Daily Brief China: Lalatech Holdings Co Ltd, Lonking Holdings, Beijing Luzhu Biotechnology, Shui On Land and more

• Lalatech’s largest segment by revenue — Chinese intra-city on-demand freight — features many of the attributes that are attractive to online logistics intermediaries
• At the top of the list of red flags in its prospectus is Lalatech’s company’s dramatic 71% Y/Y reduction in Sales and Marketing expenses last year
• Although Lalatech appears to be the leading platform for Chinese intra-city on-demand freight matching, the company faces ‘hidden’ competition from several larger groups

• After a poor FY22, 1H23 will stay challenging for Lonking Holdings (3339 HK). However, we expect pick-up in business momentum going forward, and export is a major growth driver.
• Gross margin rebounded HoH and YoY in 2H22, and Lonking maintained good operating cost control. Recovery of equity market suggests potential big positive swing in investment income. 
• Including investment portfolio, 92% of the current market capitalisation is net cash, providing solid downside buffer. Its 6.5x PER, 9.2% yield and 0.52x P/B are very attractive valuations.

• Either vaccines or therapeutic biologics, Luzhu’s clinical progress has no advantages. There have been quite a few competing products on the market or candidates with faster development progress than Luzhu.
• Luzhu applies the low price strategy to open the market. We’re not sure if it works or not, since it still depends on R&D efficiency, product quality and commercialization capabilities.
• We tend to be conservative about the Company’s prospects because its eventual revenue scale and profit margins are likely to be very limited based on our analysis.

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.

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