Daily Brief China: JD.com Inc., Melco International Development, Shougang Fushan Resources, Guoquan Food (Shanghai), Vedanta Resources, JD.com Inc (ADR), Luckin Coffee, ADICON Holdings Limited and more

• JD.com Inc (9618 HK) has declined heavily in 2023 (-44.5%), producing a new 5 month low of 143.50 on 13 April 2023.
• The 143.50 low was plagued by extreme ST momentum failure and the new low was quick to fail and reverse.
• Our TSS methodology triggered a TSS < 10 at the low and justifies a further 9-18% upswing in the coming 1-2 weeks.

• 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 in this insight include: Melco International Development (200 HK), CMGE Tech (302 HK), Differ Group Auto (6878 HK), and Sino Biopharmaceutical (1177 HK)

• After declaring a whopping 18% dividend yield in FY22, we expect Shougang Fushan Resources (639 HK)’s generous payments to continue as they could declare another 14% in FY23e.
• The margin of safety is high as there is a cash buffer (55% of the market cap in cash) and 10-year average annual free cash flows of 1.5 bn HKD.
• China’s FAI stimulus and stabilizing the steel margins could be catalysts to drive the share price forward in the short term.

• Guoquan Food (Shanghai) (1786512D CH) is looking to raise about US$500m in its upcoming Hong Kong IPO.
• Guoquan Food (Shanghai) is a home meal solutions provider in China.
• Offering a wide variety of home meal solutions products under its Guoquan Shihui (鍋圈食匯) brand, the firm had a total of 755 SKUs as of Dec 22. 

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.

• Meituan
• Nickel Industries Ltd
• Vedanta Resources

• We expect JD to report C1Q23 top-line and non-IFRS net income (1.7%) and (12%) vs. consensus, respectively. 
• We expect revenue to decline (1%) YoY in 1Q23 and grow just 3% YoY in FY23, due to (1) slow recovery in key product categories like electronics; (2) team restructuring;
• And (3) competitive landscape. We maintain SELL and US$27 TP. Our TP implies 10x 2024 P/E.

• We expect Luckin to report 1Q23 revenue at 77.0% YoY to RMB4,257mn, non-GAAP operating margin and net margin are expected to increase 12.6ppt and 9.1ppt to 16.4% and 13.2%; 
• We think the current moderate competition can bring positive externality to coffee players, whereas it may hurt street tea shops; 
• We maintain the stock as BUY and raise TP by US$1 to US$41.

• ADICON Holdings Limited (ADI HK)  is looking to raise about US$400m in its upcoming HK IPO. 
• Adicon Holdings is one of the top three independent clinical laboratory (ICL) service providers in China in terms of total revenue during the Track Record Period, according to F&S.
• In this note, we talk about our thoughts on valuation.