Daily Brief China: Alibaba Group, Hangzhou Great Star Industrial Co.,, Shanghai Pharmaceuticals Holding, Beijing Sinohytec Co Ltd, Tencent, Medco Energi and more

• We believe the revenue growth will recover from zero in 1Q23 to 4% YoY in 2Q23.
• We believe the operating margin will improve in the following two years because the company is cutting unprofitable businesses.
• We set an upside of 43% according to other retailing giants’ price / sales ratios.

• Hangzhou Great Star Industrial Co., (002444 CH) is looking to raise around US$150m in its Swiss GDR listing. Huatai is the sole bookrunner in the deal. 
• The firm is offering 11.5m GDRs (1 GDR to 5 A-shares) for sale at a 16.1-18.7% discount to last close.
• The deal would represent just 2.3 days of three month ADV and 4.3% of the firm’s current mcap.

• Shanghai Pharmaceuticals Holding (2607 HK) reported strong result for the first nine months of 2022, with revenue increasing 8.5% to RMB174.6B. Notably, total revenue growth accelerated to 13% in 3Q22.
• With a leading market positioning and nation-wide distribution network, the company is well-positioned to benefit from the sector tailwinds. Easing of restrictions will provide a major impetus to the company.
• The company has been improving its innovative drug pipeline. It has 42 innovative products in its pipeline, six of which are in pivotal studies.

• Beijing Sinohytec Co Ltd (688339 CH) (BSH) is looking to raise up to US$400m via its H-shares listing.
• BSH provides fuel cell systems in China, focusing on the design, development and manufacture of fuel cell systems and stacks mainly for commercial vehicles, such as buses and trucks.
• In this note, we talk about the company’s past performance and other deal dynamics.

• We believe Tencent’s revenue will stop declining in 3Q22 and bounce back thereafter.
• We believe FinTech will grow fast, but online game will still be stagnant.
• We expect Tencent will have an upside of 67% for year end 2023.

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.

• Central China Securities
• China Fortune Land
• Country Garden Holdings Co
• Kawasan Industri Jababeka
• Longfor Properties
• Medco Energi

• The majority revenue of Shanghai Pharmaceuticals comes from pharmaceutical distribution business, but the pharmaceutical manufacturing business has much higher gross margin,which drives up the overall profit margin of the Company.
• Due to VBP, profit margin is under pressure. Weak demand for COVID-19 vaccines, decreasing long-term profitability and concerns on synergistic effect of cooperation with Yunnan Baiyao cast doubt on outlook.
• Compared with peers, the valuation of Shanghai Pharmaceuticals doesn’t show decent upside potential. High valuation expectations cannot be supported due to industry trend. Its share prices could underperform.