In today’s briefing:
- [Alibaba (BABA US, SELL, TP US$72) Rating Change]: The Casualty of Era…Downgrade to SELL
- [Tencent(700 HK, BUY, TP HK$432)Target Price Change]: More Sustained Growth Doesn’t Mean Slow Growth
- [Blue Lotus Multi-Platform Sector Update]: Key JD Categories Will Grow Again in 2024
- [XPeng Inc. (XPEV US, SELL, TP US$9) Rating Change]: Strategic Options May Come Late and Uncertain
- China Healthcare Weekly (Nov.17) – 2023 NRDL Negotiation, Financing Data Won’t Lie, Intco Medical
- [JD Health (6618 HK, BUY, TP HK$52) TP Change]: A COVID Hiccup but Environment Is Turning Positive
- Bangkok Dusit Medical Services (BDMS TB): Highest Ever Quarterly Sales in 3Q; 2023 Guidance Raised
- [Tencent Music (TME US, BUY, TP US$9.7) Rating Change]: Unique Content Unlocked Paying Potential
- [Atour Lifestyle (ATAT US, BUY, TP US$37.5) Target Price Change]: Brand Value Brings Premium Sales
[Alibaba (BABA US, SELL, TP US$72) Rating Change]: The Casualty of Era…Downgrade to SELL
- BABA reported C3Q23 revenue, non-GAAP operating profit and GAAP net income in-line, 6% and (7%) vs. our est., and in-line, in-line and (14%);
- Instead of appointing capable management to oversee key subsidiaries, BABA backpedalled to call off its spin-off plans;
- We cut TP from US$ 127 to US$ 72, and downgrade to SELL.
[Tencent(700 HK, BUY, TP HK$432)Target Price Change]: More Sustained Growth Doesn’t Mean Slow Growth
- Tencent reported C3Q23 revenue, non-IFRS operating profit and IFRS net income (2.4%), 8.9% and 17% versus our estimates. The bottom-line beat was mainly due to the growth of high-margin businesses;
- We view commercialization of Video Accounts and expansion of overseas gaming are still at early stage.
- Progression of these high-margin, high-quality business will persist into 2024; We maintain BUY but raise target price to HK$ 432.
[Blue Lotus Multi-Platform Sector Update]: Key JD Categories Will Grow Again in 2024
- JD.com reported in-line revenue and a non-GAAP net profit beat of 12% vs. consensus, mainly due to the 145% beat by subsidiary JD Logistics (JDL).
- 3Q GMV grew low-single digit and growth could remain similar in 4Q given the high-COVID related FMCG base. JDs GMV may reaccelerate in 2024 as smartphone and FMCG growth returns.
- Meanwhile, JD lowered the minimum spend required for free shipping, which we expect to lead to accelerate parcel volume growth for JD Logistic.
[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.
China Healthcare Weekly (Nov.17) – 2023 NRDL Negotiation, Financing Data Won’t Lie, Intco Medical
- The 2023 NRDL negotiation has officially begun since Friday. Pharmaceutical enterprises predict the price reduction would be more reasonable. But some company representatives were dissatisfactory with first-day negotiation results.
- Although there’re many optimistic judgments about the improved financing environment in both China and overseas markets, this may not be the case. Based on the data, we remain cautious instead.
- As the disposable glove market gradually shows a warming trend, we are optimistic that Intco Medical would achieve a performance reversal in the future. The current valuation has bottomed out.
[JD Health (6618 HK, BUY, TP HK$52) TP Change]: A COVID Hiccup but Environment Is Turning Positive
- 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.
Bangkok Dusit Medical Services (BDMS TB): Highest Ever Quarterly Sales in 3Q; 2023 Guidance Raised
- Bangkok Dusit Medical Services (BDMS TB) reported Q3 revenue of RHB26.7 billion, up 11% YoY, driven by international and Thai patients revenue growth of 19% and 9%, YoY, respectively.
- International patient revenues increased from a recovery of fly-in patients from Qatar (+81% YoY), China (+42% YoY), and Cambodia (+11% YoY). Moreover, Thai patient revenue was aided by seasonal epidemics.
- BDMS has revised 2023 hospital revenue growth guidance upward to 9–10% YoY from 6–8% previously. However, EBITDA margin guidance was kept unchanged at ~24%.
[Tencent Music (TME US, BUY, TP US$9.7) Rating Change]: Unique Content Unlocked Paying Potential
- TME reported C3Q23 revenue, non-IFRS operating profit and IFRS net income inline, 12.9%, 2.3% vs. consensus. The bottom-line beat mainly due to the cost-effective operation and music subscription services.
- We notice TME has become less reliable on live streaming and more on monetizing its user base through ARPU enhancement
- We upgraded TME to BUY and raised the target price to US$ 9.7, implying a 21.1x PE ratio compared to its current trading at 17.8x in 2024.
[Atour Lifestyle (ATAT US, BUY, TP US$37.5) Target Price Change]: Brand Value Brings Premium Sales
- Atour reported 3Q23 revenue 6.4%/17.1% higher than our estimate/consensus, non-GAAP NI 5.5%/9.1% higher than our estimate/consensus.
- We expect Atour 4Q23/2023 RevPAR recovered to 107%/114% of 2019 level, and revenue to increase 104%/96% YoY respectively.
- We maintain the stock as BUY rating, and raised TP by US$1 to US$37.5, reflecting the rapid growth of retail product sales.
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