Daily Brief China: Shanghai Friendess Electronic, Great Wall Motor, Kunlun Energy, KE Holdings , SHEIN, Aier Eye Hospital Group, 21Vianet Group and more

• Money continues to flow into mainland China ETFs taking the total inflows since 18 July to over US$25bn. This has likely helped stabilise the market and prevent a bigger fall.
• The inflows continue to be largest on ETFs tracking headline indices – CSI 300, STAR50, CSI1000, CSI 500, SSE50, ChiNext. Plus there are inflows on some sectoral and thematic ETFs.
• The skew between stocks gaining 20%+ over the period vs those dropping -20% or more has improved significantly over the last week.

• The Brand-Spanking New (three weeks old) A-H Monitor has tables, charts, measures galore. 
• Last week was slightly disappointing but the Recommendations Outperformed the universe.
• New stimulus measures are partly supply side, and a little bit demand side, but they’re not big enough yet to move the needle. Mainland ETF buying smells like National Team.

• We think Kunlun Energy (135 HK) will see its operating momentum accelerate in 2H23, leading by better natural gas sales growth and sustained positive dollar margin performance.
• It has strengthened its financial position in 1H23, with net cash amounting to 36% of market cap. This has demonstrated its cash-generating capability and controlled capex. 
• Its 7.0x and 6.6x PERs for FY23 and FY24 are inexpensive. Its annualised ROE of 10.6% is also attractive. There is room for the other businesses to recover in 2H23.

• KE Holdings (Beike) reported 2Q23 GTV 5.6% lower than our estimate, revenue (2.6%)/0.4% vs. our estimate/consensus, and non-GAAP NI 21.8%/42.9% higher than our estimate/consensus. 
• We think 3Q23 is the trough and expect a rebound in 4Q23 as more substantial supportive policies laying out in China. 
• We maintain the stock as BUY rating and raised TP by US$2 to US$24/ADS

• In this insight we analyze the drivers of a new relationship between SHEIN and Forever 21
• We think SHEIN agreed to the deal in part to become more “mainstream” in the US
• We also believe SHEIN takes seriously the legal and political risks it faces ahead of US IPO

• Aier’s revenue would be up 20%+ YoY in 2023, but one risk is the slowing growth rate of refractive/other consumption upgrading projects in the context of sluggish consumption in 23H2.
• The positive impact of aging on performance would not be able to hedge against the negative impact of declining birth rate, ultimately leading to a decline in overall performance growth.
• When Aier’s external expansion model fails and endogenous growth is lower-than-expectation, we suggest that Aier increase dividends/stock buybacks instead of ineffective expansion. This would make Aier more attractive to investors.

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.

• O-Net Technologies (Group)