In today’s briefing:
- Alibaba Potential IPOs – Part 2 – An Early Look at Cainiao, US$10bn+
- StubWorld: China Everbright (165 HK) Trading Wide
- Tencent (700 HK): 1Q23, Significant Improvements in Growth and Margin
- [Baidu (BIDU US, BUY, TP US$178) Target Price Change]: Maintain BUY for Faster Recovery and AIGC
- Dmall Pre-IPO – The Positives – Ambitions of Aiding the Retail Digitization Journey for Retailers
- China Travel Intl Inv (308 HK): Revisiting This Undervalued Recovery Play
- TME: Online Music Drives Earnings; No Recovery in Sight for Social Entertainment Yet
- Hutchmed China Ltd (13.HK/HCM.US)- Stronger than Expected and Deserves More Attention from Investors
- [Miniso Group (MNSO US) Target Price Change]: Brand Upgrade Strategy Bears Fruit…Reiterate BUY
- ZTO Express Q1 Results Surprise: Despite Lower Pricing, Margins Up Y/Y | Mgmt Raises Volume Guidance
Alibaba Potential IPOs – Part 2 – An Early Look at Cainiao, US$10bn+
- On 28th Mar 2023, Alibaba (ADR) (BABA US) announced that it would adopt a new organizational and governance structure, splitting into six major business groups and other investments.
- Alibaba also stated that each of the business groups would be set up as an independent entity with its own board and the groups will eventually seek to list.
- In our previous note, we highlighted which division could list. In this note, we will look at Cainiao.
StubWorld: China Everbright (165 HK) Trading Wide
- Fund manager China Everbright (165 HK)‘s implied stub and simple ratio (CEL / Everbright Securities Co (A) (601788 CH))) are at multi-year lows.
- Preceding my comments on China Everbright are the weekly setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Tencent (700 HK): 1Q23, Significant Improvements in Growth and Margin
- In 1Q23, the revenue growth rose significantly to 11% YoY.
- The operating margin also improved significantly to 24% in 1Q23 versus 17% in 1Q22.
- We set an upside of 28% and a price target of HK$440 for yearend 2023.
[Baidu (BIDU US, BUY, TP US$178) Target Price Change]: Maintain BUY for Faster Recovery and AIGC
- Baidu delivered 1Q23 results with top line beat our estimate by 3.5%, and non-GAAP net income beat our estimate by 14.7%.
- We expect both its ads and AI cloud revenues to recover with accelerated pace, which could offset the increase of R&D spending in AIGC.
- Reiterate BUY rating and slightly raise TP to US$ 178 to reflect the faster recovery. Our TP implies 17.9x PE in 2023.
Dmall Pre-IPO – The Positives – Ambitions of Aiding the Retail Digitization Journey for Retailers
- Dmall Inc (1751691D CH) is looking to raise around US$200m in its upcoming Hong Kong IPO.
- Dmall provides cloud-based, end-to-end SaaS platform purpose-built for the Chinese retail industry.
- In this note, we will talk about the positive aspects of the deal.
China Travel Intl Inv (308 HK): Revisiting This Undervalued Recovery Play
- China Travel International Investment Hong Kong (308 HK) should have more upside from here given the sharp earnings recovery over FY23-25. But the market seems to have overlooked this.
- Its FY18 net profit reached HK$687m; but dipped to HK$356m loss in FY22. With its businesses now behind issues like HK social unrest and border closure, there is immense upside.
- All of CTII’s business segments have experienced recovery in FY23, especially following the resumption of HK-mainland China traffic. Its 0.54x P/B is still 52% down from the peak.
TME: Online Music Drives Earnings; No Recovery in Sight for Social Entertainment Yet
- Tencent Music reported 1Q2023 results. Revenue increased 5.4% YoY to RMB7.0bn (vs consensus RMB6.9bn) while adj. OP more than doubled to RMB1.09bn (vs consensus RMB1.13bn) vs RMB518m in 1Q2022.
- Online music services revenue grew 33.8% driven by strong growth in both paying users and monthly ARPU. Social Entertainment further declined during the quarter.
- 1Q2023 earnings were primarily driven by Online music services and we do not expect a recovery in social entertainment segment’s earnings in the short-term.
Hutchmed China Ltd (13.HK/HCM.US)- Stronger than Expected and Deserves More Attention from Investors
- HUTCHMED has been a company that is easily overlooked by investors. However, its BD capabilities have been verified after the deal with Takeda, and its commercialization performance is also commendable.
- Based on our forecast, total oncology/immunology consolidated revenue in 2023 could reach about US$220 million. If product sales growth remains benign, together with good cost control on R&D/SG&A, eventual breakeven is reachable.
- However, based on the current development trend, HUTCHMED could have to remain at the stage of a biotech, and is difficult to become a biopharma. Investors should be aware of this.
[Miniso Group (MNSO US) Target Price Change]: Brand Upgrade Strategy Bears Fruit…Reiterate BUY
- MNSO reported its C1Q23 revenue (3.7%)/1.1% vs. our estimate/consensus, while non-GAAP net income beat our estimate/consensus by 17.7%/26.1% respectively, driven by gross margin ramp-up strategy and G&A reduction;
- We think MNSO’s brand upgrade strategy is success so far, as it offered more high gross margin products without significantly diluting sales.
- We maintain Buy rating and raise TP by US$0.5 to US$25.5 to factor in the better gross margin and store expansion outlook.
ZTO Express Q1 Results Surprise: Despite Lower Pricing, Margins Up Y/Y | Mgmt Raises Volume Guidance
- ZTO Express (ZTO US) parcel volume increased by 20.5% Y/Y in Q1, better than market growth
- Unit prices fell by 3.7%, slightly worse than peers in Q1 2023, and Revenue missed consensus
- EPS beat expectations on lower unit costs, and management raised full-year volume target
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