In today’s briefing:
- Quiddity Leaderboard STAR 50 Dec 23: The Real Deal
- WuXi XDC Cayman Pre-IPO – The Negatives – Bottlenecks Have Held Margins Back. Receivables Ballooning
- Chongqing Brewery (600132 CH) Limit Up 10% Today After Results Beat; Buy China Resources Beer
- JD Health 1H2023: Reports Operating Profits; Margin Upside Is Very Limited
- Jindong (JD US): We Would Stay on the Sideline
- Quiddity Leaderboard CSI 300/500 Dec 23: US$2.5bn One-Way Turnover; Some Changes to Expectations
- State Investors to Inject $1.7 Billion in Shenzhen Wafer Foundry
- Bilibili (9626): 2Q23, Cut Losses and Raised Growth, Upgrade to Buy
- [Tencent (700 HK, BUY, TP HK$402) TP Change]: Cut TP to HK$ 402 to Reflect Weakness in Gaming
- JD (9618 HK): 2Q23, Main Business Began to Recover, Buy
Quiddity Leaderboard STAR 50 Dec 23: The Real Deal
- STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
- Recently, I discussed the historical price and volume performance of STAR 50 rebalance events in Quiddity Primer for STAR 50 Index Rebalance Events.
- In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the December 2023 Rebalance event.
WuXi XDC Cayman Pre-IPO – The Negatives – Bottlenecks Have Held Margins Back. Receivables Ballooning
- WuXi XDC Cayman Inc (1877628D HK) is looking to raise at least US$100m in its upcoming Hong Kong IPO.
- WuXi XDC Cayman (WXDC) is a CRDMO focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
- In this note, we will talk about the not-so-positive aspects of the deal.
Chongqing Brewery (600132 CH) Limit Up 10% Today After Results Beat; Buy China Resources Beer
- Chongqing Brewery Co A (600132 CH) announced a impressive earnings beat last night, with net profit up 24% yoy in 2Q23. Stock is limit up (10%) today.
- The results confirm the premiumization thesis of the China beer sector is in tact.
- Buy China Resources Beer Holdings (291 HK); take advantage of the overall H-share market weakness and unfounded fear on deflation.
JD Health 1H2023: Reports Operating Profits; Margin Upside Is Very Limited
- JD Health reported 1H2023 results yesterday. 1H revenue increased 34.0% YoY to RMB27.1bn (vs consensus RMB27.5bn) and reported an OP of RMB943.9m (vs consensus RMB753.2m) vs RMB60.1m in 1H2022.
- Though the company made OPM of 5.7% in 1Q2023, 1H2023 OPM was 3.5% in line with our analysis that OPM in excess of 2-3% may not be possible in LT.
- There is very little upside for GPM to improve unless the company’s high-margin service business takes off at a higher rate which seems unrealistic to us.
Jindong (JD US): We Would Stay on the Sideline
- JD reported 2Q results that were slightly better than the street expected.
- But the set of results did little to alleviate our concerns about the structural challenges JD need to combat.
- We still don’t think JD represents a viable investment case due to its lack of growth catalysts (vs. PDD) and attractive valuation (vs. Alibaba). We would stay on the sideline.
Quiddity Leaderboard CSI 300/500 Dec 23: US$2.5bn One-Way Turnover; Some Changes to Expectations
- CSI 300 represents the 300 largest stocks by market capitalization and liquidity from the entire universe of Shanghai and Shenzhen Stock Exchanges. CSI 500 represents the next largest 500 names.
- In this insight, we take a look at the potential ADDs/DELs for the CSI 300 and CSI 500 rebalance in December 2023.
- I currently expect 14 ADDs/DELs for CSI 300 and 50 ADDs/DELs for CSI 500.
State Investors to Inject $1.7 Billion in Shenzhen Wafer Foundry
State investors including China’s biggest government-backed chip investment fund agreed to pour 12.6 billion yuan ($1.7 billion) into a wafer production project in Shenzhen as the country strives to boost its domestic chipmaking capacity.
Shanghai-listed China Resources Microelectronics Ltd. (CR Micro) said in an exchange filing Tuesday that its board has approved a plan for its Shenzhen subsidiary Runpeng Semiconductors to sell shares to several investors.
The deal, still pending approval by shareholders, will expand Runpeng’s registered capital from 2.4 billion yuan to 15 billion yuan, with a capital injection from the National Integrated Circuit Industry Investment Fund Co. Ltd., known as the “Big Fund,” and four other government-backed investment funds.
Bilibili (9626): 2Q23, Cut Losses and Raised Growth, Upgrade to Buy
- The growth rate of advertising revenue rose to 36% YoY in 2Q23 from 22% YoY in 1Q23.
- Bilibili continued to cut costs and expenses by dismissing employees in a game studio.
- The share price has fallen enough, and we believe it is time to Buy.
[Tencent (700 HK, BUY, TP HK$402) TP Change]: Cut TP to HK$ 402 to Reflect Weakness in Gaming
- Tencent reported 2Q23 revenue/non-IFRS net income (2.5%)/2.3% vs cons. Gaming was weaker than the street expected, while online advertising beat.
- We expect gaming growth will improve slightly while advertising growth will decelerate in 3Q.
- We maintain BUY but cut TP to HK$ 402 to reflect online gaming weakness.
JD (9618 HK): 2Q23, Main Business Began to Recover, Buy
- The main business line, home appliance began to grow by two digits.
- Logistics revenue continued to grow strongly by 51% YoY and can still break even.
- The operating profit rose to RMB7.3 bn in 2Q23 versus RMB3.8 bn in 2Q22.
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