In today’s briefing:
- HSCEI Index Rebalance Preview: Four Sets of Changes from July to September
- Angelalign Technology (6699.HK) – There Is Still Plenty of Downside, but Limited Upside Potential
- Lonking (3339 HK): Not Out of the Woods Yet
- Morning Views Asia: Kawasan Industri Jababeka, Jingrui Holdings, KWG Living Group
HSCEI Index Rebalance Preview: Four Sets of Changes from July to September
- Sunac China Holdings (1918 HK) is still suspended from trading and could be deleted from the index in July and replaced by SenseTime Group (20 HK) or PetroChina (857 HK).
- SenseTime (20 HK) or PetroChina (857 HK), Great Wall (2333 HK) and Zhongsheng (881 HK) could replace Haidilao (6862 HK), CPIC (2601 HK) and Alibaba Health (241 HK) in September.
- There will be buying on SenseTime Group (20 HK) from HSCEI INDEX and HSTECH INDEX trackers. But there is also a big lock-up expiry on 29 June.
Angelalign Technology (6699.HK) – There Is Still Plenty of Downside, but Limited Upside Potential
- Due to pandemic/lockdown/economic downturn, the case shipments could further decline. Our revenue forecast this year is below 20%, or even below 15%. We also lowered our forecast on profit margins.
- Limited qualified orthodontists in China and challenging internationalization cast doubts on Angelalign’s long term growth prospects. We can’t see high growth potential of Angelalign with certainty.
- Angelalign’s performance in 2022 would be under pressure. Although PE/TTM reached about 73 by the end of June 10 after corrections, it’s still overvalued. The upside potential could be limited.
Lonking (3339 HK): Not Out of the Woods Yet
- Share price of Lonking Holdings (3339 HK) has seen muted reaction to weak industry figures recently but it is still unexciting in near-term, based on our catch-up with the company.
- It has underperformed industry sales volume in 5M22 across all product categories, with that for wheel loader behind 4pp and excavator by 10pp. Forklift sales were down 18% YoY.
- Both gross margin and investment income are set to contract in this year, making it highly likely to see significant earnings downgrade after 1H22 result announcement in Aug.
Morning Views Asia: Kawasan Industri Jababeka, Jingrui Holdings, KWG Living Group
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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