In today’s briefing:
- CSI500 Index Rebalance Preview: Potential Adds Starting to Close the Gap
- Zeekr Pre-IPO – The Negatives – Remains Highly Dependent on Geely
- Livzon Reloads Diagnostic Spin-Off
- Haier Smart Home (6690 HK): Stays Smart
- Keymed Biosciences (2162.HK) – Looking Forward to the Next Leap in Valuation
CSI500 Index Rebalance Preview: Potential Adds Starting to Close the Gap
- With the review period for the December rebalance of the CSI500 Index complete, we forecast 50 changes (the maximum permitted) for the index at the close on 8 December.
- Estimated one-way turnover is 9.66% at the December rebalance resulting in a one-way trade of CNY 6.36bn. There are 29 stocks with over 1 day of ADV to trade.
- The potential deletes have outperformed the potential adds over the last 6 months though there has been a narrowing of the gap recently. Position for a further narrowing.
Zeekr Pre-IPO – The Negatives – Remains Highly Dependent on Geely
- ZEEKR, a premium EV brand by Geely Auto (175 HK), aims to raise around US$500m in its US listing.
- Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
- In this note, we talk about the not-so-positive aspects of the deal.
Livzon Reloads Diagnostic Spin-Off
- Back in late 2020, Livzon Pharmaceutical Group (1513 HK) proposed spinning off 39.4%-held Livzon Diagnostics on Chinext. After numerous filings with the regulators … crickets.
- Livzon has now proposed listing Livzon Diagnostics on the National Equities Exchange and Quotations with an intention of transitioning listed shares to the Beijing Stock Exchange (BSE).
- The CSRC recently introduced a raft of initiatives to spur investor interest in the BSE. After all-but-abandoning the prior listing, Livzon looks to be cashing in on this recent excitement.
Haier Smart Home (6690 HK): Stays Smart
- Haier Smart Home (6690 HK) is less exposed to China’s real estate market than one would have thought. Despite poor property industry, HSH still generated 12.9% earnings growth in 3Q23.
- We are delighted to see further margin pick-up in 2Q23-3Q23, thanks to digitalisation and better efficiency. We believe such a trend can be sustained over the next 12-18 months.
- More innovative products will drive market share, and better margin can support a 13% 3-year earnings CAGR. ROE is high at 17-8% despite net cash (8.8% of share price).
Keymed Biosciences (2162.HK) – Looking Forward to the Next Leap in Valuation
- Abrocitinib/Upadacitinib/Dupilumab will all exert great pressure on the future commercialization space of CM310 in China. If Keymed doesn’t run head-to-head trials with dupilumab, CM310’s internationalization outlook would be gloomy.
- Compared with IL-4 that has been almost occupied by dupilumab, Keymed has more opportunity on TSLP. Even with Keymed-AstraZeneca deal, our valuation of CMG901 is cautious based on our analysis.
- The current valuation of Keymed is not cheap. The next big catalyst to share price is a new license-out deal with MNC on CM310/CM326, marking the beginning of qualitative changes.
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