Daily Brief China: Nws Holdings, Li Auto , Huawei Technology, China Tourism Group Duty Free, Lalatech Holdings Co Ltd, Country Garden Holdings Co, J&T Global Express, Guoquan Food (Shanghai) and more

• Back on the 26 June, Chow Tai Fook (CTFE) made a pre-conditional voluntary Offer for New World (17 HK)‘s 60.88%-held NWS (659 HK) at HK$9.15/share, a 22.2% premium to undisturbed.
• The Cheng-family-backed CTFE and connected parties held 45.24% of NWD, therefore the parent was effectively injecting ~US$2.75bn of cash into NWD for its NWS stake.
• The pre-cons are now done, with a 13 October despatch date for the Composite Document. Technically, this could be wrapped up before NWS’ final dividend ex-date. That’s worth exploring further.

• With no stocks in inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in December.
• Capping changes will result in a one-way turnover of 2.16% and that will result in a round-trip trade of US$556m.
• The impact of capping changes has doubled over the last month and there will be more changes from now till the official capping is done on 28 November.

• A new electric car powered by Huawei’s autonomous driving technology has hit the market with a bang, attracting tens of thousands of orders in less than a month and giving the telecom-equipment giant a confidence boost as it pushes further into China’s highly competitive auto market.
• As of Friday, more than 50,000 orders have been placed for the upgraded version of the Aito M7 SUV since it was launched on Sept. 12, said Richard Yu, chairman of Huawei’s smart car unit, in a social media post Saturday.
• For each order, customers paid a non-refundable deposit of 5,000 yuan ($695), according to information provided by Aito — a premium electric-vehicle (EV) brand co-developed by Huawei Technologies Co. Ltd. and automaker Seres Group Co. Ltd.

• China Tourism Group Duty Free (1880 HK) announced preliminary results for 3Q23 which came in below market expectations.
• Compared to the previous quarter 2Q23, sales declined by 1% q-o-q, while net profit margin declined from 10.4% in 2Q23 to 8.9% in 3Q23. 
• The company (H-share) is trading at 26x 2023E PE and 23x 2024E PE, still expensive as visibility is low and derating continues. 

• Lalatech has refiled for HKEx IPO and the company plans to raise around US$1bn through the IPO. This insight focuses on latest data points from the company’s new filing.
• The company has disclosed results for 1H2023 which point to notable improvement in the company’s financials including an operating profit margin of around 21% for 1H2023.
• There has been significant reduction in the company’s operating costs, merchant discounts and carrier incentives in particular, which have helped significant improve the company’s margins.

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• China Jinmao Holdings
• Country Garden Holdings Co

• J&T Global Express, a global logistics service provider, is looking to raise about US$500m in its upcoming Hong Kong IPO.
• As per Frost & Sullivan (F&S), the firm is the leading express delivery business in Southeast Asia, with a 22.5% market share as per 2022 parcel volume.
• We have looked at the company’s past performance and its PHIP updates in our earlier notes. In this note we will undertake a peer comparison.

• Guoquan’s model is easy to replicate.The so-called “moat” is all based on scale effects, without which Guoquan would lose competitiveness.This is why Guoquan has been striving to expand franchised stores.
• With the increasing frequency of people dining out after China reopens, the high-speed expansion in 2020 seems unsustainable. To B model has less growth space/potential than To C model.
• In such a fiercely competitive market, Guoquan’s long-term development logic is not solid. The current temporary improvement in financial performance is likely to be a flash in the pan.