Daily Brief China: SSE STAR50, China Conch Venture Holdings, China Merchants Bank A, Tuhu Car, S.F. Holding, Greentown China, Hangzhou Tigermed Consulting C, Yuexiu Property and more

• Nearly US$20bn has flowed into mainland China listed ETFs since 18 July and could be driven by the National Team supporting the market.
• Most of the inflows have been focused on large cap indices including CSI 300, STAR50, CSI 500, SSE50, ChiNext and other sectoral and thematic ETFs.
• The largest impact has been on the SSE STAR50 (STAR50 INDEX) constituents, but that has not stopped the slide in the stocks.

• The China Conch Venture Holdings (586 HK)/ Anhui Conch Cement (600585 CH) ratio, and the implied stub, are now at all-time lows.
• Preceding my comments on China Conch/Anhui are the current setup/unwind tables for Asia-Pacific Holdcos. 
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• New results detail from CMB shows divergence with credit quality and actual credit costs
• The bank saw its credit costs decline 25% YoY despite higher Loss and Doubtful Loans YoY
• Property development NPLs surged from 4.1% to 5.5% at 1H23 HoH, to RMB19.6bn in total

• Tuhu Car (2007986D HK) is looking to raise up to US$300m in its upcoming Hong Kong IPO. 
• Tuhu is an integrated online and offline platform for automotive services in China.
• We have looked at the firm’s past performance in earlier notes. In this note, we discuss the PHIP updates.

• SF Holding’s HK listing document provides added details of current international revenue 
• Two recent moves show SF’s intent to raise international sales (and reduce China exposure)
• As SF Holding courts a global investor base, its comps will become the global express names

Greentown China has released H1/23 results that were in line with expectations. Contracted sales rose 16% y-o-y, driven by higher ASP (+19%), but offset to a degree by less GFA sold (-1%). The company added CNY 57 bn saleable resources with total GFA of 2.57 mn sqm. Revenue fell 12% to CNY 57 bn, primarily due to a CNY 7.9 bn slide in revenue from property development. Gross profit also decreased 12% to CNY 9.92 bn, with a largely stable margin (16% vs. 16.5% in H1/22).

We believe Greentown will continue its strategy of clearing inventories and delivering homes through H2/23. The company’s ability to deleverage will be impacted by the scale of its land acquisitions. In this regard, Greentown could expend up to 40% of its sales proceeds on acquisitions. That said, the level may be tempered by any further deterioration in the residential housing market.

• In 23H1, Tigermed’s net profit attributable to shareholders has changed from a negative growth trend in 2022. However, net profit growth brought by its main CRO business was not impressive.
• With the reform of domestic new drug approval policies, domestic CRO demand would decrease. Since Tigermed mainly provides early-stage CRO services, it’s more susceptible to negative changes of financing environment.
• Tigermed’s performance growth would slow down in 2023. Although valuation is in the bottom range, we recommend investors to take profits in time for any rebound in the stock price.

Yuexiu Property’s (YXP) H1/23 results were largely in line with expectations. Overall revenue climbed 2.6% y-o-y to CNY 32.1 bn, driven by strong growth in property management, rental income and real estate agency & decoration services. However, sales from property development remained stagnant at CNY 29.8 bn (H1/22: CNY 29.8 bn). The company encountered ongoing margin pressure, largely due to falling profits and margins for the property development business, which we believe is in line with the overall industry trend.

We note positively YXP’s CNY 221 bn in unrecognised sales, which could have positive implications for steady revenue growth in the near to medium term. The company appears to have resilient access to capital markets. Liquidity was boosted as at end-June 2023, by a c. 39% y-o-y increase in cash to CNY 30.3 bn. The debt structure improved, with exposure to ST debt narrowing to 12% of total debt.

The 2023 notes are trading near par (yielding 7-8%). The YUEXIU 2.8 26 are quoted at c. 90.6 (yielding 6.9-7.2%), while the 2031 notes are trading at c. 80 (yielding c. 7.5%). We view the pricing as fair, and maintain our “Hold” recommendation on the YUEXIU curve given the current weak market technicals.