In today’s briefing:
- Baidu: Can AI Cloud, Intelligent Driving Save the Day as Marketing Continues to Lose Market Share?
- Dongyue (189 HK): Fast-Growing FCEV Play… With Baggage
- OOIL (316 HK) Mature Rise
- WuXi AppTec (603259.CH/2359.HK) – Behind the Proposed Disposal of A Shares
- ClouDr IPO: Strong Business Model with Multiple Revenue Channels
- ZTO Express (2057 HK/ZTO US): Growth at a Reasonable Price
Baidu: Can AI Cloud, Intelligent Driving Save the Day as Marketing Continues to Lose Market Share?
- Chinese digital advertising revenue growth has slowed down considerably over the past 4 quarters and Baidu has continued to consistently lose market share to the broader industry.
- Non-Marketing revenue has led the growth for Baidu over the past 2 years and now contributes roughly 26% to Baidu Core (excludes iQiyi) revenue.
- On a PE basis, Baidu is trading at only a slight discount to global giant, Alphabet, which testifies to the negative impact on earnings expectations from Baidu’s growth engines.
Dongyue (189 HK): Fast-Growing FCEV Play… With Baggage
- Dongyue Group (189 HK) is a leader in the manufacturing of fluorochemicals and organosilicons, and the largest player in second-generation refrigerants.
- FY21 profit was up 69% yoy. The company just announced profit in the first five months of 2022 recorded an increase of 170%+ compared to the corresponding period last year.
- The trade pushback centers on corporate governance issues, both in Hong Kong and in the PRC.
OOIL (316 HK) Mature Rise
- OOIL’s (316 HK) macro uptrend remains intact but does exhibit some weak tactical signals for a pullback to the 200 support zone. 270 is the near sell zone.
- Buy volumes on the rise in late May showed a slowing pace and the recent sell down saw sell volumes pick up. Wedge support is due to come under pressure.
- RSI shows support pressure to break post uptick. WTI key levels to hold/break are 115 and 105 as pressure release valves.
WuXi AppTec (603259.CH/2359.HK) – Behind the Proposed Disposal of A Shares
- Our interpretation of WuXi AppTec’s proposed disposal is that its founder affiliates could be concerned about the Company’s future prospects, so they choose to offload in advance.
- A possible reason for WuXi AppTec to highlight the optimism about its performance and deliver a prosperous outlook/positive signal to the market is to “shield” the implementation of its proposed disposal.
- The risk is out of proportion to the opportunity. We advised investors to catch the rebound and offload rather than hold long term. It’s just temporary rebound not complete reversal.
ClouDr IPO: Strong Business Model with Multiple Revenue Channels
- ClouDr was the largest digital chronic condition management solution provider in China. The company’ application for a HKEx IPO has been approved and plans to raise proceeds of around US$500m.
- The company is well positioned to benefit from growing demand for digital healthcare marketing and services in China driven by increased health awareness, technological advancements and prevalence of chronic conditions.
- In this insight, we examine the company’s business model, segments and financials.
ZTO Express (2057 HK/ZTO US): Growth at a Reasonable Price
- ZTO Express Cayman Inc (2057 HK) has outperformed industry volume growth in 1Q22 and such trend continues into 2Q22 with good ASP improvement and cost control.
- Its strong operating cash flow and declining capex will lead to an accumulation of cash over the next few years, adding to the 1Q22 net cash position of Rmb4.1bn.
- We think the stock’s underperformance against peers not warranted. With a below-sector earnings multiple, leadership position and successful business model, we consider ZTO a “Growth at a reasonable price”.
Before it’s here, it’s on Smartkarma
