Daily Brief China: PDD Holdings Inc, Tencent, MTR Corp, China Communications Construction, Keep Inc, Alibaba (ADR), China Shineway Pharmaceutical, Huawei Technology, Times China, Sino-Ocean Group and more

• PDD’s small retailers bought out products of direct sales and claimed full refund.
• The story happened to Alibaba more than ten years ago.
• It can be hard for PDD to enter the high quality market.

• Tencent authorized video editing right to Douyin, one of its main competitors.
• Some of Bilibili’s video uploaders cannot survive the hard time.
• Both Alibaba and Baidu launched their ChatGPT-like apps, but Baidu’s app was .

• MTR Corp (66 HK) is the lagging stock in Hong Kong although it is a key beneficiary to more Chinese tourists that will arrive soon.
• HK Government has launched a few initiatives to invite tourists to visit Hong Kong that will boost higher ridership for the company. 
• It is now trading at the level prior to COVID with the potential of higher earnings that will come from the ridership increase. 

• China Communications Construction (1800 HK) is expected to generate higher shareholder return through improvement in profitability/cash flow, spin-off, asset disposal and issuance of REITs.
• Operationally, backlog reached Rmb3.39trn at end-FY22, enough to cover 3.9x FY23F revenue. It expects revenue to grow at least 7% and new contract by no less than 9.8% in FY23. 
• Employee incentive scheme has been adopted with targets including FY21-23 earnings CAGR of at least 8% and FY23 return on net assets of 7.7%. This aligns employee interests with shareholders’. 

• Keep Inc., the sports technology unicorn and the largest fitness app in China, has renewed its application proof in Hong Kong. Goldman Sachs and CICC are leading the upcoming IPO.
• With a mission to make the world move, the fitness app has been making waves in the fitness industry with its innovative approach to online fitness.
• Keep fitness app has been downloaded over 300M times since inception and there were 370M+ fitness users in China in 2022, the world’s largest market globally.

• We expect BABA to report C1Q23 (F4Q23) top-line and non-IFRS net income (5.0%) and (5.9%) vs. consensus, respectively, 
• Due to: 1) weak sales of Taobao, Tmall and 1P sales; 2) the on-going move of a key Cloud client; 
• We maintain US$109 TP as: 1) Taobao and Tmall sales shows recovery trend; 2) near-term benefit of unveiling its LLM AI; and 3) benefit from the new business unit structure.

• Shineway’s 2022 performance was outstanding.Its TCM formula granules business would seize more market share and maintain strong growth momentum, which would continue to be the main performance driver in 2023.
• Considering obvious policy preferences and lower price reduction of TCM in VBP, we recommend investors to leave a place for TCM company in portfolio, and Shineway deserves investors’ attention.
• Shineway is cash rich. Together with promising growth potential and solid financial performance, Shineway’s share price is expected to perform well, which could be a good trading target for investors.

• Huawei Technologies Co. posted its lowest profit margin ever for 2022 but managed a slight revenue gain in the third year of U.S. sanctions that forced the Chinese electronics giant to diversify its business into new sectors from cloud computing to automobiles.
• The company reported net profit of 35.6 billion yuan ($5.18 billion) for 2022, a 69% decline from 2021, on revenue of 642.3 billion, up 0.9% from a year ago.
• Its profit margin fell to a record low of 5.5%.

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.

• China Vanke
• Lenovo
• Sunny Optical
• Times China
• Yanlord Land

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Sino-Ocean’s ESG as “Weak”, in line with its “Weak” Governance score. That said, the company has an “Adequate” Environmental score and a “Strong” score for the Social pillar. Controversies are “Material”, but Disclosure is “Strong”.