Daily Brief China: Xinjiang Tianshan Cement A, Beijing Yuanxin Technology Group Co Ltd, Octillion Energy Holdings and more

In today’s briefing:

Quiddity Leaderboard CSI 300/500 Jun 24: SHORT CSI 300 Direct DELs Vs the Index
Pre-IPO Beijing Yuanxin Technology Group (PHIP Update) – Risk of Overvaluation and Poor Profit Model
Octillion Energy Holdings Pre-IPO – Over-Reliance on Top Customer and Lack of Competitive Edge

Quiddity Leaderboard CSI 300/500 Jun 24: SHORT CSI 300 Direct DELs Vs the Index

CSI 300 represents the 300 largest stocks by market capitalization and liquidity from the entire universe of Shanghai and Shenzhen Stock Exchanges. CSI 500 represents the next largest 500 names.
In this insight, we take a look at the potential ADDs/DELs for the CSI 300 and CSI 500 rebalance in June 2024.
I currently see 11 changes for the CSI 300 index and 50 changes for the CSI 500 index.

The essence of Yuanxin’s business is selling drugs.Although Yuanxin is backed by Tencent, it’s difficult to come up with more outstanding advantages to compete with Alibaba Health and JD Health.
We have doubts about Yuanxin’s core competitiveness and sustainable profitability, which are also far behind its peers. In our view, the market/investors may find it difficult to accept such stories.
Pre-IPO valuation level of Yuanxin has greatly exceeded the valuation of its drugstore business model. Yuanxin’s valuation should be lower than peers, or for example, P/S ratio of below 1x.

Octillion Energy Holdings (OE HK) is looking to raise US$400m in its upcoming Hong Kong IPO.
Octillion’s main revenue driver has been its EV battery systems with battery cells over the track record period, with a healthy balance sheet to support its cash burn.
However, its revenue growth fell off a cliff in 1H23 due to its heavy reliance on a single customer, which doesn’t appear sustainable, in our view.

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