Daily Brief China: Yashili International Holdings, China Vast Industrial Urban Development, Shede Spirits, CIMC Enric Holdings, Adaro Energy, WuXi AppTec Co. Ltd. and more

• Yashili International Holdings (1230 HK)‘s spread to China Mengniu Dairy Co (2319 HK)’s offer (HK$1.20) has widened to 10.1% due to doubts about the satisfaction of the remaining pre-condition.
• We think the delay in satisfying Dumex Key Condition is due to the glacial bureaucratic process. The pre-conditions long stop date is 31 July 2023, which provides sufficient time.
• Both Danone SA (BN FP) and Mengniu can waive conditions to satisfy the pre-condition. Both have the motivation to complete the transaction as it facilitates the unwinding of their partnership.

• On the 9 June, Urban planner China VAST Industrial Urban Development (6166 HK) received a pre-conditional Offer, by way of a Scheme, from China Jinmao Holdings (817 HK).
• On the 17 October, China Jinmao and China VAST announced that all pre-cons for the HK$2.40/share Offer had been fulfilled.
• The Scheme Doc is now out. The Court Meeting will be held on the 23 November. The IFA says fair and reasonable. This is done and trading tight to terms

• With the review period complete, we expect 18 changes to the index in December – most deletions are Financials, most inclusions are Industrials.
• The market volatility over the last couple of weeks has altered the sectoral breakup of the potential changes with Industrials gaining index spots at the expense of Consumer Staples.
• We see 5 of the potential adds being added to the MSCI China Index in February and 6 of the potential adds being added to the FTSE All-World/All-Cap in March.

• CIMC Enric Holdings (3899 HK) has a steady 3Q22 with good revenue growth for the chemical & environmental and liquid food segments. Management also said margin has expanded YoY.
• Overall order backlog of Rmb13.7bn is generally sufficient to cover individual segment’s revenue over the next 6-15 months, comfortably securing the growth prospects. 
• With significant overseas revenue, it is benefiting from depreciation of Rmb against the USD. It also anticipates a pick-up in domestic clean energy segment growth in FY23.

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.

• Adaro Minerals
• Greenland Holdings Corp
• Longfor Properties
• UPL Ltd

• WuXi AppTec’s 2022Q3 results beat the market expectations. The Company’s performance showed good recovery from the prior pandemic/lockdown, but it has not yet entirely reversed the trend of slowing growth.
• Wuxi AppTec has a problem of decreasing future gross margins. Although the Q3 results could bring short-term catalyst for WuXi AppTec’s share price, such rebound may not last long.
• We further analyzed WuXi AppTec’s business, and we remain to be conservative on the Company, because the whole outlook and investment logic of CXO have changed.