Daily Brief China: Dongzheng Automotive Finance, CALB, Lepu Medical Technology A, Hong Kong Hang Seng Index, Xinyi Solar Holdings, Sino-Ocean Group and more

• Back on the 19 May, SAIC (600104 CH) acquired China Zhengtong Auto Services (1728 HK)‘s 71.04% stake in Dongzheng Automotive Finance (2718 HK) at a judicial auction. This triggered the mandatory Offer.
• SAIC confirmed a possible unconditional mandatory cash Offer for Dongzheng on the 26 May.
• The Composite Doc has now been dispatched. The Offer is open for tendering and closes on the 16 October

• CALB (CALBLZ CH), a leading EV battery manufacturer, is seeking to raise US$2.0 billion through an HKEx IPO, according to press reports.
• We previously discussed the IPO in CALB IPO: The Bull Case and CALB IPO: The Bear Case. This note updates our view for the PHIP and recent developments.
• The 1Q and truncated 1H numbers outline the highest growth among peers, customer diversification and sequential improvement in gross margin. The IPO is worth a look.

• Dongzheng Automotive Finance (2718 HK)‘s composite document is out with the offer open from 15 September to 6 October. The IFA considers the offer to be fair and reasonable.
• SAIC Motor (600104 CH), which acquired a 71.04% stake, has launched an unconditional MGO at HK$1.2430 per H Share. SAIC intends to maintain Dongzheng’s listing status.
• At the last close and the 17 October payment, the gross and annualised spread to the MGO price is 1.1% and 13.3%, respectively.

• Lepu Medical Technology A (300003 CH) is looking to raise up to US$550m in its Swiss GDR listing. Bookrunners on the deal are CICC, Citic Securities, and Credit Suisse.
• The firm has earlier secured CSRC’s approval to list a maximum 36.09m GDRs (or 180.46m A-shares, at a 1:5 conversion). 
• As per media reports, Lepu Medical will look to launch its Swiss GDR offering soon and the eventual deal size might amount to US$300m.

• CALB aims to raise around US$1.5bn in its Hong Kong IPO.
• CALB undertakes design, R&D, production and sales of EV batteries and Energy Storage Systems (ESS) products.
• In our previous note, we undertook a peer comparison. In this note, we will talk about valuations.

• HSI INDEX is trading back down to recent lows and support levels. It looks oversold and there are potential catalysts for a bounce
• Implied vols are low and options offer a great way to play a tactical long
• We highlight a relative value vol trade vs the SPX

• The main drivers for Hong Kong stock rallies are short covering, buybacks, and China government real estate support measures announcements.
• Hang Seng Index and most of its constituents continue to read like bear porn. Without a meaningful reversal/impulse rally, it is hard to call for a reversal.
• I hear and agree the case is so bad that it must be a buy signal. The sentiment is precious, BUT it needs a price action supporting the exhaustion thesis.

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.

• China SCE
• CIFI Holdings
• Fosun International
• Sino-Ocean Service
• Vedanta Resources