Daily Brief China: Alibaba Group, Gotion High-Tech Co Ltd, Gem Co Ltd A, Pop Mart International Group Limited, Shenzhen Pagoda Industrial, Pharmaron Beijing Co Ltd-H, Onewo Space-Tech, Honghua Group and more

• Alibaba Group (9988 HK) currently has a Secondary Listing in Hong Kong and is looking to become dual primary listed in Hong Kong and the U.S.
• The main change will be inclusion in the Southbound Stock Connect program where mainland investors will be able to buy the stock.
• Alibaba Group (9988 HK) is capped at 8% in the HSCEI INDEX and is close to 8% of the HSI INDEX, there will be negligible impact on the dividend futures.

• Gotion High-Tech Co Ltd (002074 CH) (GHT) is looking to raise US$1bn from its Swiss GDR listing. Bookrunners on the deal are CICC and Haitong International.
• The shares offered in GHT’s GDR offering ranges between 16.65m – 33.29m GDRs (83.24m – 166.47m A-shares), ranging the deal size between US$499m-US$1bn. 
• At the top end, in terms of number of GDRs offered, the deal would represent 4.7 days of ADV on the A-share market and 9.6% of current mcap.

• Gem Co Ltd A (002340 CH) is looking to raise around US$245m in its Swiss GDR listing.
• Proceeds will be used mainly for overseas expansion, such as the development of the Indonesian Nickel Resource Base and development of its production base and recycling center in Europe.
• In terms of discount, relative to the most recent two deals, Keda Industrial and Ningbo Shanshan, GEM’s GDRs are offered at a more enticing 11.7-14.2% discount to its A-shares,

• Pop Mart’s share price has lost more than 50% YTD as resurgence of Covid in China has severely impacted the company’s operations including closure of physical stores and robo shops.
• The company also issued a profit warning last week for 1H2022 that was severely impacted by the spread of Covid-19 as well as business expansion related costs.
• We expect the company’s aggressive overseas expansion strategy to continue to impact the company’s profitability and there is further downside.

• Shenzhen Pagoda Industrial (1317437D CH) is looking to raise up to US$500m in its upcoming Hong Kong IPO. 
• Shenzhen Pagoda Industrial (SPI) is a fruit retail operator in China. According to Frost & Sullivan, it ranked first among all fruit specialty retail operators in China in 2021.
• However, the firm operates in a highly fragmented industry with low market share of 1.0%, even as the largest player. 

• Pharmaron’s share price plunged after the release of the estimate for 2022 interim results, even dragging down the entire CXO sector, which reflected the attitude of Mr Market.
• One important reason for low net profit growth is related to the development strategy – Even if Pharmaron achieves  “integration”, its advantage/profit margin could largely shrink due to overcapacity/fierce competition.  
• Pharmaron can only achieve V-shaped rebound by making breakthroughs in CGT CXO to boost valuations and expectations on outlook rather than pursue the strategy of “integration” as in the past.

• We believe Alibaba’s revenue growth rate will reach historical low in 1Q23, but it will recover two quarters later.
• Alibaba’s stock price fell from HK$300 in October 2020 to HK$100 today.
• We believe Alibaba has at least an upside of 43%.

• Onewo Space-Tech (OST) aims to raise around US$2bn in its Hong Kong IPO. OST is a property management service provider primarily owned by China Vanke Co Ltd (H) (2202 HK).
• As per Frost & Sullivan, amongst the residential community service providers in China, OST ranked first. It also ranked first in the commercial space integrated services market in China.
• In this note, we will talk about the positive aspects of the deal.

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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