Daily Brief China: Jiangxi Special Electric Motor A, Yashili International Holdings, Hesai Group, JD Health, Alphamab Co Ltd, Luckin Coffee, Adani Ports & Special Economic Zone, Atour Lifestyle Holdings and more

• Three quarters of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 9 June.
• There is a big sector skew in the potential changes. We estimate a one-way turnover of 11.47% at the June rebalance resulting in a one-way trade of CNY 10.11bn.
• The potential adds have outperformed the potential deletes and the CSI500 Index over the last few weeks. There could be more outperformance till nearer the end of the review period.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – Alliance Aviation Services (AQZ AU), 21Vianet Group (VNET US), Origin Energy (ORG AU), Golden Energy & Resources (GER SP), 111 Inc (YI US), Toyo Construction (1890 JP). 
• Lowest spreads – Essential Metals (ESS AU), Tyro Payments (TYR AU), Chip Eng Seng Corp (CHIP SP), Conexio Corp (9422 JP), Kanematsu Electronics (8096 JP), Elmo Software (ELO AU). 

• Hesai Group (HSAI US) is looking to raise around US$170m in its upcoming US IPO.
• HSAI is a manufacturer of three-dimensional light detection and ranging (Lidar) solutions. It has shipped over 103,000 Lidar units from 2017 to the end of 2022.
• We have looked at the company’s past performance and undertaken a peer comparison in our previous notes. In this note, we will talk about valuations.

• In this insight, we take a look at the potential index changes for the Hang Seng Index (HSI INDEX) in March 2023.
• We believe Healthcare names could be given top priority when selecting additions for the upcoming rebalance.
• The final index changes along with indicative capping and index weights could be published in Mid/Late-February 2023 and implemented in early-March 2023.

• Our base case valuation of Hesai Group is implied market cap of US$3.4 billion or target price of US$27.1 per share.
• Our target price is 43% higher than the high end of the IPO price of US$19 per share. Given the solid upside, we have a positive view of this IPO. 
• The company’s superior technology in the LiDAR product segment along with its global market leadership should help Hesai Group to successfully complete this IPO despite political risks related to China. 

• Unlike ADC, there’re still doubts on the outlook of whole bispecific antibody mechanism. Alphamab Oncology doesn’t actively promote related head-to-head trials, which makes people doubt the competitiveness of its products.
• Investors’ trust in Alphamab Oncology continues to decline, mainly because the Company often missed the guidance/milestones it announced before. This will greatly affect the credibility of Alphamab Oncology.
• The current valuation is expensive and has basically priced in all the positive factors. The Company is more suitable for short-term trading to capture the rebound rather than long-term holding.

• We initiated Luckin with a BUY with TP $40 because we believe Luckin is a rising challenger in a rising market, half way through a rising business model; 
• We see room for Luckin to expand transaction frequency and transacting customers before expanding ASP in order to drive same store sales;
• In the long run, we see coffee + western bakery to gain market share over tea house + Chinese dim sum in the snack + breakfast market. 

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.

• Adani Ports & Special Economic Zone
• China Hongqiao

• Although the operating metrics are expected to be weak in 4Q22 due to the lingering of Covid effects, we expect the resumption of travel to stimulate hotel demands in 2023. 
• We expect Atour to report its 4Q22 revenue at RMB580mn and OPM at 8.2%, both in-line with consensus. We expect a strong revenue growth at 60% YoY in 2023.
• We rate the stock as BUY and maintain the TP at US$35.