility and pregnancy lifecycle. But it could drag down the overall net profit margin,resulting in lower-than-expected performance in the end.
- The breakthrough point is internationalization. If COVID-19 is under control and Jinxin continues to expand overseas markets successfully, it could change its valuation logic and open up upward potential.
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