In today’s briefing:
- Zhihu (2390 HK/ZH US)’s Cheeky Buyback
- Tencent/Netease: Zero for Major Names; Industry Revenue Growth Flattish in First Half
- The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (July 26)
- [Meituan (3690 HK, BUY, TP HK$160) TP Change]: Resilient Catering & Eased Competition Support Growth
- Consumer Tales #July21-26:Apple Falls from Top 5 in China, Xiaomi Tops India Smartphones
- [Kanzhun (BZ US, BUY, TP US$19) TP Change]: Impacted by Poor Macro but Still on Top of Competition
Zhihu (2390 HK/ZH US)’s Cheeky Buyback
- Back on the 19th July, online Q&A play Zhihu (2390 HK/ZH US) announced the buyback of 46.92mn ordinary A shares (15.9% of shares out) at HK$9.11/share (US$3.50/ADS).
- Assuming the buyback is fully taken up, chairman Yuan Zhou’s stake will increase to 44.4% from 42.9% currently (held via A shares and the weighted-voting B shares).
- The key condition is a simple majority vote from independent shareholders. Zhihu is sitting on net cash of US$764mn. A significantly larger buyback, or higher price, could have been initiated.
Tencent/Netease: Zero for Major Names; Industry Revenue Growth Flattish in First Half
- China announced game approval for the June batch. The number of games approved remained at a higher level than 2023.
- The pace of China game approval appears to have accelerated to the same level as pre-tightening. Of companies that we are monitoring, none got any approval.
- China’s CADPA published a semi-annual report pointing to flattish growth of gaming revenue in the first half.
The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (July 26)
- China’s National Team was steadily buying ETF’s during and after the Third Plenum. Southbound Connect Flows continue to be positive during July.
- Smoore International Holdings (6969 HK) , Xinjiang Goldwind Science & Technology (2208 HK) and Hisense Home Appliances Group Co., Ltd. H (921 HK) benefited from positive news sentiment this week.
- Chow Tai Fook Jewellery (1929 HK) and ASM Pacific Technology (522 HK) suffered on negative news, while Meituan (3690 HK) continued its pullback in concert with the retail food sector.
[Meituan (3690 HK, BUY, TP HK$160) TP Change]: Resilient Catering & Eased Competition Support Growth
- We expect Meituan’s C2Q24 rev. and non-IFRS NI to be 0.7% and 12.3% higher than cons, driven by resilient catering demand and eased competition.
- We expect Meituan in-store OPM improve to 33%/35% in 2Q24/2H24 supported by increasing commission rate and cutting BD cost.
- We maintain the stock as BUY rating and raise TP by HK$4 to HK$160/share to factor in the better profitability.
Consumer Tales #July21-26:Apple Falls from Top 5 in China, Xiaomi Tops India Smartphones
- Welcome to Consumer Tales & Trends, your weekly roundup of the latest corporate developments, investment reports and sector events in the consumer industry.
- An interesting comparison between China and India smart phone markets in 2Q 2024 – highlighting differences in market size and the dominance of leading players.
- Xiaomi Corp(1810 HK) made a strong come back in 2Q24 in terms of sales in both the markets. In China, it saw a 17% year-on-year increase, shipping 10 million units.
[Kanzhun (BZ US, BUY, TP US$19) TP Change]: Impacted by Poor Macro but Still on Top of Competition
- Due to weakening hiring demand from both manufacturing and service, we expect BZ’s cash billing to decline 5% QoQ in 2Q24, 9% below consensus.
- We believe BZ’s user matrices still growing and leading. The weakness is mainly attributable to the employer/hiring side;
- We cut TP by US$3 to US$19/ADS while keep the BUY rating.
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