Daily Brief China: Tencent, Semiconductor Manufacturing International Corp (SMIC), Baidu , Shenzhou Intl Group Holdings, Vedanta Resources, 4Paradigm, Shiyue Daotian, EC Healthcare, China Petroleum & Chemical Cor, Huawei Technology and more

• China just announced game approval for September batch. The number of games approved is in-line with the pace of approval in recent month.
• Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
• Neither Tencent or Netease received approval for any game. Same thing happened for July batch.

• The latest Mate 60 Kirin SOC is a major accomplishment for the Huawei, SMIC combo
• SMIC will likely continue to refine their N+2 node and develop a 5nm-like process within 2-3 years, even without the use of EUV
• SMIC’s accomplishment is not reflected in its share price which lies midways between 52 week highs & lows

• After a heavy decline in ownership between 2016 and 2020, active Asia Ex-Japan managers are re-engaging with Baidu Inc.
• Ownership levels are at 4-year highs, with Baidu one of the key beneficiaries of manager rotation this year.
• Baidu is the 3rd largest holding in the Communication Services sector, but there a plenty of funds with a history of ownership who remain on the sidelines for now.

• Nike (NKE US) reported better than expected 1Q24 results this morning, with the stock up 8% in after market trading. 
• Nike’s inventories declined by 10% yoy during the quarter, which bodes well for Shenzhou Intl Group Holdings (2313 HK), as sales to Nike made up 30% of Shenzhou’s sales.
• Shenzhou is trading at 15x 2024E PE, compared to an average of 21x forward PE over the last decade. 

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Vedanta Resources
2. Tata Steel Ltd
3. JSW Steel Ltd
4. China Jinmao Holdings
5. Geely Auto

and more…

• 4Paradigm, a self-developed AI platform and scenario-specific AI applications provider, has completed an IPO and raised net proceeds of ~HK$836M, excluding the over-allotment option. 
• Founder-Led AI unicorn priced its IPO at the bottom end of the range at HK$55.60 per share. Cornerstone investors agreed to purchase ~13.6M H shares at the IPO price. 
• I like the company’s leadership position in China’s fastest-growing decision-making AI market, large TAM for their enterprise-grade generative AI offering SageGPT and top-tier VC investors. 

• Shiyue Daotian (1892269D CH) is looking to raise up to US$108m in its Hong Kong IPO, after downsizing from an earlier reported float of US$200m.
• Shiyue Daotian is a pantry staple food company in China, providing consumers with pre-packaged premium rice, whole grain, bean, and dried food products.
• In our previous notes, we covered the company’s performance. In this note, we will cover the firm’s PHIP updates and share our thoughts on valuation.

• EC Healthcare (2138 HK) reported record high revenue of HK$3.9B in FY23 and started FY24 on a strong note, with Q1FY24 revenue increasing 23% YoY, driven by medical services segment.
• Cost pressure is negatively impacting the bottom line. The company is reporting decelerating EBITDA and net profit margins since FY20. ROE deteriorated to 4.5% in FY23 from 33% in FY19.
• The company is well-positioned to see turnaround in profitability with the resumption of Mainland China visitors in Hong Kong providing impetus to high margin earning aesthetic business and cost optimization.

• China Petroleum & Chemical Corp., the state-owned energy giant known as Sinopec, is making a bigger push into a renewable energy generated by heat within the earth as the country looks to diversify its sources of green energy.
• Sinopec’s push could serve as a catalyst for fast-tracking the exploration and use of geothermal energy, and spur the development of related technologies in the country, experts said.
• The company said on social media on Sept. 14 that it was expecting a “major development” in its geothermal heating segment and that it was on track to expand its service to more than 60 cities in over 10 regions in China by the end of the year.

• Huawei Technologies Co. Ltd. launched a line of new products this week, including a tablet and smart TV, powered by self-developed chips, in its latest show of semiconductor self-sufficiency in the face of U.S. sanctions.
• The fall season launch event on Monday came a month after the tech giant made headlines with the rollout of its new flagship smartphone the Mate 60 Pro — a handset using Huawei’s own Kirin 9000s chip that reviewers claimed can rival 5G speeds.
• During the launch event, the head of Huawei’s consumer division, Richard Yu, spent much of his time on stage measuring the company’s new MatePad Pro tablet against Apple’s iPad Pro.