In today’s briefing:
- CSI300 Index Rebalance Preview: 14 Potential Changes in December
- JF Wealth Lock-Up – At Least US$465m to Be Unlocked, Needs Some Selling to Improve Its Liquidity
- Modern Dental Group (3600 HK): Stellar 1H23 Result- Volume Drives Revenue Growth; Net Profit Doubled
- Budweiser APAC: Chinese Beer Makers Poised for a Breakout
- [Luckin Coffee (LKNCY US, BUY, TP US$44) TP Change]: Moutai Latte Is Not Just a Blockbuster
- APAC Insurers Series (#3): Initial Theses At Different Stages of Being Played Out
- Pre-IPO Xiamen Yan Palace Bioengineering – Concerns About Profitability and Growth Sustainability
CSI300 Index Rebalance Preview: 14 Potential Changes in December
- Over 85% of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
- We estimate a one-way turnover of 1.93% at the December rebalance leading to a one-way trade of CNY 6.93bn.
- The huge inflow to passive trackers has led to the gap between the potential adds and deletes narrowing. That should reverse as passive will need to sell the deletes.
JF Wealth Lock-Up – At Least US$465m to Be Unlocked, Needs Some Selling to Improve Its Liquidity
- JF Wealth Holdings (9636 HK) was listed on 10th March 2023, its one-year lockup will expire on 9th Sept 2023.
- The firm had raised around US$129m in its Hong Kong IPO, at the bottom end of its indicative price range.
- JF Wealth (JFW) is an online investment decision-making solution provider in China, focusing on the online investor content services market.
Modern Dental Group (3600 HK): Stellar 1H23 Result- Volume Drives Revenue Growth; Net Profit Doubled
- Modern Dental Group (3600 HK) reported strong 1H23 performance, with 12% YoY revenue growth to HK$1.6B, driven by increase in demand for its products from existing, returning, and new customers.
- With increasing economies of scale resulting from China re-opening and global dental industry recovery and increase in the proportion of digital solution cases, net profit jumped 109% YoY to HK$210M.
- Despite macroeconomic headwinds, the company is confident that the medium and long-term global demand for dental prosthetics is expected to continue due to key irreversible demographic factors and trends.
Budweiser APAC: Chinese Beer Makers Poised for a Breakout
- With shares trading near its all-time low since its listing on HKEX in 3Q19, we think it could be worthwhile taking another look at Budweiser Brewing APAC (1876 HK)’s valuation.
- China’s beer industry and regional markets are expected to sustain growth momentum in Q3, driven by tourism’s impact on increased beer consumption.
- We think it’s worth keeping an eye on Budweiser APAC, as we suspect that it could start to break out from the current downtrend in the near term.
[Luckin Coffee (LKNCY US, BUY, TP US$44) TP Change]: Moutai Latte Is Not Just a Blockbuster
- Luckin Coffee’s new blockbuster Moutai Latte achieved 5.42mn cup sold with RMB100mn GMV in first day.
- We think Luckin Coffee had effectively achieved two goals through the new premium product: 1) de facto price lifting; 2) extend potential customer base and step into the monetization stage.
- We raised our 2023 revenue and non-GAAP NI on Luckin by 1.6%/4.4%. We maintain the stock as BUY rating and raise TP by US$1 to US$44/ADS.
APAC Insurers Series (#3): Initial Theses At Different Stages of Being Played Out
- PICC P&C’s thesis has materialized and played out well this year, with the stock being HK’s best-performing Chinese insurer.
- Samsung Life’s share price recovered slightly since our last update as LT Korean government bond yields further increased.
- Prudential’s thesis is slowly being played out, with its P/BV discount to AIA having narrowed; but still a long way to go.
Pre-IPO Xiamen Yan Palace Bioengineering – Concerns About Profitability and Growth Sustainability
- Although Yan Palace prioritizes R&D capabilities in prospectus, its revenue growth and business model are mainly relied on large investment in marketing/promotion.The root cause is the efficacy problem of EBN.
- Whether Yan Palace’s future performance growth can be sustained is a question mark if marketing/promotion cannot drive growth anymore. Net profit margin is low. EBN is not a profitable business.
- Yan Palace’s products do not have core competitiveness or high moat. Compliance risks are also worth being vigilant about. The valuation of Yan Palace should be lower than Giant Biogene.
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