In today’s briefing:
- China Traditional Chinese Medicine (570 HK): Relief as Update Favours the Bulls
- TCM (570 HK): A Spoonful Of Sugar …
- Alibaba (9988 HK/BABA): 1Q25, Growth Lower Than Expectation, But Many Expansion Plans Following
- Midea Group (000333 CH): Index Implications at US$3bn Issue Size
- [KE Holdings Inc. (BEKE US, BUY, TP US$24) TP Change]: Market Share Gain Is the Main Catalyst
- Jiangsu Zenergy Battery Technologies Pre-IPO Tearsheet
China Traditional Chinese Medicine (570 HK): Relief as Update Favours the Bulls
- China Traditional Chinese Medicine (570 HK)’s monthly update reinforces the bull case. The gross spread has remained uncomfortably high since falling on no news on 26 June.
- The monthly update will relieve the bulls, as the consortium has finally made the regulatory submissions. The update stresses that the filing delay is due to an unwieldy consortium.
- Potential stumbling blocks remain, which should not be an issue. Nevertheless, the risk (17.7% downside to the undisturbed price)/reward (21.4% gross spread) remains attractive.
TCM (570 HK): A Spoonful Of Sugar …
- A 14.8% gain month-to-date, including this past Monday’s 6.5% pop – you just knew something positive was taking place behind closed doors. And leaking its way into the public.
- So it was no real surprise to read in the latest monthly update announcement on the HKEx that various regulatory approvals are almost, but not quite, satisfied.
- The wording in the announcement strikes a positive tone. Even remaining conservative on the timeline, this could be wrapped up before year-end.
Alibaba (9988 HK/BABA): 1Q25, Growth Lower Than Expectation, But Many Expansion Plans Following
- Alibaba’s revenue grew by 4% YoY in 1Q25 due to the stagnancy in e-commerce.
- However, many expansion plans follow, including overseas market, physical stores, and fresh food wholesale.
- We set an upside of 51% and a price target of HK$115 for March 2025.
Midea Group (000333 CH): Index Implications at US$3bn Issue Size
- Midea Group Co Ltd A (000333 CH) has got approval to list on the HKEX (388 HK) and reports are that the listing could be up to US$3bn.
- That issue size is around half of the maximum that the company can issue. But it would still need cornerstone investors and a nice discount on the H-shares.
- The stock will still get included in some indices even with the scaled down size, and inclusion in Southbound Stock Connect is a given.
[KE Holdings Inc. (BEKE US, BUY, TP US$24) TP Change]: Market Share Gain Is the Main Catalyst
- KE Holdings (BEKE) reported C2Q24 revenue 12%/9% higher than our estimates/consensus, and non-GAAP NI 19%/49% higher than our estimates/consensus, due to market share gain and take rate hike.
- We particularly like its business scalability, as its agent efficiency kept stable despite growing connected agents.
- We maintain the stock as BUY rating and raise TP to US$24 to reflect the better growth outlook from market share gains.
Jiangsu Zenergy Battery Technologies Pre-IPO Tearsheet
- Jiangsu Zenergy Battery Technologies (JSZENERGY CH) is looking to raise up to US$300m in its upcoming HK IPO. The deal will be run by CICC, and CMB International.
- Jiangsu Zenergy Battery Technologies (Zenergy from hereon) is an EV and energy storage system (ESS) battery manufacturer in China.
- It provides integrated battery solutions, encompassing battery cells, modules, packs, racks, and battery management systems dedicated to large-scale applications of electrochemical products to interconnect omni-scenarios of land, sea and air.
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