Daily Brief China: Star CM Holdings , PDD Holdings , Hopson Development, Fosun International, Ping An Insurance Group of, Keep Inc, Greentown China, Malo Medical Management and more

• STAR CM Holdings (6698 HK), a variety program intellectual property creator and operator, was listed last December and promptly gained 475% by early August. All good so far.
• Shares cratered on the 18 August (-23.4%) and are currently 76% adrift from its recent high. The reason? A viral clip from late pop diva Coco Lee discussing unfair treatment.
• The music competition show, in which Coco appeared, pushed back on any impropriety; however, its broadcaster has temporarily suspended the program. This is no easy fix.

• PDD reported blowout 2Q results with bottom line beating consensus by 40% thanks to stronger domestic marketplaces business, narrower losses incurred by TEMU and higher other income.
• 2Q results cleared much of our concern around PDD’s bottom line growth and we now see 2Q as the low point of earnings growth in FY23.
• We believe the company will report $9 billion net profit for FY23 and expect rounds of earnings revision by the street will further lift share price. US $120 price target.

Hopson’s H1/23 results were strong as expected, and will likely outperform those of many other POE developers. The top line grew 14% y-o-y to HKD 15.1 bn. Gross profit surged 75% to HKD 5.4 bn, with the gross margin rising by 12 ppts to 36%.

The company also managed to cut net debt by HKD 5 bn. We expect Hopson’s contracted sales and cash collection to be supported in the next 1-2 years by its high-quality land bank and CNY 47 bn of saleable resources. In addition, we believe the company faces low near-term repayment risk, given the limited ST bond maturities.

Our Credit Bias on Hopson is “Stable”. That said, we believe the bond price could be volatile amid the weak market sentiment and poor technicals. We maintain our “Hold” recommendation on the HPDLF curve.

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.

• Fosun International

• Weak results at Ping An Insurance across many divisions, with banking most important
• Life and Health negative insurance revenue delta, not offset by insurance cost delta
• Net asset growth is now at 5% YoY, from 9% YoY last year, from ~29% avg for years

• Keep Inc (3650 HK) , the largest online fitness platform in China, announced interim results for the six months ended Jun-23. The overall revenue growth is slowing down. 
• The company completed its Hong Kong IPO of ~10.8M shares at HK$28.92 (bottom of the range) and raised ~HK$192M (~$25M) of net proceeds. CICC led the offering.
• Keep appears well capitalized to outperform despite China’s temporary slowdown in fitness activities. I remain cautious on Keep stock after a downsized IPO, but I like the long-term fitness story. 

• Greentown China (3900 HK) is a high quality China property developer that is unfairly suppressed given the extreme pessimism of the sector. 
• Even though the overall sales of China property industry will likely continue to decline, the market is large enough that some developers could stand to gain massive market share. 
• The company trades at 2.5x 2024E PE, and 71% discount to NAV, with expected growth in net profit in 2023 and 2024. 

• Malo Medical Management (MMM HK) (MMM) is looking to raise around US$100m (estimated) in its upcoming Hong Kong IPO. The deal will be run by Haitong.
• MMM is a dental service provider in China. It ranked ninth among all private dental service providers and second among all premium dental service providers, as per F&S.
• MMM provides dental services to patients through a widespread network of Malo Clinic-branded specialty dental clinics. As of Apr 2023, it owned 29 dental clinics in 13 cities in China.

• PDD reported CY2Q23 top-line and non-GAAP net profit 28% and 58% vs. our est., and 21% and 44% vs. cons., respectively. 
• We raised our 2H23 forecasts for PDD because: 1) GMV growth hasn’t been significantly impacted by the current competitive landscape; 2) take rate could maintain a high level due to 
• Continuous optimization of ad products; and 3) new businesses such as Temu and Kuaituantuan (快团团) have fair growth. We maintain BUY and raise our TP to US$ 107.