Daily Brief China: Meituan, Pop Mart International Group L, AAC Technologies Holdings, Indika Energy and more

• Meituan (3690 HK) reported 2Q2023 results yesterday which beat consensus estimates and the company’s profitability has further strengthened during the quarter.
• However, there has been clear signs of a slowdown in the company’s core local commerce biz with increased promotions/incentive, decline in revenue per on-demand delivery transaction and fall in OPM.
• Meituan has flagged that macroeconomic headwinds and adverse weather conditions could slowdown core local commerce biz in the current quarter which should drag down earnings.

• Pop Mart International Group L (9992 HK) presents an interesting story of a Chinese domestic brand going overseas, and potentially being successful overseas (at least in the short-term). 
• A recent case of a Chinese brand achieving success overseas is Miniso (MNSO US), and shareholders of Miniso have been richly rewarded. 
• Pop Mart trades at a PE of 24x based on estimated 2024 earnings, with around 30% expected net profit growth in 2024E.   

AAC Technologies’ results were weak as expected, with the top line and gross margin both lower. Overall revenue fell 2% y-o-y to CNY 9.22 bn for H1/23. Gross profit declined 27.2% to CNY 1.3 bn, with the gross margin down 4.8 ppts to 14.1%. This was largely due to market competition for the optics and acoustics business, as well as changes in the product mix. Despite the muted sales performance, the company deleveraged further and achieved strong FCF, driven by increased CFO and reduced capex. Liquidity appears to be sound, with 4.4x LTM Cash/ST Debt. Management guided for the optical lens gross margin to be positive in Q4.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Softbank Group
2. China Hongqiao
3. China Jinmao Holdings
4. Geely Auto
5. First Pacific Co

and more…