In today’s briefing:
- WeRide Pre-IPO – The Positives – Large Monetisation Opportunity on the Horizon
- Budweiser APAC (1876 HK): Weak 2Q2024. Premium Beer, Cheap Valuations
- DPC Dash (1405.HK): 1H24 Profit Alert Validating Investment Case
- WeRide Pre-IPO – The Negatives – Losses Have Widened, Still in the Early Stages of Commercialization
- [Luckin Coffee (LKNCY US, SELL, TP US$16.5) TP Change]: Milkteaization Diminishes Differentiation
- China’s Giant Invests $690 Million in Dry Docks as Tide Turns For Shipbuilding
- International Housewares Retail (1373 HK): Inflection Point In Earnings, 8.8x PE, 9% Div Yield
WeRide Pre-IPO – The Positives – Large Monetisation Opportunity on the Horizon
- WeRide Corp (WER CH) is looking to raise around US$300m in its upcoming US IPO.
- WeRide provides autonomous driving products and services from L2 to L4 of driving automation.
- In this note, we will talk about the positive aspects of the deal.
Budweiser APAC (1876 HK): Weak 2Q2024. Premium Beer, Cheap Valuations
- Budweiser Brewing APAC (1876 HK)‘s performance could improve from 2H2024, driven by a likely recovery in China’s premium beer market and favourable commodity prices.
- Stock’s upside potential from current price levels seem to outweigh downside risk.
- With a high dividend payout and strong free cash flow generation, Budweiser trades at a 5% dividend yield and an 11% FCF yield.
DPC Dash (1405.HK): 1H24 Profit Alert Validating Investment Case
- Company issued 1H24 profit alert after market yesterday which significantly beat even the high-end sell-side expectations.
- Impressive SSSG and store-level unit economics imply sizable potential for operating leverage and earnings growth in the mid to long term.
- The profit alert, along with 2Q operating data released earlier, reinforced our confidence in earnings estimates of RMB130 million/RMB300 million for FY24/25 respectively.
WeRide Pre-IPO – The Negatives – Losses Have Widened, Still in the Early Stages of Commercialization
- WeRide Corp (WER CH) is looking to raise around US$300m in its upcoming US IPO.
- WeRide provides autonomous driving products and services from L2 to L4 of driving automation.
- In this note, we will talk about the not so positive aspects of the deal.
[Luckin Coffee (LKNCY US, SELL, TP US$16.5) TP Change]: Milkteaization Diminishes Differentiation
- Luckin’s SSSG declined 20.9%YoY in the peak season, indicating diseconomies of scale for Luckin and a deteriorated competitive environment. We do not expect a quick turnaround in the near term.
- We think Luckin has limited capability to further raise its prices in 3Q24, and expect its NPM to be 11.9%/7.1% in 3Q24/4Q24 as the new norm.
- We keep SELL rating and lower TP to US$16.5/ADS. The stock trading at 20x/16x PE in 2024/2025, and we expect the NI to increase 15%CAGR in the next 2 years.
China’s Giant Invests $690 Million in Dry Docks as Tide Turns For Shipbuilding
- China’s state-owned shipbuilding giant, China Shipbuilding Industry Co. Ltd. (601989.SH +2.12%), is to invest more than 5 billion yuan ($690 million) in two acquisition deals to expand its shipyard capacity and meet rising demand.
- China Shipbuilding Industry, the Shanghai-listed arm of China State Shipbuilding Corp. Ltd. (CSSC), announced Saturday a 4.04 billion yuan acquisition of Tianjin Xingang Shipbuilding Heavy Industry Co. Ltd.’s assets in Lingang, northern China’s port city Tianjin.
- The purchase includes a 500,000-ton and a 300,000 ton dry dock, each equipped with two gantry cranes, as well as associated plants, outfitting quays, ship repair docks, sea outlet docks and other shoreline facilities, according to the company’s filing.
International Housewares Retail (1373 HK): Inflection Point In Earnings, 8.8x PE, 9% Div Yield
- FY24 marked a new low in earnings for International Housewares Retail (1373 HK), with core earnings falling 38% YoY to 101 mn HKD, placing it at 8.8x PE trailing.
- Management continues to maintain an 80% payout, placing the stock at a ~9% dividend yield. It has more than 300 mn HKD of net cash (34% of Mkt cap).
- The stock has been decimated and is down 63% from its peak in 2021. Earnings inflection looks around the corner.
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