Daily Brief China: Topsports International Holdings, Cainiao Smart Logistics, Gushengtang, Hopson Development, ZTO Express Cayman and more

• Topsports International Holdings (6110 HK) announced first half FY24 (fiscal year ending February) results last week, with net profit up 17% yoy.
• The company trades at a 7% dividend yield, backed by strong free cash flow.
• The stock is not only a yield play, but also a call option on the recovery of Nike and Adidas’ retail performance in China.

• In this insight we first consider which comparables are the most appropriate for CaiNiao
• We then discuss which valuation multiples make sense, plus some potential pitfalls 
• We believe CaiNiao and their bankers could justify a valuation up to 310 bn CNY

• 3Q23 is expected to achieve over 40% YoY growth. 2023 overall performance would be better than previous guidance- Revenue up 40+% YoY and adjusted net profit up about 45% YoY.
• With abundant cash flow, Gushengtang has increased dividend payouts and share buyback, indicating that the current stock price is undervalued and has not yet reflected its high growth expectations/healthy fundamentals.
• Gushengtang has cross-regional expansion capability. The “sustainability” + “high growth” of performance are worth noting. Depressed sentiment/complex external environment provide a good buying opportunity. Rebound in stock price is expected.

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.

• Hopson Development

• In this month’s Tracker, we focus on a new price war among the ‘sort & transport’ names
• Q3 ASPs at these express companies fell by -12% Y/Y, and volume growth softened
• We believe margins are under increasing pressure in China’s mainstream express segment