Daily Brief China: Alibaba Group, Tencent, CIMC Enric Holdings, Greentown China, Jafron Biomedical Co Ltd and more

• Friday in US time, the China Securities Regulatory Commission (CSRC), China’s MOF, and the US Public Company Accounting Oversight Board (PCAOB) “agreed” on a Statement of Protocol.
• This SoP sets the outlines for PCAOB access to inspect/investigate audit papers and accounting firms in China and HK for companies listed in the US.
• The releases’ difference in language is to be expected – different constituencies – but as PCAOB Chair Williams said, “Now we will find out whether those promises hold up.”

• New title approvals halved during 2021, yet overall industry games revenue grew by 3.4%y/y. 1H22 new games approvals are down a further 82%y/y, yet games revenue is down 1.8%.
• Tencent has lost revenue market share to the overall Chinese online game software market, most notably to NetEase, this year.
• Tencent’s paying gamer participation rate has dropped to levels last seen during 2018.

• We see the positive share price reaction of CIMC Enric Holdings (3899 HK) after posting a 34.5% 1H22 core profit growth not yet enough to reflect its encouraging earnings outlook.
• Good order backlog, recovery at clean energy and increase in liquid food demand will add to the strength at chemical and environment segment as CIMC Enric’s drivers.
• Hydrogen energy business made impressive contribution growth and it should benefit from local governments’ hydrogen initiatives. The stock’s high PERs are just reflection of huge long-term potential. 

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.

• Greentown China
• Meituan

• The centralized procurement of hemoperfusion cartridge is the major risk. This is why capital market is divided over the logic of long-term growth when performance continued to grow in 2022H1. 
• Jafron is not without chances to get out of a passive situation. Either business diversification or internationalization would help re-establish the investment logic and improve the outlook.
• The valuation of Jafron Biomedical Co Ltd (300529 CH)has entered the “hitting zone”. After continuous correction, there could be some rebound, like 10%-20% upside potential. Short term trade is recommended.