Daily Brief China: Innovent Biologics Inc, Poly Culture Group Corp H, Meituan, Sun Hung Kai Properties, PDD Holdings , Tuhu Car, Hang Seng Index, Nongfu Spring , Pakuwon Jati, Shenzhen Mindray Bio-Medical Electronics and more

• Innovent Biologics Inc (1801 HK) (IB) aims to raise around US$313m for R&D and marketing.
• The company has undertaken a number of deals in the past, with the overall results being mixed.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• The pre-condition relating to Poly Culture Group Corp H (3636 HK)’s privatisation offer from Poly Group at HK$8.88 per H Share has been fulfilled. 
• The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). No independent H Shareholder holds a blocking stake.
• The offer’s 77.6% premium to the undisturbed price and no minimum acceptance condition will help completion. At the last close and for 1 November completion, the gross/annualised spread is 7.1%/64.3%.

• The street’s expectations for Meituan’s bottom line have gone too pessimistic for 2023 while in the meantime too optimistic for 2024 and beyond.
• Besides the macro weakness, we see the company’s growth increasingly be constrained by the business model itself, resulting in only 14% CAGR for bottom line over 2023-25 by our calculation.
• We take investors’ indifference to Meituan’s strong bottom line growth for 2023 as a signal they are discounting the sharp deceleration kicking in from 2024. Stay neutral.

• After announcing full year results, one investment bank revised down share price target excessively (we will look at reasons).  On Monday, HSBC also announced adjustment of mortgage rate cap
• These 2 events caused a sell-off in the property sector, SHKP, in particular, was down 10% and trading at HKD80 per share. We think it is overdone
• At this valuation, market is pricing in super bearish scenario.  At 0.38x P/B, I think it is a bargain to buy now.  It is a value trade.

• Grizzly Research’s track record, especially with accusations against well-known Chinese ADRs like NIO (NIO US), ZTO Express Cayman (ZTO US), and Gaotu Techedu (GOTU US), hasn’t been successful lately.
• Despite past setbacks, the company has recently targeted another renowned Chinese ADR, PDD Holdings (PDD US).
• Grizzly Research alleges that Pinduoduo’s shopping app, “TEMU,” is a harmful malware/spyware secretly extracting user data.

• We contacted drivers here in Shanghai and asked about their experience at Tuhu stores.
• Franchised stores are well positioned in the aftermarket and Tuhu is the largest store chain among them.
• However, Tuhu sets high standards for workshops, but average standards for mechanics.

• Our previous insight correctly predicted the current pullback for the Hang Seng Index (HSI), now let’s analyze MRM WEEKLY support prices, to identify when/where a bounce could begin.
• The 17835-17105 support price area is where the index should stop and bounce, however depending on the duration of the pullback the % correction could vary wildly.
• If the index is about to bounce, it should bounce this week or the next, if it falls >3 weeks down, it could enter a downward spiral towards 15707.

• The growth rate of total revenue accelerated to 23% YoY in 1H23 from 15% YoY in 2H22 and 9% YoY in 1H22.
• Tea revenue grew by 60% YoY in 1H23 as the company caught the fashion of sugar free.
• We believe the stock has an upside of 41% for yearend 2024.

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.

• Pakuwon Jati
• Pertamina Geothermal Energy PT
• Sunny Optical Technology Group

• Mindray’s 23H1 results were in line with expectations. The high growth in Q2 has given us more confidence in the “complementarity of performance” between different business lines of the company.
• Mindray is right to acquire DiaSys,but Mindray should disclose the impact of M&A on financial statements.When investors understand how to “quantify” M&As, positive news would be reflected in stock price.
• The anti-corruption campaign and foreign capital outflows have weighed on Mindray’s share prices. Based on our analysis, the decline offers a good buying opportunity and share price will rebound afterwards.