Daily Brief China: Shanghai Henlius Biotech , Xiaomi Corp, Sun Art Retail, Trip.com, Full Truck Alliance , China International Capital Corporation, Sciclone Pharmaceuticals, China Vanke and more

• Biopharmaceutical outfit Shanghai Henlius Biotech (2696 HK) is currently suspended pursuant to the Takeovers Code.
• Shanghai Fosun Pharmaceutical (Group) (2196 HK) holds ~60% in Henlius, mostly via domestic shares. Co-founders and Qatar Authority hold ~28% and 8% the H shares respectively.
• IF an Offer were to unfold, it would be the third in this space in the past two months, after Offers for Sciclone (6600 HK) and Yichang HEC (1558 HK),

• Shanghai Henlius Biotech (2696 HK) entered a trading halt “pending the release of an announcement pursuant to the Code on Takeovers and Mergers.” The likely bidder is Fosun Pharma.
• A merger by absorption would require approval by at least 75% independent H Shareholders (<10% of all independent H Shareholders rejection). There could also be a 90% minimum acceptance condition. 
• The shares are 62% below the IPO price. However, shareholders with blocking stakes would welcome an offer suggesting a 30-40% takeover premium would be sufficient.

• Total revenue growth rate climbed up 27% YoY in 1Q24 with all businesses growing strongly.
• Smartphone shipments grew by 34% YoY and achieved global No. 3.
• In 1Q24, the gross margins of all major businesses obviously improved.

• Sun Art Retail (6808 HK)‘s FY24 (fiscal year ending March) numbers were overall unimpressive, with sales down 13% yoy and net loss increasing to RMB1.6bn.
• The new CEO’s strategy is to refocus on SSSG of offline traffic and restore price competitiveness.  April and May SSSG improved. 
• The stock is up 20% since my initial insight on the name in March, and I believe more upside remains.

• In a tough macro environment with travel as perhaps the only bright spot in consumption
• However, equally compelling is the demand negatives of overseas travel as a somewhat luxurious consumption item and tough competition at home;
• Given the stock’s valuation, we maintain the rating as SELL but raise TP to US$45/ADS, implying 2025 PE of 15x.

• FTA’s revenue growth accelerated in Q124 and exceeded management guidance
• Gross and OpInc margins (cash basis) both improved sharply in Q124
• Growth, profitability, mix improved, but FTA no longer so cheap; HOLD

• China International Capital Corporation (3908 HK) is a laggard among the Chinese securities companies. With the rebound in HSI and Shanghai Composite, such divergence should narrow.
• The investment banking business should recover following the rebound in the secondary market and equity valuations. HK’s IPO funds raised are forecast to double in 2024.
• At 0.4x 12-month P/B, the market has deeply discounted CICC’s earnings outlook. However, as earnings recovery will be fast, its share price will react rapidly.

• On the 28th March, Li Zhenfu (SciClone (6600 HK)‘s NED), Assicurazioni Generali (G IM), and concert parties (collectively controlling 36.61%), made an Offer at $18.80/share, a 33.9% premium to undisturbed. 
• The Offer price is bang in line with SciClone’s March 2021 IPO price. Terms were declared final. This is a clean deal.
• The Scheme Document is now out. The Court Meeting will be held on the 19th June. Expected payment on or before the 12 July. FWIW: IFA says fair & reasonable.

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
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