In today’s briefing:
- Huitongda Lock-Up – US$1.1bn Pre-IPO Lock-Up Expiry. China-Based Funds at Least 40% Up
- Yashili (1230 HK): Pre-Condition Finally to Be Satisfied?
- Taste Gourmet: Encouraging 3Q 2023, Super Set Up for Q4.
- [Meituan (3690 HK) Downgrade to SELL]: The Rise of Douyin Is Likely to Hurt Meituan
- Meituan to Hire 10k Employees to Compete with Douyin’s Food Delivery Business
- Hong Kong CEO & Director Dealings (13 Feb): Koolearn, China Gas, MOG, Hua Yin, China Environmental
- UBTech Robotics Hong Kong IPO: Capital Dried Up as Fundamentals Deteriorated
- China Comm Const (1800 HK): Securing Stronger Backlog to Fuel Growth
- [Weibo (WB US) Target Price Change]: Rebound After Temporary Disturbance, Maintain BUY
- [Li Auto (LI US, BUY, TP US$40) Earnings Preview]: Riding Intact Model Cycle in 2023
Huitongda Lock-Up – US$1.1bn Pre-IPO Lock-Up Expiry. China-Based Funds at Least 40% Up
- Huitongda (9878 HK) was listed on 18th Feb 2023, when it raised US$285m in its HK IPO. Its one-year lockup will expire on 17th February 2023.
- Huitongda (HTD) is a commerce and service platform serving businesses in the lower-tier retail markets of China.
- Coming up for one-year lockup expiry are HTD’s pre-IPO investors. With the exception of Alibaba and SOE backers, the bulk of HTD’s pre-IPO investors are still currently in the money.
Yashili (1230 HK): Pre-Condition Finally to Be Satisfied?
- Yashili International Holdings (1230 HK) latest monthly update notes that Dumex Key Condition 2 is satisfied paving the way towards completing the Dumex China Disposal.
- The completion of the remaining pre-condition, the 25% Yashili acquisition, depends on the completion of the Dumex China Disposal, which now looks imminent.
- We think the pre-condition will be satisfied by the end of February and the scheme document will be despatched by early April. At the last close, the spread is 6.2%.
Taste Gourmet: Encouraging 3Q 2023, Super Set Up for Q4.
- Earnings for Q3 2023 came in at 17.5 mn HKD up 5% YoY, about 15% below our expectations due to closure costs incurred on some restaurants in November.
- The company added four restaurants in December 2022 which should result in strong revenue growth in January 2023. We expect monthly revenue to surpass HKD 80 mn.
- Post the recent rally, the stock trades at 8.2x/5.2x FY23e/24e, with a 7.3%/11.5% FY23e/24e dividend yield assuming a 60% payout. We see this as an extremely cheap HK recovery play.
[Meituan (3690 HK) Downgrade to SELL]: The Rise of Douyin Is Likely to Hurt Meituan
- We expect Meituan to report 18% YoY topline growth in C4Q22, in line with cons. Our non-IFRS net margin est. is 1.9ppt higher than cons.
- In-Store would be impacted by Douyin’s category expansion and deepening penetration in lower-tier cities.
- We downgrade Meituan to SELL and cut TP to HK$137 due to pressure from competition for in-store.
Meituan to Hire 10k Employees to Compete with Douyin’s Food Delivery Business
- On Tuesday last week, short-video app Douyin announced that it plans to offer its food delivery service in more Chinese cities expanding its current trial in Beijing, Chengdu and Shanghai.
- Following this, on Wednesday last week, Meituan announced that it plans to recruit 10,000 workers in 1Q2023 across a number of its business divisions including technology development and customer services.
- Though we don’t expect Douyin’s entry into food delivery to have large impact, increased competitive pressure and headcount increase would drag down Meituan’s profitability in the near-term.
Hong Kong CEO & Director Dealings (13 Feb): Koolearn, China Gas, MOG, Hua Yin, China Environmental
- The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
- Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
- Stocks mentioned include Koolearn (1797 HK), China Gas Holdings (384 HK), MOG Holdings (1942 HK), Hua Yin International Holdings (989 HK), China Environmental Technology (646 HK).
UBTech Robotics Hong Kong IPO: Capital Dried Up as Fundamentals Deteriorated
- UBTech Robotics, a leader in AI-powered robotics in China, filed for a Hong Kong IPO with Guotai Junan Capital leading the offering. The company plans to sell H-shares to investors.
- UBTech Robotics mulled IPO in 2019, but the company postponed domestic listing in China. In May 2018, UBTech Robotics closed an $820M Series C round at a $5B post-money valuation.
- Despite challenges, we remain bullish on China’s AI industry and consumer robotics market. However, UBTech’s fundamentals deteriorated, capital dried up, and IPO looks risky today.
China Comm Const (1800 HK): Securing Stronger Backlog to Fuel Growth
- There is a sharp escalation in business momentum of China Communications Construction (1800 HK) in 4Q22, with value of new contracts signed surged 95.3% YoY to Rmb510bn.
- New contract growth reached 21.6% in FY22, ahead of its target of 11.8%. We estimate its end-FY22 backlog at Rmb3.6trn, which is enough to cover 5x its FY22 revenue.
- Local governments’ special purpose bond quota may increase by 4-10% in FY23F, boosting CCCC’s contract outlook. At 2x PER, 0.2x P/B and 7.6% dividend yield, CCCC stays attractive.
[Weibo (WB US) Target Price Change]: Rebound After Temporary Disturbance, Maintain BUY
- We estimate that Weibo’s top line/bottom line would be 1.3%/9.0% vs cons., as the continuous cost-saving measures offset the impacts of temporary disturbance caused by reopening.
- We remain optimistic about Weibo’s rebound in 1H23 as the macro improves, with top line/bottom line beating cons. by 2.2%/5.5% in 2023.
- Reiterate BUY rating and raise TP to US$ 26.9, implying 11.7X PE in 2023.
[Li Auto (LI US, BUY, TP US$40) Earnings Preview]: Riding Intact Model Cycle in 2023
- We expect Li Auto to report 4Q22 top line of RMB 17.5bn, in line with consensus, and recovered GPM of 21.8%, vs 12.7% in Q3.
- We reiterate Li Auto as our top pick, because of 1) positive growth outlook in 2023 driven by strong model cycle (L9/L8/L7);
- 2) margin upside in 2023 driven by improved product mix, sharing of auto parts among its product line up, and expanded scale economy; 3) less impacted by Tesla’s price war.
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