Daily Brief China: WuXi XDC Cayman , Zhejiang Expressway Co H, Hygon Information Technology C, Vinda International, Zeekr, China Feihe, Cainiao Smart Logistics Network, China Jinmao Holdings and more

• WuXi XDC Cayman (1877628D HK) is looking to raise up to HK$4.07bn (US$521m) in its IPO by selling 197.6m shares at HK$20.6/share, valuing the company at HK$24.67bn (US$3.16bn).
• WuXi XDC Cayman (1877628D HK) will not get Fast Entry to any indices but should be added to the HSCI and to Southbound Stock Connect in March.
• Inclusion in other indices will take longer with the highest probability of index inclusion starting in September 2024.

• Last week, Zhejiang Expressway Co H (576 HK) announced its rights offering on both its H-Shares and its A-Shares, previously mooted on 23 May, and the Circular on 26 June.
• The company applied, got CSRC approval on 5 Nov, announced the issuance on 6 Nov, and shares went ex- on 10 November. It’s probably unneeded, but it’s there. 
• The stock is cheap. The company will boost its payout ratio. And it isn’t that “heavy” a deal. The Rights Trading Dynamics may be interesting.

• With the review period for the December rebalance of the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) complete, there could be 13 changes for the index.
• We estimate one-way turnover of 1.94% at the December rebalance leading to a one-way trade of CNY 6.98bn. There are a lot of stocks with over 1x ADV to trade.
• Over the last 6 months, the potential adds and potential deletes have tracked each other and underperformed the index. Positioning has led to outperformance in the last week.

• Bloomberg reported Asia Pulp & Paper is the latest party to have expressed interest in acquiring Essity (ESSITYB SS)’s controlling Vinda International (3331 HK) stake at more than HK$20 per share.
• Vinda has three substantial shareholders. We think the most likely structure is a bidder acquiring Essity’s stake, which would trigger a mandatory general offer.
• Vinda’s recent update points to improving growth and margins. Peers and historical multiples imply a fair price range of HK$21-26 per share, a 7-32% premium to the last close.

• Zeekr, a premium EV brand by Geely Auto (175 HK) , aims to raise around US$500m in its US listing.
• Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
• In this note, we talk about the positive aspects of the deal.

• China Feihe (6186 HK) saw major derating (from around 20x PE to the current high-single-digit PE) coupled with sizable earnings drop (-28% yoy in 2022/-25% yoy in 1H23) since 2022. 
• The investment thesis or trade thesis here is a play on the rise of new born babies in 2024, the year of the dragon in China. 
• The margin of safety here is also high given a 7% forward dividend yield (Feihe has pledged to increase dividend payout ratio going forward).

• J&T debuted with a rich valuation, but little investor enthusiasm to date
• Focusing on J&T’s valuation alone could be a boon to CaiNiao’s valuation…
• …but, with few other comps, J&T’s lackluster early performance could be a drag

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.

• China Jinmao Holdings