Daily Brief China: Piotech, China Railway Signal & Communication, Guangzhou Kingmed Diagnostics, Sunac China Holdings and more

• The review period for the September rebalance ends 31 July. We expect the changes to be announced 25 August with the implementation taking place after the close on 8 September.
• We expect the index committee to continue using a 6-month minimum listing history resulting in two changes to the index.
• One way turnover is estimated at 3.45% resulting in a one-way trade of CNY 3,675m. The impact on the deletions will be larger than that on the inclusions.

• China Railway Signal & Communication (3969 HK) (CRSC) has achieved good share price performance YTD, but we think there is more room to go for the rest of the year.
• We like its steady domestic growth, exposure to overseas recovery, strong order backlog, and net cash position. 1Q23 new contracts reached Rmb13.7bn, an impressive 35.8% YoY growth.
• Unlike the highly-geared infrastructure construction peers, CRSC’s net cash equals 52% of the share price. On such basis, its P/B of 0.7x relative to ROE of 9-10% is inexpensive.

• 2023 would be a low point in performance for Kingmed, with negative YoY growth. But this year is a good time to bottom-fish because non-COVID conventional testing business would rebound.
• Many people think the implementation of DRGs policy would be a big catalyst for future growth of ICL industry, but we’re actually skeptical since the reality could be quite different.
• The different business models of Kingmed and Dian lead to different valuation outlook. Since the current duopoly pattern is difficult to change, we recommend investors focus only on top two ICLs.

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.

• NagaCorp Ltd
• Sunac China Holdings
• Vedanta Resources