In today’s briefing:
- STAR50 Index Rebalance Preview: Sustaining Outperformance on Expected Impact
- L’Occitane (973 HK): Operational Update Shows Strong Growth Momentum
- Wuxi Biologics (2269.HK) – The Latest Updates Related to 2024 Performance Worth the Attention
- [Atour Lifestyle (ATAT US, BUY, TP US$37.5) ]: Hotel Scale Leverage Is Still the Main Driver in 2024
STAR50 Index Rebalance Preview: Sustaining Outperformance on Expected Impact
- The review period for the March rebalance ended 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
- We expect the index committee to continue using a 6-month minimum listing history resulting in three changes to the index.
- The potential inclusions have dropped but there has been significant outperformance versus the potential deletions. That could continue as positioning continues for the high expected impact on the stocks.
L’Occitane (973 HK): Operational Update Shows Strong Growth Momentum
- L’Occitane (973 HK) announced a strong 3QFY24 operational update last night. Share price is up 7% today and up 36% since interim results announcement late November last year.
- Sol de Janeiro, the Brazilian-inspired premium body care brand, continued to shine in the quarter, growing 199% at reported sales and 214% at constant currency.
- Recommend to take advantage of the current weak sentiment on such companies trading on the HK stock exchange but are actually not reliant on China in terms of business fundamentals.
Wuxi Biologics (2269.HK) – The Latest Updates Related to 2024 Performance Worth the Attention
- Li Ge has begun increasing his holdings, but we’re not sure whether this move is really confident about the prospects of WuXi Bio, or another buy low sell high/capital operation.
- The actual situation of WuXi Bio is not necessarily optimistic. Due to geopolitical risks, WuXi Bio has to start striving for more domestic orders. However, price reduction seems inevitable.
- Although WuXi Bio released optimistic expectations for 2024 project number/outlook, there may be another announcement of lower-than-expected performance in the future,which would be a devastating blow to investors’ confidence/management’s credibility.
[Atour Lifestyle (ATAT US, BUY, TP US$37.5) ]: Hotel Scale Leverage Is Still the Main Driver in 2024
- We expect Atour to report 4Q23 revenue 3.5% higher than consensus, and non-GAAP NI 15.1% higher than consensus, mainly due to (1) stable business travellers in tourism off-season;
- (2) raising retail sales drive up gross margin. We think hotel supply and demand will turn to equilibrium in 2024.
- Occupancy may stabilize but ADR will fall, especially economy hotels. Atour, however, will be immune to the price fall, in our view.
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