Daily Brief China: Li Ning, BYD, Huatai Securities Co Ltd (A), JD Logistics , Shougang Fushan Resources, PegBio, Adani Transmission and more

• As the Hong Kong bourse languishes, recent Hong Kong privatisation include mainland Chinese firms such as Vinda International (3331 HK) and China Traditional Chinese Medicine (570 HK) . 
• Reportedly (Reuters) Li Ning (2331 HK) is now in the crosshairs.  Shares are up 7.8% as I type.
• Olympic champion Li Ning holds ~10.5% in his self-named company, which was recently in the news after acquiring a HK$2.2bn commercial building from Henderson Land (12 HK)  as its headquarters.

• Reuters reported that due to the steep share price declines, Mr Li Ning is considering leading a consortium to privatise Li Ning (2331 HK). 
• The shares have been weighed down by concerns about channel inventory, steep retail discounts, and unauthorised distributor sales. To counter this, Li Ning aims to achieve RMB50bn sales by 2028.
• The probability of an offer is low as funding the scheme consideration could prove challenging. Nevertheless, the downside is low as Li Ning trades at an undemanding valuation. 

• According to public news today afternoon during trading hours, the founder and biggest shareholder of Li Ning (2331 HK), Mr. Li Ning, is mulling privatizing the public company. 
• Mr. Li Ning has shown the opposite intention over the last few years, with several major sell-down of stake.
• The company is trading at 16x 2024 PE, with visibility being quite low. 

• We believe revenue will grow by 44% in 2023 according to the sales volume and the price trend.
• We believe net profit will increase by 100%, higher than the company’s estimate.
• We conclude an upside of 54% and a price target of HK$304. Buy.

• SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
• In this insight, we take a look at our expectations for potential index changes for SSE 50 and SSE 180 during the June 2024 index rebal event.
• I continue to expect 5 changes for SSE 50 and 18 changes for SSE 180 but some names have changed since my last insight.

• In Q423 JD Logistics booked 10% top-line growth & solid margin improvement
• We analyze the impacts of JD.com & Deppon Logistics on JD Logistics’ Q423
• Given still-low profitability, JD Logistics does not appear cheap, in our view

• We preview Shougang Fushan Resources (639 HK) earnings for FY23. We expect revenue /profit growth of -15%/12% YoY with H2FY23 revenue/profit -1.7%/2.3% YoY due to lower coking coal prices.
• We expect the company to pay an FY23 dividend of 36 HKD cents, implying an 11.3% yield. At the current spot price, the implied yield is 11.3%. 
• The company’s balance sheet is rich in cash, with more than a billion USD (~50% of market capitalization). However, we are skeptical that the company will pay big special dividends. 

• PB-119 (T2DM) has the fastest R&D progress, but this is a highly competitive market.China’s diabetes drug market is dominated by traditional drugs. It’s not easy for PegBio to break through. 
• Since the future competitive landscape of GLP-1s (obesity) would present a very different situation.If PB-119 fails to have better weight loss effect, it would be eliminated due to fierce competition.
• PegBio’s IPO on SSE STAR Market was rejected. We’re not optimistic about its future commercialization performance. Together with cash-flow issues, we doubt whether PegBio would bring expected returns to investors.

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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