Daily Brief China: XPeng, Acotec Scientific Holdings, Bilibili Inc, Li Auto, Tencent, Akeso Biopharma Inc, Seazen (Formerly Future Land), NetEase and more

• Hang Seng Indexes has changed the index handling treatment for Secondary Listings and Dual Primary Listings from the next rebalance in March.
• The changes could lead to an increase in the index weighting for Li Auto (2015 HK) and the inclusion of XPeng (9868 HK) at the March rebalance.
• The improved rankings for the Secondary and Dual Primary listings will lead to other changes to the index in March.

• Acotec Scientific Holdings (6669 HK), a Chinese medical technology company, has announced a Partial Offer from Boston Scientific (BSX US).
• The Offer Price for up to 65% of shares out is HK20/share, a 31.6% premium to last close, but below last year’s IPO price of HK$23.80/share. 
• Irrevocables who intend to tender a total of up to 60.14% of shares out. This includes the CEO and the key pre-IPO investor. 

• Acotec Scientific Holdings (6669 HK) disclosed a partial offer from Boston Scientific (BSX US) to acquire a maximum of 203.7 million shares at HK$20 per share.
• The partial offer is conditional on the offeror hitting 50.01% voting rights and approval by the requisite majority of shareholders. Irrevocables represent a minimum of 55.14% of outstanding shares.
• Despite the recent share price pop on the back of FDA approval for Vericor, the partial offer represents an all-time share price high. Therefore, the offer will be declared unconditional.  

• BILIBILI shares have rallied more than 200% since early November on prospects of China exiting zero-COVID, short covering, and accelerated breakeven timeline.
• Yet simply achieving breakeven doesn’t justify its US$10 billion valuation. It has to be accompanied by decent profitable growth – an unlikely scenario given the aggressive downsizing needed for breakeven.
• BILI’s businesses also entail structurally low margin. Stock could easily de-rate by 30% or more when growth euphoria recedes and disappointed profitability checks in during 2023.

• Hang Seng Indexes has changed the index handling treatment for Secondary Listings and Dual Primary Listings from the next rebalance in March.
• The change could result in Tencent Music Entertainment Group (1698 HK) replacing Ming Yuan Cloud Group (909 HK) in the index.
• There could be passive buying on Li Auto (2015 HK) and XPeng (9868 HK) due to an increase in the index shares with outflows on other index constituents.

• Bilibili is dismissing employees in live streaming, cartoon, and main station.
• The Chinese mobile game market began to expand, but the global market is shrinking.
• JD.com chairman reorganized its company, reducing the departments from eight to three.

• Akeso Biopharma Inc (9926 HK) and Summit Therapeutics entered into a collaborative and licensing agreement for AK112, which has set a new record for China’s innovative drug license-out cooperation. 
• While the market remained positive about the transaction, there are also doubts. We deep dive the potential logic of the deal. 
• We recommended investors not to neglect “the nature of the deal” and “the real motivation” behind. It’s also important to see whether the subsequent operations can make some achievements overseas.

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 Vanke
• Greenko Energy Holdings
• Powerlong Commercial Management Holdings
• Tata Motors ADR
• Yuzhou Group

• This is our first report on online gaming giant, NetEase.
• In the quarter, the new expansion packs unveiled for the summer holidays, the legacy PC side of the company, which includes New Westward Journey Online 2 and Fantasy Westward Journey Online, continues to attract players.
• Among other updates, NetEase has recently announced that the company’s game division, NetEase Games, acquired Quantic Dream, one of the world’s major independent video game developers.