In today’s briefing:
- Techtronic Industries (669 HK): JR Puts Down That Tool
- Alibaba (9988 HK): 3Q23, Growth Flat, But Margin Up, Buy
- Perfect Medical: Calm Start to the Year, Correction Provides Good Entry Point
- Baidu: Undervalued Cyclical Revenue Growth Acceleration and Margin Expansion Story
- Fangzhou Pre-IPO – The Negatives – Hard to Shake off Loss-Making Tendencies
- Guangzhou Tinci Materials GDR Listing Early Look – US$1.5bn Raising Could Further Aid Growth Plans
- Automaker GAC Seeks China-Made Chips to Ease Dependence on Foreign Suppliers
- Pharmaron Beijing Co Ltd (3759.HK/300759.CH) – Start to Enter a Vicious Circle
- Pre-IPO Fangzhou Group – The Business and the Concerns
Techtronic Industries (669 HK): JR Puts Down That Tool
- Jehoshaphat Research (JR) argues the case that Techtronic Industries (669 HK) has been engaged in “snowballing” to maintain margin growth.
- JR flags TTI is the only public company in the world (with over $1bn in revenues) exhibiting positive sequential gross margin change in every semi-annual period over ten years.
- Short interest had been picking up ahead of the short sell report. Shares fell 19% before being suspended in the afternoon session.
Alibaba (9988 HK): 3Q23, Growth Flat, But Margin Up, Buy
- Revenue grew by 2% YoY in 3Q22, as the decrease of online sales offset the increase of physical stores.
- The operating margin began to improve, as the company cut sales and marketing expenses in minor businesses.
- We believe the stock has an upside of 78% for March 2024 and the price target will be HK$170.
Perfect Medical: Calm Start to the Year, Correction Provides Good Entry Point
- A correction in Perfect Medical Health’s (1830 HK) share price recently has led to it trading at a decent multiple of 15.2x/11.6x FY23e/24e PE(x) with a 6.9%/9.1% FY23e/24e dividend yield.
- We estimate the lockdowns in China from Oct-Dec last year will impact the H2 FY23 result, leading to softer revenue growth of 4.8% for FY23 (profit 11% YoY).
- We are optimistic about China re-opening and cross-border travel and believe that >20% revenue growth can materialize in FY24, led by a recovery in China/HK revenue.
Baidu: Undervalued Cyclical Revenue Growth Acceleration and Margin Expansion Story
- Following several years of sustained revenue share loss, Search’s digital advertising revenue market share has stabilised, having seemingly retained its core advertising customers.
- With China’s economic growth recovery, Baidu is perfectly positioned to accelerate its core marketing revenue growth, which is also a high-margin operation.
- Baidu is set up for significant group margin expansion as the higher-margin core marketing business returns to positive annualised growth and it continues to expand AI Cloud margins.
Fangzhou Pre-IPO – The Negatives – Hard to Shake off Loss-Making Tendencies
- Fangzhou Group (FANGZHOU HK) is looking to raise about US$300m in its upcoming Hong Kong IPO.
- Fangzhou (FZ) is an online chronic disease management (CDM) service provider in China.
- In this note, we will talk about the not-so-positive aspects of the deal.
Guangzhou Tinci Materials GDR Listing Early Look – US$1.5bn Raising Could Further Aid Growth Plans
- Guangzhou Tinci Materials Technlgy (002709 CH) is looking to raise up to US$1.5bn in its upcoming Swiss GDR listing. Bookrunners on the deal are CICC, HSBC, and JPMorgan.
- As per the firm’s filings, it is to issue no more than 289m A-shares, or not exceeding 15% of the firm’s total ordinary share capital.
- In this note, we discuss the GDR’s timeline, and the firm’s recent financial performance.
Automaker GAC Seeks China-Made Chips to Ease Dependence on Foreign Suppliers
- Guangzhou Automobile Group Co. Ltd. (GAC) (601238.SH -0.51%) is working to get more domestically produced microchips into its vehicles.
- It relies on overseas suppliers for about 90% of its automotive chips.
- GAC Capital Co. Ltd. sees plenty of opportunity to increase the share of domestic chips in the automaker’s cars.
Pharmaron Beijing Co Ltd (3759.HK/300759.CH) – Start to Enter a Vicious Circle
- Pharmaron’s disappointing 2022 performance is just a start.Its business layout has always been “one step behind”. CGT cannot become the main cornerstone business supporting valuation growth for the next stage.
- The overall environment of CXO is different from that of the past. Even if Pharmaron finally achieves end-to-end integration,whether the prosperity of CXO industry still exists is a question mark.
- Pharmaron may have entered a vicious circle, so that it is very challenging to generate the expected results no matter which direction the Company tries to break through.
Pre-IPO Fangzhou Group – The Business and the Concerns
- Fangzhou initially launched online retail pharmacy to address the needs of chronic disease patients, and then expand to online chronic disease management. However,the investment logic of this business is problematic.
- Due to the low willingness to pay/high acquisition cost of C-end patients, it is difficult to achieve large-scale profits. Developing To B business would be important for Fangzhou’s future development.
- Either To B business or To C business, the key point is to accumulate/retain large physician resources, but Fangzhou hasn’t had “a panacea” in this regard.
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