In today’s briefing:
- China Consumption Weekly (4 Mar 2024): Alibaba, Sun Art, Li Auto, Nayuki, NetEase, Vipshop
- [NetEase, Inc. (NTES US, BUY, TP US$122) TP Change]: Strong Games Pipelines Offering More Potentials
- Vinda International (3331 HK): Pre-Condition Satisfied
- BeiGene (6160.HK/BGNE.US/688235.CH) – Pain Points Behind the High Growth
- EQD | The Hang Seng Index’s Turning Point
- Monthly Chinese Tourism Tracker | January & Initial Read On February Both Indicate Solid Growth
- [Vipshop (VIPS US, BUY, TP US$20.4)TP Change]: Will Live for the Moment Consumption Persist in 2024?
- China Travel Intl Inv (308 HK): A Laggard that Sets to Catch Up
- Vinda (3331 HK): That’s A Wrap As Pre-Cons Done
- CCB- Housing Rental Subsidiary Listing May Be Overshadowed By Weak Credit Metrics
China Consumption Weekly (4 Mar 2024): Alibaba, Sun Art, Li Auto, Nayuki, NetEase, Vipshop
- Alibaba closed four more supermarkets at the end of February.
- Alibaba is moving retailers from the discount app back to Taobao.
- Li Auto’s deliveries increased by 62% YoY in the first two months of 2024.
[NetEase, Inc. (NTES US, BUY, TP US$122) TP Change]: Strong Games Pipelines Offering More Potentials
- NetEase reported C4Q23 top line, GAAP operating profit and GAAP net income (4.8%), (16%) and (9.0%) vs. our estimates, and (3.6%), (12%) and (6.8%) vs. consensus， mainly due to..
- The positive, however, is the acceleration of launch of <Naraka Mobile> by 1-2 quarters. Our estimate of the gross billing remains the same;
- We remain optimistic about the upcoming pipeline, and we raise our TP to US$122. Our new TP implies 15.4X PE, which is 12% above current price.
Vinda International (3331 HK): Pre-Condition Satisfied
- Vinda International (3331 HK) has announced the pre-condition for Sukanto Tanoto’s HK$23.50 voluntary offer is satisfied. The composite document will be despatched on or before 11 March.
- The offeror has received irrevocables from Essity (ESSITYB SS) and Mr Li, representing 72.62% of outstanding shares, which satisfies the 50% minimum acceptance condition.
- Including irrevocables, the offeror currently represents 80.31% of outstanding shares. The offeror intends to exercise compulsory acquisition rights. The tight 0.4% gross spread reflects a done deal.
BeiGene (6160.HK/BGNE.US/688235.CH) – Pain Points Behind the High Growth
- Although people acknowledged BeiGene’s performance, it still makes us uneasy about a long-standing question: When will BeiGene be profitable?With current cost structure, there’s at least two years left until breakeven.
- BeiGene’s internationalization only proves decent increase in revenue, but it doesn’t yet verify its profitability.SG&A expense ratio completely deviates from the normal state of Biotech with over US$2 billion sales.
- If BeiGene indeed has a plan to turn loss into profits, besides maintaining a high growth rate in sales, reasonable optimization in cost and expenses is the most basic “sincerity”.
EQD | The Hang Seng Index’s Turning Point
- The Hang Seng Index closed the month of February up, printing a +6.63% return, after months of uninterrupted downtrend.
- The big question at this point is: has the index reached the turning point that many have been waiting for?
- In this insight we will try to analyze what the possible short-term trend could be for the index after the recent trend reversal.
Monthly Chinese Tourism Tracker | January & Initial Read On February Both Indicate Solid Growth
- Adjusting for impact of LNY timing, January numbers still seem firm
- Headline February / LNY 2024 traffic growth also appears solid
- Our thesis remains that tourism recovery takes longer, strongest in H124
[Vipshop (VIPS US, BUY, TP US$20.4)TP Change]: Will Live for the Moment Consumption Persist in 2024?
- Vipshop reported C4Q23 top-line, non-GAAP EBIT, and GAAP net profit in-line, 6.3% and 7.0% vs. our estimate, and 4.5%, 20.5%, and 23.9%, vs. consensus, respectively;
- We expect the two themes of “live for the moment” consumption and consumption downgrade to persist in 2024. The former drives apparel spending, while the latter drives consumers to Vipshop
- We maintain BUY and raise the TP to US$ 20.4, implying 7.7x CY24 non-GAAP P/E, and 4.9x CY24 EV/Earnings.
China Travel Intl Inv (308 HK): A Laggard that Sets to Catch Up
- China Travel International Investment Hong Kong (308 HK) has an impressive 2024 CNY with the volume and revenue of its tourist attractions increased by 46% to 123% YoY.
- Relative to 2019 CNY, most businesses have fully recovered. 1H23 earnings is the highest since 1H20 and the market may have underestimated 2H23, providing upside surprise potential.
- The share price is still some 30% below the peak in late-2021 when earnings have yet to recover. Also, its net cash now equals 19% of the share price.
Vinda (3331 HK): That’s A Wrap As Pre-Cons Done
- On the 15 December 2023, the Tanoto family emerged with a HK$23.50 pre-conditional Offer for Vinda (3331 HK). PRC regulatory approval to one side, this Offer was a done deal.
- Those regulatory approvals have now been satisfied. The Composite Doc will be dispatched on or before the 11th March, at which time the Offer will be open for acceptances.
- With a 50% minimum acceptance condition and irrevocables of 72.624% (plus Tanoto’s 7.69% direct stake), this should turn unconditional on or before the 20th March
CCB- Housing Rental Subsidiary Listing May Be Overshadowed By Weak Credit Metrics
- The large SOE bank indicates that it will list its housing rental subsidiary, although the proceeds may be inconsequential given the size of CCB.
- CCB shows lower (and very low) credit costs despite what appears to be a major weakening in its NPL distribution.
- Loss NPLs are up 2.5x from FY19 to 1H23 much more than its 1.5x rise in total NPLs, so that its declining and benign credit costs may not last.
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