Daily Brief China: China Traditional Chinese Medicine, BYD, Prada S.P.A., Beijing Capital International Airport (BCIA), MDL Wholesale, New World Development, Saint Bella, China Oil And Gas and more

• What disappoints investors is that privatization progress is slower-than-expected. Since approval is in “advanced stage”, August update is eye-catching. Investors may need more patience with this type of SOE deal. 
• The key to the success of this privatization lies in whether CNPGC is willing to abide by its commitments. If yes, CNPGC will take all measures to solve the problems.
• According to our valuation calculation, even without this privatization, HK$3.5/share is fair for China TCM. Reasonable share price is above HK$5/share. Don’t forget, the privatization is still on the agenda.

• In July, BYD’s deliveries increased by 31% YoY and Tesla’s deliveries in mainland China increased by 47% YoY.
• Alibaba Taobao will soften its “refund only” rule, but Alibaba Hellobike raised its usage price.
• New Oriental revenue increased by 32% YoY and TAL revenue increased by 50% YoY in the May quarter.

• China ETF flows were steady for the week, however Southbound Connect flows were negative for the first time since February.
• Prada S.P.A. (1913 HK)  shares standout in the luxury brand sector as Miu Miu sales surged.  WuXi AppTec (2359 HK) slightly beat estimates but still have BioSecure Act overhang.
• Property development firms Hang Lung Properties (101 HK) and Wharf Holdings (4 HK) were hurt by poor results, while New Oriental Education & Techn (9901 HK) saw earnings miss estimates.

• Market’s muted response to the airport’s worse-than-expected 1H24 losses suggest investors are looking beyond.
• While non-aviation businesses will remain under pressure in the near-term, potential for earnings growth from fare hike could be significant and is not at all reflected at current valuation.
• Free cash flow turning positive in 2024 also open to door for restoring dividend payments, which will be another catalyst for stock re-rating. Risk reward payoff gets increasingly positive.   

• MDL Wholesale (WMHGCZ CH) is looking to raise about US$100m in its upcoming Hong Kong IPO. The deal will be run by UBS, CMS, CMBI, Deutsche Bank, BOCI, and China Galaxy.
• MDL Wholesale is a leading food and FMCG distribution solution provider in China, providing a broad range of customers and retailers with high-quality merchandise and convenient solutions
• Its solutions mainly include (i) food service and distribution, (ii) welfare and gifting, (iii) retailer distribution (comprising product sales to retailers and supply chain services) and (iv) merchandise wholesale. 

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.

• Adani Ports & Special Economic Zone
• Indika Energy
• New World Development
• Tata Steel Thailand

• Saint Bella, a premium postpartum care service provider, filed to go public in Hong Kong. UBS and CITIC Securities are leading the offering.
• Saint Bella operates ultra-premium postpartum centers in Asia, which are located at luxury hotels and detached villas. The company opened its first postpartum center in Hangzhou in 2017.
• With strong multi-brand strategy and asset-light business model, Saint Bella is uniquely positioned in premium segment under Saint Bella, Bella Isla and Baby Bella brands.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess China Oil & Gas’ ESG as “Adequate”, in line with the Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Adequate”.