In today’s briefing:
- China Healthcare Weekly (Nov.17) – TCM VBP New Updates, CR Boya Completes Acquisition of Green Cross
- SF Holding Pre-IPO: Three Important Issues for Long-Term Investors to Consider
- HK Connect SOUTHBOUND Flows (To 15 Nov 2024); Tech Bought, High-Div SOEs Sold or Ignored, Again
- FXI Rebalance Preview: One Change in December as Shorts Spike
- A/H Premium Tracker (To 15 Nov 2024): AH Premia Rise Sharply; Hs Shellacked Vs As In Most Sectors
- [Tencent (700 HK, BUY, TP HK$518) TP Change]: C3Q24 Review: Performance In-Line with Catalysts
- China A50 ETFs Rebalance Preview: One Change to Close Out the Year
- Pony AI IPO Pricing: The Bottom Of a Range Looks Reasonable After WeRide’s Mixed Debut
- [Bilibili (BILI US, BUY, TP US$22) TP Change]: C3Q24 Review: Traffic Growth Bodes Well for Future
China Healthcare Weekly (Nov.17) – TCM VBP New Updates, CR Boya Completes Acquisition of Green Cross
- The new round of national TCM decoction pieces VBP has started. We think the overall price reduction would be relatively mild, and the impact on related TCM enterprises is limited.
- The NHSA will vigorously promote the expansion of TCM VBP, which is another challenge for TCM injections. But the impact on exclusive TCM varieties and innovative TCM injections is smaller.
- CR Boya has completed the acquisition of 100% equity of Green Cross and has included it in the scope of consolidated financial statements starting from November. Future M&As will continue.
SF Holding Pre-IPO: Three Important Issues for Long-Term Investors to Consider
- SF Holding’s domestic parcel volumes have grown slower than overall market volumes recently; is this strategic, or simply a loss of share?
- SF Holding is not closely aligned with any of the large online retail platforms in China; ultimately, is this independence an advantage or a disadvantage?
- When will SF Holdings’ varied international operations — and there are a few of them — begin to pull their own weight, in terms of profitability and growth?
HK Connect SOUTHBOUND Flows (To 15 Nov 2024); Tech Bought, High-Div SOEs Sold or Ignored, Again
- SOUTHBOUND gross trading activity still high. Net buying very strong. 7 names traded more than US$1bn. Last week I said tech would continue to be bought. It was.
- The trend continues to net sales of ETFs and high div SOEs. Net buying is very, very broad-based. Tracker Fund of Hong Kong (2800 HK) is batted around like crazy.
- I expect HK-listed tech to continue getting bought. Alibaba, Tencent, Xiaomi, etc are safe havens against Trump tariffs as they don’t compete in the US.
FXI Rebalance Preview: One Change in December as Shorts Spike
- With one trading day left in the review period, we expect one change with China Merchants Securities Co Ltd (H) (6099 HK) replacing Yankuang Energy Group (1171 HK) in December.
- Capping will result in selling for Meituan (3690 HK) and buying in Tencent (700 HK) and Alibaba Group Holding (9988 HK).
- Short interest has jumped on both stocks, but the increase is far higher in China Merchants Securities Co Ltd (H) (6099 HK) compared to Yankuang Energy Group (1171 HK).
A/H Premium Tracker (To 15 Nov 2024): AH Premia Rise Sharply; Hs Shellacked Vs As In Most Sectors
- Huge volumes continue to be traded on the mainland share markets. SOUTHBOUND volumes bounced, and net buying was both large and broad-based.
- Stocks in HK and mainland markets fell heavily with HK’s main indices down 6-7% and China’s blue chip indices down 3.3-3.6% (CSI 500 – 4.8%).
- Within H/A Pairs, after outperforming the HK/mainland spread for weeks, spreads got shellacked. Worst week in a long time (-3.7%), perhaps on the back of “disappointing” lack of stimulus measures.
[Tencent (700 HK, BUY, TP HK$518) TP Change]: C3Q24 Review: Performance In-Line with Catalysts
- Tencent reported C3Q24 revenue, IFRS operating profit, and IFRS net income in-line, in-line, 11% vs. our estimates and in-line, in-line, 18% vs. consensus.
- The bright spot is fintech transaction volume grew 10% YoY showing gain in market share, which coupled with rebound in consumption since October should rive recovery.
- We raise TP by 2% to HK$518. Tencent is still our TOP PICK in an uncertain geopolitical environment with an upswing fundamental story.
China A50 ETFs Rebalance Preview: One Change to Close Out the Year
- The December review will use closing prices from 18 November to determine the list of stocks that will be included into and excluded from the ETFs.
- As of the close on 15 November, we see NAURA Technology Group (002371 CH) replacing Huaneng Lancang River Hydropow (600025 CH) in the ETFs.
- NAURA Technology has doubled in price this year, while Huaneng Lancang has corrected from its highs and could be deleted from the ETF in just one quarter.
Pony AI IPO Pricing: The Bottom Of a Range Looks Reasonable After WeRide’s Mixed Debut
- Pony AI, a China’s robotaxi operator and self-driving technology company, plans to raise up to $360M in upcoming IPO and concurrent private placements.
- Pony AI is expected to IPO next week. The company’s amended F-1 puts the price range per ADS at $11.00-$13.00, implying a market cap of ~$4.2B at the midpoint.
- I believe Pony AI may price its IPO at the bottom of a range after WeRide’s mixed debut. IPO valuation suggests a drop from last round valuation of ~$8.5B.
[Bilibili (BILI US, BUY, TP US$22) TP Change]: C3Q24 Review: Traffic Growth Bodes Well for Future
- Bilibili (BILI) reported C3Q24 revenue and GAAP net income 2.1%, 18% vs. our estimates and 2.5%, 24% vs. consensus.
- We believe the market oversold on BILI because its traffic was rebounding in accelerating fashion, which shall benefit from a consumption recovery now visible into C1Q25.
- We maintained our BUY rating and raised our TP to US$22. BILI is our mid-cap TOP PICK.
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