Daily Brief China: Alibaba Group Holding , Dream International, Huawei Technology, Hygeia Healthcare Group, Wynn Macau Ltd, Hang Seng Index and more

• While Alibaba (ADR) (BABA US)‘s 2Q24 revenue and OP closely matched consensus expectations, the company experienced a significant sell-off, resulting in shares plummeting by over 9% yesterday.
• Yesterday’s weak performance may be linked to a 10% pre-earnings price surge, anticipating robust results. The postponement of the Cloud Spin-off could also have contributed to the decline.
• We maintain a bearish stance on Alibaba Group Holding (9988 HK) as we identify other fundamental and structural downside catalysts might become increasingly important and price-sensitive as time progresses.

• Based in Hong Kong, Dream International is one of the largest toy manufacturers in the world. It specializes on plush stuffed toys and plastic figures. 
• Despite the global toys markets going into destocking cycle, the company has generated significant growth in operating profit in the past year driven by strong demand for plush stuffed toys.
• If we assume a moderate 20% YoY increase in dividends in 2023, this would imply DPS of HKD 0.48 and this would suggest a dividend yield of 12.7% current prices. 

• Huawei Technologies Co. Ltd. on Thursday began taking preorders for the first electric vehicle (EV) it co-developed with auto partner Chery Automobile Co. Ltd., upping the ante in its push into China’s highly competitive EV market.
• Equipped with a digital cockpit powered by Huawei’s HarmonyOS 4.0 and an advanced assisted driving system, the Luxeed S7 is the first electric sedan marketed under Huawei’s Smart Selection business model. The previous releases with other auto partners were SUVs.
• The Luxeed S7 is available for pre-order in four versions with a starting price of 258,000 yuan ($35,417), according to Huawei’s Vmall website.

• In 1H23, Hygeia Healthcare Group (6078 HK) reported revenue growth of 15% YoY to RMB1,760 million, mainly driven by a 16% YoY growth in hospital business.
• Hygeia’s gross profit margin contracted 20bps YoY to 32.4%. Riding on 5.6x increase in government grant, operating profit jumped 33% YoY to RMB420M, leading to 320bps margin expansion to 23.9%.
• In July, Hygeia acquired Chang’an Hospital for RMB1,660 million. The acquisition will provide Hygeia with greater room to expand its business in the northwest region of the PRC.  

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1. SJM Holdings
2. Melco Resorts & Entertainment
3. Lenovo
4. Longfor Properties
5. Tata Motors Ltd

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