Daily Brief Consumer: XPeng , JD Health International , Tencent Music and more

In today’s briefing:

[XPeng Inc. (XPEV US, SELL, TP US$9) Rating Change]: Strategic Options May Come Late and Uncertain
[JD Health (6618 HK, BUY, TP HK$52) TP Change]: A COVID Hiccup but Environment Is Turning Positive
[Tencent Music (TME US, BUY, TP US$9.7) Rating Change]: Unique Content Unlocked Paying Potential

[XPeng Inc. (XPEV US, SELL, TP US$9) Rating Change]: Strategic Options May Come Late and Uncertain

XPeng C3Q23 top line, non-GAAP operating loss and GAAP net loss in line, 28% and 68% worse than our estimates, main reason is G3’s End-Of-Production charge to the gross margin
We expect XPEV to experience tough transition in 2024 since product line which spans across sedan and SUV, shall experience severe competition at a time when its differentiation is eroding.
We prefer to wait out this period; we cut TP of XPEV from US$18 to US$9 and downgrade to SELL.

JDH reported C3Q23 top line and non-IFRS operating profit that are 39% and 34% of our C2H23 estimates. We cut C2H23 top line, non-IFRS operating profit and IFRS net income.
We keep 2024 top line unchanged but cut non-IFRS operating profit by 31% as we believe JDH might need to invest to explore new growth opportunities;
We cut TP from US$65 to US$52 but maintain BUY.

TME reported C3Q23 revenue, non-IFRS operating profit and IFRS net income inline, 12.9%, 2.3% vs. consensus. The bottom-line beat mainly due to the cost-effective operation and music subscription services.
We notice TME has become less reliable on live streaming and more on monetizing its user base through ARPU enhancement
We upgraded TME to BUY and raised the target price to US$ 9.7, implying a 21.1x PE ratio compared to its current trading at 17.8x in 2024.

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