In today’s briefing:
- Huafa Props (982 HK): A Quick Word On Voting
- Alibaba Group (9988-HK): Positive Technical Analysis Signals
- Pinduoduo: Anticipating Slower Growth And Potential Profit Dip
- Monthly Chinese Tourism Tracker | Outbound Activity Approaches Pre-Covid Levels | (August 2024)
- [Pinduoduo (PDD US, BUY, TP US$160) TP Change]: Investment Means Continued High Growth
- [Trip.com (TCOM US, BUY, TP US$50) Rating Change]: Beyond the Difficult Time…Upgrade to BUY
- MT / Meituan (3690 HK): 2Q24, Three-Digit Profit Growth After Three-Year Stock Plunge, Buy
- PDD Holdings (PDD US) : Could U.S. Elections Impact Temu’s Dominance?
- Xinhua Winshare (811 HK): Unmatched Strengths
- Geely Auto Raises Export Target After 67% Growth in First Half of Year
Huafa Props (982 HK): A Quick Word On Voting
- Huafa Property (982 HK) shareholders overwhelmingly approved (99.52% [of shares present and/or via proxy] FOR; 0.48% AGAINST) the Scheme yesterday. This part was expected. The headcount test was less certain.
- The final headcount tally, on a look-through basis into HKSCC Nominees by CCASS Participants, was 111 FOR, 14 AGAINST. Again, a pretty clear pass.
- Normally a Scheme Vote, if approved, wouldn’t warrant a full note. But when the headcount test is involved, it is worthwhile understanding the mechanics.
Alibaba Group (9988-HK): Positive Technical Analysis Signals
- Despite a negative share price reaction following its 1Q2025 earnings report, Alibaba Group Holding (9988 HK) seems to have entered an earnings upgrade cycle due to improved profitability expectations.
- Despite recent share price pressure, due to negative industry readthroughs from peers, Alibaba Group’s near-term momentum indicators are displaying bullish signals.
- Alibaba Group trades at more than one standard deviation below its 5-year historic average forward PE ratio, and near the lowest level it has ever been.
Pinduoduo: Anticipating Slower Growth And Potential Profit Dip
- PDD Holdings (PDD US) shares fell 28% on Monday after a 3% revenue miss, with shares dropping an additional 4% yesterday.
- The results themselves weren’t bad enough to justify such a sharp price reaction.
- However, management’s comments on slower growth and a potential drop in profits triggered a significant sell-off.
Monthly Chinese Tourism Tracker | Outbound Activity Approaches Pre-Covid Levels | (August 2024)
- July outbound travel (and seat capacity) fnally approached pre-Covid19 levels
- Domestic air travel demand also showed modest Y/Y improvement in July
- We still like Trip.com on improving profitability, BUY with US$55 target
[Pinduoduo (PDD US, BUY, TP US$160) TP Change]: Investment Means Continued High Growth
- PDD reported C2Q24 top line, non-GAAP operating income and GAAP net income (3.9%), (1.2%) and (4.4%) below our estimates, and (2.9%), 12% and 16% above consensus.
- We believe PDD’s upgrade in its ecosystem and infrastructure is long overdue. Such investment would support its growth, especially in overseas.
- Trading at 6.4x 2025 PE, we believe PDD is undervalued. We reiterate BUY and place it as TOP PICK of China’s e-commerce sector.
[Trip.com (TCOM US, BUY, TP US$50) Rating Change]: Beyond the Difficult Time…Upgrade to BUY
- TCOM reported C2Q24 revenue in-line with our est./cons., non-GAAP operating income also in-line with our est./cons., and non-GAAP net income beat our est./cons. by 18%/40%,mainly due to rising equity income
- Robust int’l growth offset weakness in domestic. With services possibly included in the government consume subsidy in C2H24/1H25 and Rmb’s appreciation.
- We feel it is time to buy TCOM again, TP to US$50 from US$42.
MT / Meituan (3690 HK): 2Q24, Three-Digit Profit Growth After Three-Year Stock Plunge, Buy
- The stock has declined for three years and a half, from HK$460 to HK$100.
- Revenue grew by 21% YoY and the operating margin improved significantly in 2Q24.
- We conclude the stock has an upside of 131% and a price target of HK$237. Buy.
PDD Holdings (PDD US) : Could U.S. Elections Impact Temu’s Dominance?
- The “non-business factors” mentioned in PDD Holdings (PDD US) ‘s earnings call likely refer to potential political and policy risks in the U.S. due to the upcoming presidential elections.
- Temu, PDD Holdings’ global online shopping platform, has become the most downloaded shopping app in the U.S., significantly disrupting the local retail market.
- PDD’s rapid and disruptive growth has already led to litigation in the US, and political pressure could increase if Donald Trump wins the presidential election.
Xinhua Winshare (811 HK): Unmatched Strengths
- Xinhua Winshare (811 HK)‘s 4.4% YoY decline in recurring profit in 1H24 is due to a 6.6x increase in taxation. Its pre-tax profit has still increased 5.8%.
- We expect XW to maintain its textbook franchise and overall gross margin to stay stable. Growth in general book publication and distribution will supplement the textbook business.
- Net cash equals 70% of the share price, while its listed equity investments had appreciated 3.6x. It stands on a 5% dividend yield but this is a potential upside.
Geely Auto Raises Export Target After 67% Growth in First Half of Year
- Geely Automobile Holdings Ltd announced that it is to raise its 2024 export target to 380,000 units from 330,000 units, after reporting a 67% year-on-year growth in vehicle exports in the first half of this year.
- Gan Jiayue, Geely Auto Group’s CEO, highlighted the company’s impressive export performance, saying it was driven by aggressive expansion into emerging markets such as Africa, where sales surged over 400%.
- There had also been significant growth in Central Asia, Mexico and other regions such as the Middle East, Eastern Europe and Southeast Asia, with Geely targeting further expansion in these markets, Gan said.
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