Daily Brief China: Great Wall Motor, L’Occitane, Alibaba (ADR), Cainiao Smart Logistics, Chindata Group, China Jinmao Holdings and more

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• In response to media speculation, L’Occitane (973 HK) has clarified that Reinold Geiger, the Chairman and the largest shareholder, is contemplating a possible transaction through a voluntary general offer.
• However, the rumoured offer of HK$35 per share is false. Mr Geiger has confirmed that the potential offer price would be no less than HK$26.00 per share.
• The floor price of HK$26 is light and needs a bump (towards HK$30), particularly if Mr Geiger wants 95% of voting rights to exercise the right of compulsory acquisition (squeeze-out).

• Alibaba delivered a strong June quarter that beat consensus by a wide margin and across the board, showcasing an acceleration of recovery.
• The strong results were however clouded by China’s weak macro signals and investors’ lingering concern about China consumption of which Alibaba is commonly seen as a proxy.
• Alibaba trades at 9x our revised-up FY24 earnings. The most certain thing about Alibaba amidst all the uncertainties is it is getting cheaper and it is not a value trap.

• BABA reported CY2Q23 top-line and non-GAAP net profit 10% and in-line vs. our estimate, and 12% and 20% vs. consensus, respectively. Taobao/T-mall 3P, international retail, and DME beat our estimate.
• We suspect WeChat cooperation has been a main driver for increasing DAU of a cohort of previously untapped users. This also drove merchants to return to the platform.
• We maintain BUY and raise TP to US$ 120 to reflect (1) higher growth of Taobao/Tmall, and (2) improved profitability of most business groups.

• Within Alibaba (ADR) (BABA US)‘s June quarter results, the numbers from logistics arm Cainiao Smart Logistics (1437124D HK) stood out: revenue up 34% Y/Y, & EBITA turned to +ive
• In this insight we attempt to place Cainiao’s stellar results into context: it grew far faster than parent Alibaba’s revenue, but also faster than Chinese e-comm and Chinese express
• As Cainiao preps for its IPO, its June results should boost investors’ confidence. The numbers also hint at what is driving Cainiao’s recent performance, and which indicators to watch

• Back on the 7 June, Chindata Group (CD US) announced Bain Capital’s NBIO to buy all shares of the Chinese data center provider it does not already own for $8/ADS.
• On the 13 July, Chindata announced that China Merchants Capital has made an NBIO at $9.20/ADS.
• Now Chindata has entered into a definitive agreement with Chindata at US$8.60/ADS. Bain holds more than 2/3s of Chindata to vote this through. And there is no PRC regulator approval.

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.

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• China Jinmao Holdings
• Road King Infrastructure