China: Zhihu Technology, CATL (A), Cafe De Coral Holdings, Suchuang Gas Corp, PICC Property & Casualty H, JD.com Inc., Dongzheng Automotive Finance, Tencent Music, Zhenro Properties and more

• Zhihu Technology (ZH US) raised around US$106m via a dual primary listing in Hong Kong. 
• Unlike all the prior dual primary/secondary listings which have been done via offering either only primary or a mix of primary+secondary shares, Zhihu’s offering will consist of only secondary shares.
• In this note, we’ll talk about the demand and trading dynamics.

• Skyrocketing material costs shook the stock of Contemporary Amperex Technology Co. Ltd. (CATL) as investors wiped billions of dollars off the value of the world’s largest electric-vehicle battery manufacturer.
• Word circulated in the market that CATL is set to post net profit of less than 5 billion yuan for the first quarter, a sharp decline from the previous quarter.
• The company hasn’t issued detailed financials for the fourth quarter and all of 2021. An estimate issued in January put annual net profit between 14 billion yuan and 16.5 billion yuan.

• Hong Kong’s hospitality industry has endured three years of upheaval, first with the democracy protestors in 2019, which slowed inbound, followed by the onset of Covid in early 2020.
• Beginning today, 21 April, the Government commenced the relaxation of most social distancing measures, to be eased over three phases.
• This evolving dynamic is welcome, yet the progress and recovery for many operators may be gradual.

• CR Gas (1193 HK)’s privatisation bid for Suchuang Gas Corp (1430 HK) was derailed by the trading suspension due to the disclosure of previously unaccounted for pledges/guarantees by subsidiaries.
• The controlling shareholders have attempted to keep the offer alive by agreeing to fully indemnify CR Gas for losses related to the pledges/guarantees.
• The long stop date of the offer was extended to 31 August 2022. The key risk is that the timeframe to fulfil the resumption guidance exceeds the long stop date. 

• As of the last close, we expect Li Auto (2015 HK) and PICC Property & Casualty H (2328 HK) to replace Smoore International (6969 HK) and Sunny Optical (2382 HK). 
• There are some reasonably large capping changes that will result in one-way turnover estimated at 4.25% and will result in a one-way trade of HK$2,090m.
• Short interest has spiked recently on Smoore International (6969 HK), while there has been short covering on the other potential inclusions and exclusion. 

• JD.com met our 240+ short zone and has gapped below immediate 215 support, opening the way for  C wave decline to our target and buy zone near 180.
• RSI trendline rejection sets up a slide to the sub 30 area which mean we will at least hit 180 if not reach for 160.
• Holding the 160 low sets up an intermediate long trade. Be aware that there will be some wide tactical swing over the turbulent summer cycle.

• On 16 April, the Shanghai Financial Court published the details for the auction of China Zhengtong Auto Services Hldg (1728 HK)’s 71.04% stake in Dongzheng Automotive Finance (2718 HK). 
• If the auction is successful and results in any person and a group of persons acting in concert holding 30%+ of the voting rights, it will result in an MGO.
• The base bid implies an MGO price of HK$1.294 per H Share, a 112.1% premium to the last close. The auction will be held from 18 May to 19 May.

• After both stocks were suspended on the 19 April, the forced liquidation of China Zhengtong (1728 HK)‘s stake in Dongzheng (2718 HK) will occur, via auction, on the 18 May. 
• That minimum bid price is HK$1.294/share, or a 112% premium to last close.
• ZhengTong’s stake is 71.04% of shares out. A mandatory general offer – conditional or unconditional – may materialise from the auction process. 

• Several news media outlets report that ByteDance has launched a new music streaming service in China called Qishui Yinyue.
• Tencent Music (TME US) earnings have come under pressure with ending of exclusive music streaming licensing deals and increased regulatory pressure on its social entertainment biz.
• We expect TME’s 1Q2022E earnings to decline further with increased competition and drop in social entertainment.

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.

• Zhenro Properties