Daily Brief China: Oriental Watch, Acotec Scientific Holdings, China MeiDong Auto, Li Auto, Jinxin Fertility Co Ltd, PICC Property & Casualty H, Hisense Home Appliances Group Co., Ltd. H, Pinduoduo, China Power International, Times China and more

• Oriental Watch (398 HK) went ex-dividend on the 30th of December, post which there was a slight correction, and now the stock is 7x PE FY23 (~15% dividend yield).
• There is a substantial margin of safety with assets worth 4+ HKD/share ( 2 HKD/share of net cash + 1 HKD/share of inventory and >1 HKD of real estate).
• Trends point to a year of decent profitability as SSSG continues remain stable in China in November/December 2022. HK sales trended lower due to outbound travel.

• On the 12 December, Acotec Scientific (6669 HK) announced a HK$20/share partial Offer from Boston Scientific, a 31.6% premium to last close, but below August 2021’s IPO price of HK$23.80/share.  
• Boston Scientific will acquire at least 156.7mn shares (50.01%), up to 203.7mn (65%). Irrevocables total 60.14%, comprising shares held by CA Medtech/CPE Investment, Jing Li (chairman, CEO), and Bliss Way.
• The Composite Doc is now out and the Offer is open for acceptances. This Offer is done. The key question is the final proration. 

• China MeiDong Auto (1268 HK) is looking to raise US$100m via a top-up placement.
• Proceeds from the offering will be geared towards potential M&A and general working capital purposes.
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• There are currently 76 index constituents and we can (maybe? finally! hopefully 🤞) get to 80 members in March before commencing the next leg up to 100 index constituents.
• We list 10 potential inclusions to the index in March. Adding all 10 stocks will lead to over 6% one-way turnover, so there will be fewer inclusions.
• All stocks will have over 1 day of ADV to buy from passive trackers. Some stocks have short interest of over 7% of float.

• Jinxin Fertility Co Ltd (1951 HK) is looking to raise US$122m via a top-up placement. 
• Proceeds from the offering will be used to repay its outstanding convertible bond and general corporate purposes. 
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• The insurance sector should definitely warrant more investor attention going forward as some insurance names in the region have had a very strong year in 2022.
• Two key markets we view positively in 2023 are China’s P&C and Korea’s L&H insurance markets, given their favorable industry catalysts and tailwinds. 
• Among all the insurance stocks in these two markets, we believe PICC P&C and Samsung Life will continue to have an exciting year ahead.

• Hisense announced the long-awaited equity incentive scheme on Jan 2. 
• For 100% vetting, Hisense net profit needs to grow by 62%/86%/109% from 2023 to 2025, compared with its 2021 net profit level. 
• We have seen Hisense Home Appliance (Hisense HA) transforming itself into a more market-oriented company. 

• There has been debate: 1) why PDD’s take rate can be higher than BABA, 2) how to justify PDD’s long term margin, 3) will PDD be able to beat cons.
• We suggest that the key driver of PDD’s outperformance in recent quarters has been the weak macro environment.
• We raise our 2023 forecasts of total revenue and non-GAAP net income by 4% and 19%, more than consensus by 8% and 7% respectively.

• The three recent transactions of China Power International (2380 HK) provide solid evidences that it is accelerating its progress in transformation into a giant green energy play.
• Partial disposal of coal-fired assets will generate significant disposal gain and reduce exposure to loss-making business. Introduction of CCB Investment as green power shareholder will improve cash flow.  
• Acquisition of 579MW of wind power capacity will raise proportion of clean energy in its total installed capacity by 0.9pp. This also showcases strong support from its parent SPIC. 

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.

• Times China