In today’s briefing:
- Midea A/H Listing – 1H24 Updates – Strong Growth, Margins Uptick Continues
- Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health
- China ETF Inflows & Implications: YTD Inflows Near US$100bn
- Pinduoduo (PDD US): Oversold on Concerns About Slowdown
- BUY: First Pacific Company (142 HK): Right Stock Trapped in the Wrong Market
- Zhongsheng Group Holdings (881 HK, BUY, TP:HKD12.5): A Contrarian Play
- Trip.com Q224: Slower Growth | But Higher Margins | Competition Has Eased | BUY with US$58 Target
- Dream International H1 FY24 Concall Highlights: Resilient, Dividend, And Cash Levels Maintained
- [NetEase (NTES US, BUY, TP US$122) Review]: Growth Will Materially Accelerate in C2H24 and 2025
- EQD | (Updated) Support Levels to BUY For HSI Index Rally Continuation In September
Midea A/H Listing – 1H24 Updates – Strong Growth, Margins Uptick Continues
- Midea Group Co Ltd A (000333 CH), recently filed its PHIP as it aims to raise up to US$3bn in its H-share listing, as per media reports.
- Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
- We have covered the company and deal background in our previous notes. In this note, we talk about the updates from its 1H24 results.
Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health
- Midea Group Co Ltd A (000333 CH), the world’s biggest home appliances maker, is premarketing an H Share listing to raise US$3 billion.
- Midea is the world’s largest home appliance company in sales volume and revenue in 2023. Its subsidiary, KUKA Group, is one of the world’s “big four” industrial robotics companies.
- The PHIP update shows that the business is in good health, with accelerating growth, rising margins, and strong cash generation. Therefore, a premium multiple to peers is justified.
China ETF Inflows & Implications: YTD Inflows Near US$100bn
- Nearly US$100bn has flowed into mainland China listed ETFs year to date and could be driven by the National Team led by Central Huijin supporting the market.
- Nearly all the net inflows have been focused on the CSI 300, CSI 1000, CSI 500, SSE50, ChiNext and STAR50 indices. Flows to sector ETFs have been mixed.
- Over 70% of the net inflows have gone to the CSI 300 Index with another 18% going to the CSI 500 Index and CSI 1000 Index.
Pinduoduo (PDD US): Oversold on Concerns About Slowdown
- The market has lingering concern about substantial slowdown in PDD’s growth and has been pricing in the outlook for most part of the year.
- 2Q results did signal imminent growth deceleration, and management’s blunt yet honest comments about the pressure on margin further stoke fears.
- We regard 1/3 market cap wipe-out after the results as over-reaction. While risks have been reflected to large extent, we do not expect a meaningful re-rating until 2H25.
BUY: First Pacific Company (142 HK): Right Stock Trapped in the Wrong Market
- First Pacific Co (142 HK) is a Southeast Asian conglomerate that has been handicapped by its listing in the Hong Kong market over the last several years.
- As Southeast Asian markets (Indonesia and Philippines) begin to re-rate on the back of a more accommodating Fed policy, First Pacific is beginning to participate in the uptrend.
- Metro Pacific Investments Corp (MPIC), the second largest piece of the company’s NAV has been active in acquiring more infrastructure assets since being privatized last year.
Zhongsheng Group Holdings (881 HK, BUY, TP:HKD12.5): A Contrarian Play
- 1H24 results were below expectations, with profits halved YoY. Irrational competition with overzealous discounts, and general decline in preference of traditional luxury cars for NEVs is hurting Zhongzheng (ZS)
- Signs of bottoming as industry are trying to stop the discounting madness and instill some level of rationality
- ZS is trading at 0.47x book, its cash = MCAP, and FY25 PE of 3.7x. Ridiculously cheap for a profitable and positive FCF churning company.
Trip.com Q224: Slower Growth | But Higher Margins | Competition Has Eased | BUY with US$58 Target
- Despite slower top-line growth, Trip.com posted firmer margins in Q224
- Cash Operating Expenses as a % of Net Revenue fell by around -250 bps Y/Y
- Post-Covid, Trip.com has less competition; BUY with target of US$58 per ADS
Dream International H1 FY24 Concall Highlights: Resilient, Dividend, And Cash Levels Maintained
- Dream International (1126 HK) reported revenues/profits of -7.8%/-17% YoY for H1 FY24 due to prolonged destocking of plastic/plush toys, resulting in weak (-18% YoY) North American sales (43% of revenues).
- With over 1.26 bn HKD net cash (43% of the market cap), the company paid another generous dividend of 20 cents (we believe H2 will be higher).
- The company has deep value, trading at 3.9x FY24e PE/1.1x EV-EBITDA, with a 12.7% yield.
[NetEase (NTES US, BUY, TP US$122) Review]: Growth Will Materially Accelerate in C2H24 and 2025
- NetEase reported C2Q24 top line, GAAP operating profit and GAAP net income in line, (5.6%) and (7.3%) vs. our estimates, and in line, (4.0%) and (5.5%) vs. consensus.
- We believe game growth will materially accelerate in C2H24 and 2025, based on our projection for Naraka Mobile, Where Winds Meet and the two Marvel games.
- We keep TP of US$122 unchanged and maintain BUY .
EQD | (Updated) Support Levels to BUY For HSI Index Rally Continuation In September
- In a previous insight we have postulated that a pullback may be behind the corner for the Hang Seng Index (HSI INDEX).
- We said the pullback could come the week after the insight was published, or the following week (i.e. this week). Last week closed up, the index could retrace this week.
- In this insight we want to update the levels to buy LONG for this week, to benefit from a highly probable continuation of the rally in September.
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