Daily Brief Consumer: Alibaba Group Holding , Prosus NV, Meituan, Flair Writing Industries , paragon AG, Connect and more

• Optimism for improved shareholder returns through IPOs diminishes further as Alibaba (ADR) (BABA US) puts the Cloud spinoff on hold.
• Jack Ma’s sale of 10m ADS, representing 5% of his Alibaba holdings, sparks concern. Investors should worry about his lack of optimism.
• With the Cloud IPO on hold, Alibaba Group Holding (9988 HK) is vulnerable to numerous downside catalysts, as outlined below.

• The accretion trade is going to plan as Prosus NV (PRX NA) sells Tencent (700 HK); and Prosus and Tencent both back their own shares.
• Preceding my comments on Prosus/Tencent One are the current setup/unwind tables for Asia-Pacific Holdcos
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Alibaba’s cloud servers experienced downtime for more than three hours.
• Kuaishou achieved success in the Singles Day sales and we expect a high growth rate for “other revenue” in 3Q23.
• Tims China’s revenue grew strongly with aggressive expansion of new stores.

• We expect total revenue will grow by 24% in 3Q23, as catering has been recovering in China.
• We expect Meituan can still earn positive operating profit 3Q23, as the company cut salespeople’s bonuses.
• We also believe that the stock has an upside of 87% for year end 2024.

• Flair Writing Industries (1656496D IN) ‘s INR 5.9 bn upcoming IPO consists of fresh issue worth INR 2.9 bn and OFS worth INR 3 bn (at the upper end).
• The company is the largest pen manufacturer in India and one of the top three players in the Indian Writing Instruments Industry.
• While the company has shown a handsome growth since the pandemic, some operating metrics pertaining to employees don’t seem to add up.

Following a significant refocusing in recent years, paragon has returned to its core strengths as a supplier of electronic and kinematic content to major automotive producers globally. It seeks to address the global megatrends that are important to the automotive industry, namely climate change (CO2 reduction), digitisation, increasing comfort and urbanisation.

The FY23 results highlight continued growth in adjusted operating profit, management’s tight control of the business and the ongoing annual efficiencies being delivered. Smiths may also renew several long-term publisher contracts this year, which could imply visibility over at least 80% of annual revenues to 2029. Furthermore, development of new profit streams is beginning to create momentum, which may have the potential to more than offset the slow decline in core profits and support the dividend. Our valuation remains unchanged at 89p, representing c 90% upside.