Daily Brief China: XPeng , Shanghai United Imaging Health, Sino-Ocean Group, AAC Technologies Holdings, Lianlian DigiTech and more

• VW’s long-term software dilemma caused delays of new EV model launch. Thus, leveraging established software capability of Xpeng could help VW catch up and shorten its R&D cycle.
• We see two benefits for Xpeng: 1) a new revenue stream from tech licensing and potential reduction of supply chain costs; 2) VW’s endorsement  could help Xpeng’s overseas expansion.
• We think the potential of Xpeng’s high-margin tech licensing being opened to more VW models and other OEMs. Our TP implies 2.5x 2024PS

• 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 December 2023.
• I currently expect 13 ADDs/DELs for CSI 300 and 50 ADDs/DELs for CSI 500. 

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.

• Sands China
• Sino-Ocean Service
• SK Hynix
• O-Net Technologies (Group)
• Yuexiu Property

The Asia HY Trade Book for July 2023 includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds across Asia (ex-Japan) HY and crossover credits.

• Lianlian DigiTech (2104619D CH), a digital payment services provider in China, has filed for an HKEx IPO to raise US$500 million, according to press reports.  
• In LianLian DigiTech IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The key elements of the bear case rest on margin pressure on the fastest-growing business, operating losses, an unconvincing path to profitability, FCF burn with a weak balance sheet.