In today’s briefing:
- 2024 High Conviction: China Tourism Group (601888 CH, BUY, TP:CNY106): See the Forest for the Trees
- [Meituan (3690 HK, BUY, TP HK$118) TP Change]: Deeply Cultivate Domestic While Wait for Overseas
- Asian Dividend Gems: Fufeng
- China Healthcare Weekly (Dec.1) – Medical Device VBP, Biotech to Breakeven Soon, Orient Gene Biotech
- [Bilibili Inc. (BILI US, SELL, TP US$9) Target Price Change]: Niche Player Faces Market Saturation
2024 High Conviction: China Tourism Group (601888 CH, BUY, TP:CNY106): See the Forest for the Trees
- China stock market despair has brought down China Tourism Group Duty Free Corp Ltd (601888 CH) to its lowest forward valuation in the past ten years
- Poised for long-term growth, Chinese are buying albeit more prudently, government supportive on promoting domestic consumption, efficiency enhancements will lower cost and boost margins
- Using the company’s lowest recorded PE ratio in the past 10 years of 23.2x into FY24, we derive a target price of CNY106 (+21% UPSIDE)
[Meituan (3690 HK, BUY, TP HK$118) TP Change]: Deeply Cultivate Domestic While Wait for Overseas
- Meituan reported C3Q23 top line (1.0%)/0.6% vs. our estimate/consensus, non-GAAP net income (9.7%)/8.3% vs our estimate/consensus. Subsidies and investment in in-store business is the main reason for bottom-line miss.
- Meituan in-store GTV increased 90% YoY in 3Q23, effectively counteracted Douyin’s attack and maintained size ratio at 3:1 vs. Douyin in-store, which scarified profit.
- Meituan OPM lowered 2.5ppt QoQ to 4.4% in 3Q23, and we expect it decline to 2.4% in 4Q23.
Asian Dividend Gems: Fufeng
- Fufeng (546 HK)’s core businesses include food additives such as MSG, animal nutrition, high-end amino acids, and colloid such as xanthan gum.
- Xantham gum is increasingly becoming popular as millions of people around the world purchase gluten free foods.
- Fufeng’s dividend yield averaged 7.5% annually from 2018 to 2022. Its current dividend yield is about 11-12%. Fufeng is trading at P/E of 2.9x and EV/EBITDA of 1.8x in 2024.
China Healthcare Weekly (Dec.1) – Medical Device VBP, Biotech to Breakeven Soon, Orient Gene Biotech
- The national centralized procurement of high-value medical consumables for intraocular lens (IOL) and medical consumables related to sports medicine released results, with lower than expected price reductions.
- Despite anti-corruption campaign, the business/profit model validation process of Chinese Biotech has not slowed down. There’s a chance to see Chinese Biotech turn losses into profits in 2024-2025.
- Zhejiang Orient Gene Biotech (688298 CH) once brought considerable returns to investors, but now the beautiful story is over.After deletion from CSI Medical Service Index, share price could remain weak.
[Bilibili Inc. (BILI US, SELL, TP US$9) Target Price Change]: Niche Player Faces Market Saturation
- Bilibili reported C3Q23 revenue, operating profit, and GAAP net income inline, 4.37%, (21.6%) vs. consensus. The miss was primarily due to ineffective investment in game studio and related costs.
- We are bearish on BILI’s game pipeline as ACGN is already a crowded market with well-entrenched competitors
- We maintain our SELL rating and cut the TP from US$ 12.3 to US$ 9.04, and consider that it is unlikely for them to breakeven in 2024
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