Daily Brief Equity Bottom-Up: JD.com (9618 HK) Earnings Preview: Weak Q4 and more

• We believe the revenue growth rate would still be low at 8.5% YoY in 4Q22, even lower than 11.4% YoY in 3Q22.
• However, we believe the growth rate of total revenue will be 10% in 2022, 15% in 2023, and 18% in 2024.
• We believe the stock has an upside of 47% for year end 2023.

• ChatGPT has focused the investment community on the potential of AI to drive business performance and investment returns.
• Forbes picked Adobe as its top AI pick in 2023. We pick Appier, which is a faster-growing alternative in the digital marketing space.
• Appier’s revenue grew by over 50% last year and unlike many SaaS companies, it is profitable.

• Having reached a 30 year high of 4% in December 2022, which is two times the BOJ’s target, Japanese companies are finding it hard to absorb cost inflation.
• This macro environment presents an opportunity to appreciate the few Japanese Food and Beverages companies that have managed to maintain average pricing growth even in a deflationary environment.
• With a lasting pricing-power and a relatively inelastic demand than competitors, we think Yakult Honsha (2267 JP) and Nissin Foods Holdings (2897 JP) are in a great position to outperform competition. 

• Baidu managed to deliver an all-around in the last quarter beat despite the fact that its financial performance was impacted by a challenging environment because of a rapid rise in COVID-19 cases as well as its impact on the broader economy.
• Both feeds distributed through the Baidu app and mobile search queries continued experiencing double-digit growth in the quarter.
• Baidu is expected to launch Ernie Bot, its new conversational AI bot, powered by its latest in-house large language models, to counter ChatGPT.

• In Q3 FY23, Aurobindo Pharma (ARBP IN) recorded net profit of INR4.9B (~$60 million), down 19% YoY. Consensus expected the company to report net profit of INR5.2B during the quarter.
• Net profit was negatively impacted by 51% YoY increase in R&D expenditure due to biosimilar pipeline progress. R&D expenses are expected to remain high over the next 6–7 quarters.
• The company had negative free cash flow of $82M. With lack of any immediate catalyst or shareholders’ reward, we don’t expect multiple expansion for Aurobindo Pharma at least in near-term.

AFT Pharmaceuticals (AFT) has announced it has received FDA approval for Maxigesic Rapid tablets, a quick-release version of its flagship Maxigesic product line. Notably, this marks the first regulatory win for AFT in the US (the world’s largest analgesic market), valued at c US$7bn. While AFT awaits Maxigesic IV’s clearance in the US, we expect this approval to help it build initial commercial traction in this high-margin market. The Rapid tablets, a patented combination of paracetamol (325mg) and ibuprofen (97.5mg), has been authorised for the treatment of mild-to-moderate acute pain. Negotiations with potential distribution partners are ongoing, with plans to release other dose versions in the future. The market has reacted positively to the news, with shares trading up by 10% at close of business.

• Alibaba managed to deliver an all-around beat despite experiencing significant challenges because of the rapid change in the Covid situation.
• The company delivered double-digit growth in its free cash flow and adjusted EBITA through operating efficiency and cost optimization.
• The strong net cash position of Alibaba is supported by its healthy cash flow generation.

• Booking reported a strong finish to 2022 as it delivered revenue and adjusted EBITDA above Wall Street expectations.
• Gross Booking increased as compared to the pre-pandemic time.
• Room night growth trends have strengthened in the quarter, with the improvements driven by the U.S. and Asia.

• BILI’s 4Q results missed expectations across key metrics from revenue and MAU growth to guidance for 2023
• The results suggest fast growth will not return in 2023 and an uncertain road to breakeven by 2024.
• Reiterate our bearish view on the stock and see further downside risks ahead.

• 4QFY22 results in-line with guidance and expectations; guidance for FY23 lower
• Growth outlook while weakening, is surprisingly stronger-than-expected
• Share price unlikely to move up materially due to overhang from Figma acquisition; but valuations seem fair given growth is holding up; fair value (FV) rises to USD365