In today’s briefing:
- Over Capacity in Chinese Auto Market
- Consumer Tales & Trends #July 11-20: THBEV SP Swap Deal, Bad Debts in Thailand, AI in Beauty.
- Brilliance China Automotive (1114 HK, NEUTRAL, TP:HKD3.90): Go for the >15% Dividend Yields
- China Healthcare Weekly (July.21)-Rumor About Akeso, Takeover Bid for Legend Bio, InnoCare’s Trouble
- Baidu Teams Up With Hesai Group For Its Robotaxi Platform Yichi 06: A Big Win For Hesai Group
- Zhongsheng Group Holdings (881 HK, BUY, TP:HKD15.0): Challenging Outlook and Reflected in Valuation
- LiAuto (LI US, BUY, TP:USD25.0): High Growth + Deep Value Stock
- CrowdStrike: A Once-Promising Cybersecurity Titan’s Fall From Grace
Over Capacity in Chinese Auto Market
- News show that European car makers such as BMW is moving out of China, leaving the Auto market to the local players
- Stocks like Brilliance China will suffer losses as they lose some of the most famous co-brand.
- Foreign firm exits may give relief to local auto makers as it resolves part of the over-capacity problems
Consumer Tales & Trends #July 11-20: THBEV SP Swap Deal, Bad Debts in Thailand, AI in Beauty.
- Welcome to Consumer Tales & Trends, your weekly roundup of the latest corporate developments, investment reports and sector events in the consumer industry.
- Thai Beverage (THBEV SP)‘s proposed swap deal with promoter company raises several questions for shareholders. Start with the back story about how Fraser And Neave (FNN SP) joined the group.
- Bigger weddings could become a trend in India – Read why we like Kalyan Jewellers(KALYANKJ IN) . Also, household debt in Thailand as % of GDP is highest in ASEAN.
Brilliance China Automotive (1114 HK, NEUTRAL, TP:HKD3.90): Go for the >15% Dividend Yields
- Business is struggling due to legacy luxury brands such as BMW losing its positioning in China. Local brands are eating into market share fast.
- Thankfully, the company is cash rich and its trading nature enables steady supply of dividends and have been known to pay special dividends.
- Share price has been under pressure, now trading at ~15% dividend yield based on 50% payout, appealing to yield seekers.
China Healthcare Weekly (July.21)-Rumor About Akeso, Takeover Bid for Legend Bio, InnoCare’s Trouble
- There’re rumor that Akeso’s AK112 and AK104 2024 revenue is RMB300 million and RMB1.5-1.6 billion respectively. Sales of AK104 may be below expectations, so Akeso decided to enter NRDL reimbursement.
- Regardless of whether there is a takeover offer, reasonable valuation of Legend Bio is between US$12.5bn-US$15bn based on solid fundamentals. This deal is “a test” for the management of Genscript.
- Current stock price of InnoCare just reflects its essence. If no new catalysts (e.g. breakthroughs in clinical data, new licensing agreement, etc.), we are not optimistic about the prospects of InnoCare.
Baidu Teams Up With Hesai Group For Its Robotaxi Platform Yichi 06: A Big Win For Hesai Group
- Baidu, a Chinese multinational technology giant, chose Hesai Group to be the exclusive LiDAR supplier for its robotaxi fleet in China.
- Baidu is uniquely positioned for growth in a self-driving robotaxis and its autonomous ride-hailing platform, Apollo Go Robotaxi, gains real traction.
- Hesai Group may ship at least 300K LiDARs for Baidu’s sixth generation Apollo RT6 robotaxis that would translate into a revenue of up to $300M.
Zhongsheng Group Holdings (881 HK, BUY, TP:HKD15.0): Challenging Outlook and Reflected in Valuation
- Most brands under control (Mercedes, Lexus, Toyota) are undergoing popularity downtrend by consumers in China.
- There will remain a loyal niche supporter base, every legacy auto does, but it also means Zhongsheng will be a smaller and niche distributor going forward.
- Share price has plunged significantly YTD, trading at only ~5x, which we think is overdone. Yield hunters will like its ~8% DY.
LiAuto (LI US, BUY, TP:USD25.0): High Growth + Deep Value Stock
- Share price under pressure due to industry challenges and transition of new product line-ups.
- 2024 is a blip, things will normalise 2025 and deliver strong topline and bottomline growth.
- LiAuto is trading at bargain levels for a company delivering 3-year earnings CAGR of 38%, net cash balance sheet and churns high free cash flow.
CrowdStrike: A Once-Promising Cybersecurity Titan’s Fall From Grace
- CrowdStrike, once hailed as a beacon of innovation in the cybersecurity sector, now finds itself at a precarious crossroads.
- Despite boasting a robust platform, impressive revenue growth, and high-profile clients, recent events have cast a long shadow over its future prospects.
- The global IT outage linked to CrowdStrike’s software has brought its skyrocketing valuation down but is there a rock-bottom in sight?
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