In today’s briefing:
- Potential MSCI Upweights in May: Kuaishou, JD Health, Akeso
- Tencent Music (TME): 4Q21, Revenue Down for First Time
- Xiaomi (1810 HK): 4Q21, Growth Rate Bounced Up, as High End Strategy Worked
- Pinduoduo 4Q21: A Big Compromise
- TME 4Q Results: Earnings Continue to Weaken
- CPMC Holdings (906 HK): Short Term Tough but Long Term Story Intact
- Morning Views Asia: Evergrande, Ronshine China Holdings, Sunac China Holdings, Zhenro Properties
Potential MSCI Upweights in May: Kuaishou, JD Health, Akeso
- We see a potential increase in the FIF for Kuaishou Technology (1024 HK), JD Health (6618 HK) and Akeso Biopharma Inc (9926 HK) at the MSCI May SAIR.
- The increase in FIF will require passive funds to buy 79.45m shares of Kuaishou (1024 HK), 57.35m shares of JD Health (6618 HK) and 15.32m shares of Akeso (9926 HK).
- Short interest has started to inch higher on Kuaishou, while short interest is rising sharply on JD Health and Akeso.
Tencent Music (TME): 4Q21, Revenue Down for First Time
- In 4Q21, TME’s revenue decreased YoY for the first time since its IPO.
- We do not believe the music rise will cover the social entertainment decline in 2022.
- Either, we do not believe social entertainment will recover based on its operating data.
Xiaomi (1810 HK): 4Q21, Growth Rate Bounced Up, as High End Strategy Worked
- The growth rate of total revenue bounced up and all business lines grew strongly in 4Q21.
- Smartphone revenue grew more rapidly than smartphone shipment, as the high-end strategy worked.
- We set an upside of 56% and a price target of HK$21 for the year end 2021.
Pinduoduo 4Q21: A Big Compromise
- Pinduoduo (PDD US) shares dropped 6.1% yesterday following the 4Q21 results as the company’s revenue fell short of the consensus estimate by 8.9%.
- Pinduoduo’s OP improved 223% QoQ to RMB 6.9bn (consensus RMB 3.2bn) through pushing back sales and marketing investments. However, it affected the company’s user growth as MAUs declined by 8.0m.
- Consensus is yet to factor in the impact on user growth through reduced marketing spend, which makes further downside to Pinduoduo shares possible.
TME 4Q Results: Earnings Continue to Weaken
- TME reported 4Q2021 results on Monday. Revenue for the quarter decreased 8.7% YoY to RMB7.61bn (vs consensus RMB7.66bn) and reported OP decreased 47.3% YoY to RMB682m (vs consensus RMB1.3bn).
- Revenue from Online music services grew single digit (4%) for the first time while revenue from Social Entertainment services dropped further during the quarter.
- TME expects its revenues to decline in 2022 as it expects the social entertainment services business to remain under pressure due to competition and regulatory pressure.
CPMC Holdings (906 HK): Short Term Tough but Long Term Story Intact
- FY21 result of CPMC Holdings (906 HK) indicated it is under pressure from higher input costs in 2H21, as profit growth rate has slowed to 3.1%, from 36.5% in 1H21.
- 1H22 will stay challenging, but management guided for improvement in 2H22. That said, CPMC expects gross margin for FY22 can be marginally higher than in FY21.
- Structural story of higher can demand, rise in industry concentration and increase de-plasticisation remains intact. We see any pull-back in share price as opportunity.
Morning Views Asia: Evergrande, Ronshine China Holdings, Sunac China Holdings, Zhenro Properties
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.
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