In today’s briefing:
- 2024 High Conviction: VinFast (VFS US) – Heading for Trouble
- 2024 High Conviction: Long BYD and Short Tesla
- China Healthcare Weekly (Nov.24) – Gold Content Of License-Out Deals, NRDL Pricing Levels, CR Sanjiu
- Tongcheng Travel (780 HK): Rides on the Tourism Upswing
- China Consumption Weekly (27 Nov 2023): Trip.com, Xiaomi, IQiyi, Full Truck, Home Appliance Export
2024 High Conviction: VinFast (VFS US) – Heading for Trouble
- Vinfast (VFS US), a Vietnamese EV manufacturer and a majority-owned affiliate of Vingroup Jsc (VIC VN), completed its merger with Black Spade on 14 August.
- Due to the low float, the shares have been on a wild ride, with the last close of US$6.56 materially below the high of US$82.35 per share.
- VinFast remains an avoid due to related party-driven EV sales, declining customer traction, operating losses, cash burn, equity raise overhang and frothy valuation.
2024 High Conviction: Long BYD and Short Tesla
- Tesla Motors (TSLA US) market share in China has decreased and its 3Q23 operational data suggested it offered discounts to defend its market share.
- Albeit losing some market share, BYD (1211 HK) operational data is much more solid, even expanded its profit margin during a difficult environment in China.
- Tesla share price has outpaced BYD’s this year by 70%, it should reverse in the next year.
China Healthcare Weekly (Nov.24) – Gold Content Of License-Out Deals, NRDL Pricing Levels, CR Sanjiu
- It is the upfront payment rather than the total or subsequent milestone payments that indicates the gold content of license-out collaborations. We analyzed our criteria.
- Investors actually don’t need to worry too much about the NRDL negotiation results, because the NRDL price of domestic innovative drugs has become relatively stable. There are basically three levels.
- We analyzed key points about China Resources Sanju. Considering the impact of anti-corruption in 23Q3 and the weak performance of TCM formula granules business, 23H2 performance could be under pressure.
Tongcheng Travel (780 HK): Rides on the Tourism Upswing
- Tongcheng Travel Holdings (780 HK) is best positioned to capture post-COVID travel, especially in lower-tier cities. This is reflected in a 146.5% growth in 3Q23 adjusted net profit.
- The cooperation with Tencent (700 HK) continues to bear fruits and will drive accelerated momentum as it leverages on QQ Browser, Weixin mini-program, and Tencent Docs.
- 3Q23 net cash increased 1.5x from the end-FY22 level and now represents 10.9% of market capitalisation. Its earnings valuations are attractive relative to both growth and peers.
China Consumption Weekly (27 Nov 2023): Trip.com, Xiaomi, IQiyi, Full Truck, Home Appliance Export
- Trip.com’s domestic hotel bookings increased by 70% over pre-COVID 3Q19.
- Xiaomi’s revenue began to grow in 3Q23 after decreasing for five quarters.
- China home appliance export surged in October, for example, fridge export amount growing by 42% YoY.
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