Daily Brief China: Kuaishou Technology, Ping An Insurance (H), Golden Eagle Retail, Sun Hung Kai, ClouDr Group, iQIYI Inc, West China Cement, Activation Group Holdings, Health And Happiness (H&H) and more

• The total revenue growth rate accelerated significantly to 28% YoY in 2Q23.
• The high-margin businesses grew more rapidly than the low margin business.
• Gross Merchandise Value and Active user base still increased strongly.

• There is considerable worsening in net profit, including from key divisions
• Despite rising assets for Health and Life, profit in this core division is down a lot
• Banking exposure is significant, with a poor outlook, and making Ping An less pure

• On the 28th May, PRC department store play Golden Eagle Retail (3308 HK) announced a privatisation offer, by way of a Scheme, at $6.88/share, a 40.41% premium to last close.
• The Offeror is the Wang family, Together with concert parties, they control 80.29%. 7.18% of the remaining 19.71% of the disinterested stakeholders have given an irrevocable. 
• The Scheme Doc was despatched this morning (23 August). The Scheme Meeting is September 15th with expected payment on (or before) the 17th of October. The Offer price is final.

• Despite Headwinds Revenue Remains Relatively Stable at HK $1,968 million 
• For 1HFY2023–Total Buyback of 0.77 million shares (HK$2.3 million) at average price of $2.99 
• Stock at 0.25x tangible P/B and at 1.96x P/E on our FY2024 earnings estimate 

• When we discovered that JD Health’s growth could face a downturn crisis, we hope to find a suitable substitute. ClouDr has such potential due to its good performance/reasonable business model.
• The current anti-corruption campaign could bring new opportunities to ClouDr, who can rely on “hospital first” strategy to take the upper hand, but it should be based on some prerequisites.
• ClouDr’s business is expected to keep strong growth momentum in 2023. The Company is expected to achieve breakeven in 2024. Investors could see good stock price performance at that time.

• IQiyi failed to give its share price a lift with  stronger-than-expected 2Q results except for slight miss in paying subscribers .
• We believe that investors are expecting the end of its remarkable turnaround story and embracing a stable and moderate growth stage.
• While iQiyi trades at ~10x our FY23 earnings, the cheap valuation by itself doesn’t stand out among China internet peers as a group. We would wait for better entry points.

WCC’s H1/23 results were softer than expected, as the company reported lower sales volumes and larger-than-expected ASP declines across its plants in Mainland China. In particular, sales volumes and ASP in the company’s stronghold of Shaanxi fell 4% and 16% y-o-y, respectively. Positively, WCC’s expansion in Africa has been progressing well, with overseas operations now accounting for 27% of revenue. The company’s plants in Africa enjoy substantially higher margins than those in China.

In our view, the key risk for WCC is uncertainty regarding the extent of its African expansion, with the company reportedly developing another USD 100 mn cement plant in Rwanda. We believe further expansion into Africa will fundamentally change WCC’s risk profile.

 We move our recommendation on the WESCHI 4.95 26 to “Buy” from “Hold”.

• Activation Group (9919 HK) unveiled its first-half financial results for 2023 on August 10th, 2023.
• In this article, we will provide an overview of Activation’s performance during this period and share thoughts on its future prospects.
• The Experiential Marketing segment recorded a full recovery, reaching RMB 280 million, surpassing the 2021 H1 level of RMB 276 million.

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.