Daily Brief China: J&T Global Express, Cainiao Smart Logistics, Xtep International, Anta Sports Products, Sichuan Kelun-Biotech Biopharm, Road King Infrastructure and more

• J&T Global Express (1519 HK) has announced the terms for its IPO. The company plans to issue 327m shares at HK$12 per share, which should raise proceeds of around US$501m.
• Though profitability of the company’s China business has improved, SEA margins continue to decline, hence our analysis suggests that J&T may not be able to generate profits in the near-term.
• Our SOTP valuation offers per share value of HK$9.48 per share which is at a 21% discount to the indicative IPO price suggesting J&T’s IPO is overvalued.

• Cainiao Smart Logistics (1437124D HK), a global leader in e-commerce logistics, has filed for a HKEx IPO to raise at least US$1 billion at a US$15-20 billion valuation. 
• According to CIC, Cainiao is the world’s leading cross-border e-commerce logistics company regarding parcel volume in 2022, with one of the world’s largest logistics networks in terms of geographic reach.
• The bull case rests on market share gains in China, improving performance of the largest business (international logistics), and rising gross and operating margins. 

• Xtep International (1368 HK) announced yesterday strong retail sales of high-teens growth in 3Q23.
• Though the growth was at the expense of slightly higher overall discounts of 25-30% off during the quarter.
• I prefer Anta over Xtep given higher visibility in Anta’s bottom line, as Xtep’s growth continues to be of lesser quality than Anta’s. 

• Anta Sports Products (2020 HK) achieved a decent 3Q23 with sales performance of major brands outperformed. With a low comparison base, 4Q23 sales will be even more impressive. 
• Indications are that sales for the Golden Week are satisfactory and “double-11” sales are optimistic. The acquisition of MAIA ACTIVE will further add to its product portfolio.
• Amer’s IPO is another catalyst and reports are that this has been filed in the US. Anta Sports’ stake may be valued at US$4bn, almost 12% of its market cap.

• Since IPO, stock price of Kelun-Biotech has performed quite well. Then, the Company’s valuation fluctuated. Investors seem not excited about Sichuan Kelun-Biotech Biopharm (6990 HK)’s 23H1 performance.
• We won’t expect too much on A166 in such a difficult competitive landscape.Commercialization of SKB264 is also challenging.It’s difficult to make up the story after A166/SKB264 begin to generate revenue.
• After out-licensing all valuable/core assets to Merck, together with the departure of core R&D personnel, Kelun-Biotech has been “hollowed out”.So, Kelun-Biotech’s value lies in short-term trade rather than long-term hold.

• Cainiao Smart Logistics, Alibaba Group Holding’s logistics linked arm, is planning to raise at least US$1bn in its Hong Kong IPO.
• Cainiao is the largest provider of cross-border e-commerce logistics services globally and a leader in China logistics services, according to CIC.
• In our previous note we looked at the company’s past performance and undertook a peer comparison. In this note, we will talk about valuations.

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.

• China Vanke
• NagaCorp Ltd
• Road King Infrastructure