In today’s briefing:
- 2024 High Conviction: China Tourism Group (601888 CH, BUY, TP:CNY106): See the Forest for the Trees
- [Meituan (3690 HK, BUY, TP HK$118) TP Change]: Deeply Cultivate Domestic While Wait for Overseas
- Asian Dividend Gems: Fufeng
- China Healthcare Weekly (Dec.1) – Medical Device VBP, Biotech to Breakeven Soon, Orient Gene Biotech
- 3Q Follow-Up – D. Western Therapeutics Institute (DWTI) (4576 JP)
- [Bilibili Inc. (BILI US, SELL, TP US$9) Target Price Change]: Niche Player Faces Market Saturation
2024 High Conviction: China Tourism Group (601888 CH, BUY, TP:CNY106): See the Forest for the Trees
- China stock market despair has brought down China Tourism Group Duty Free Corp Ltd (601888 CH) to its lowest forward valuation in the past ten years
- Poised for long-term growth, Chinese are buying albeit more prudently, government supportive on promoting domestic consumption, efficiency enhancements will lower cost and boost margins
- Using the company’s lowest recorded PE ratio in the past 10 years of 23.2x into FY24, we derive a target price of CNY106 (+21% UPSIDE)
[Meituan (3690 HK, BUY, TP HK$118) TP Change]: Deeply Cultivate Domestic While Wait for Overseas
- Meituan reported C3Q23 top line (1.0%)/0.6% vs. our estimate/consensus, non-GAAP net income (9.7%)/8.3% vs our estimate/consensus. Subsidies and investment in in-store business is the main reason for bottom-line miss.
- Meituan in-store GTV increased 90% YoY in 3Q23, effectively counteracted Douyin’s attack and maintained size ratio at 3:1 vs. Douyin in-store, which scarified profit.
- Meituan OPM lowered 2.5ppt QoQ to 4.4% in 3Q23, and we expect it decline to 2.4% in 4Q23.
Asian Dividend Gems: Fufeng
- Fufeng (546 HK)’s core businesses include food additives such as MSG, animal nutrition, high-end amino acids, and colloid such as xanthan gum.
- Xantham gum is increasingly becoming popular as millions of people around the world purchase gluten free foods.
- Fufeng’s dividend yield averaged 7.5% annually from 2018 to 2022. Its current dividend yield is about 11-12%. Fufeng is trading at P/E of 2.9x and EV/EBITDA of 1.8x in 2024.
China Healthcare Weekly (Dec.1) – Medical Device VBP, Biotech to Breakeven Soon, Orient Gene Biotech
- The national centralized procurement of high-value medical consumables for intraocular lens (IOL) and medical consumables related to sports medicine released results, with lower than expected price reductions.
- Despite anti-corruption campaign, the business/profit model validation process of Chinese Biotech has not slowed down. There’s a chance to see Chinese Biotech turn losses into profits in 2024-2025.
- Zhejiang Orient Gene Biotech (688298 CH) once brought considerable returns to investors, but now the beautiful story is over.After deletion from CSI Medical Service Index, share price could remain weak.
3Q Follow-Up – D. Western Therapeutics Institute (DWTI) (4576 JP)
- Major milestones with high expectations coming in the next 2-3 years: 1) Phase IIb US trials for H-1337 as “first choice as a second-line Glaucoma drug” for patients who do not respond to PGs
- 2) 2023 application, 2024 approval and 2025 launch of DW-1002 in Japan, 2023 application/approval/launch in China, as well as expedited development of combination formula MembraneBlue-DualR (DW-1002 + trypan blue) in the US [NEW]
- 3) clinical trials in 2024 in Japan and application for approval in 2025 of regenerative cell medicine DWR-2206
[Bilibili Inc. (BILI US, SELL, TP US$9) Target Price Change]: Niche Player Faces Market Saturation
- Bilibili reported C3Q23 revenue, operating profit, and GAAP net income inline, 4.37%, (21.6%) vs. consensus. The miss was primarily due to ineffective investment in game studio and related costs.
- We are bearish on BILI’s game pipeline as ACGN is already a crowded market with well-entrenched competitors
- We maintain our SELL rating and cut the TP from US$ 12.3 to US$ 9.04, and consider that it is unlikely for them to breakeven in 2024
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