Daily Brief Equity Bottom-Up: [Sea Limited (SE US and more

• We expect that Shopee is spending more in recent months to defend from TikTok Ecommerce’s growth; 
• Further, we see increased marketing to maintain <FreeFire’s> user base, especially in Indonesia; We suggest that SEA’s strong margin performance in 4Q22 was temporary. 
• We forecast that 1Q23’s net margin is 11.2% vs. 4Q22’s 17.9%. We maintain our SELL rating and US$ 62 TP, implying 27x FY23 P/E.

• JD replaces its CEO, Mr. L Xu, with the former CFO, Ms. S. Xu.
• As we expect, the revenue growth slowed down and the operating margin improved in 1Q23.
• We believe the stock has an upside of 92% for 2024.

• Li Auto reported solid 1Q23 performance, with top line in line with cons/our est., and non-GAAP net margin beating cons/our estimate by 4.0/2.7ppt. 
• We reiterate Li Auto as our top pick, because of 1) positive growth outlook in 2023 driven by strong model cycle (L9/L8/L7) and channel expansion; 
• 2) margin upside due to improved opex efficiency. Our TP implies 2.8x PS.

• Zai Lab (ZLAB) reported C1Q23 top line in-line with our estimate but operating/net loss much smaller than our estimate due to cut in R&D spending. 
• ZLAB’s narrower losses in C4Q22 and C1Q23, achieved through R&D cut, do demonstrate the viability of the company achieving commercial breakeven by 2023 and full breakeven by 2025. 
• We still think these viabilities have difficulties to achieve and even achieved, hurt the LT value of the company; We raised our TP from US$25 to US$29 but maintain SELL.

• Aekyung Chemical produces materials and additives for sodium-ion batteries. If sodium-ion batteries become more popular for EV batteries, Aekyung Chemical could benefit from this trend. 
• Aekyung Chemical is increasingly likely to be included in KOSPI 200 index in 2H 2023 or 2024.
• The Aekyung Group completed the merger of three chemical businesses (Aekyung Petrochemical, AK ChemTech, and Aekyung Chemical) into one entity (Aekyung Chemical) in 2021. 

• CPNG reported C1Q23 top-line, EBITDA, and non-GAAP net income in-line, 8.1%, and (3.7%) vs. our est., and 3.1%, 8.2%, and in-line vs. cons., respectively. 
• We estimate CPNG’s penetration of its 3P marketplace fulfilment (FLC) rose 6ppts~ YoY to 20%~ in 1Q23. 
• We maintain our BUY rating and raise our TP to US$21.

• PHC Holdings (6523 JP) announced FY23 result, which is in-line with previously announced downward revised guidance. For FY23, revenue increased 5% to ¥356B, driven by diagnostics and life sciences business.
• Despite an impairment loss of ¥8.7B in Epredia, operating profit grew 145% to ¥20B. FY23 net loss narrowed to ¥3.2B from ¥8.5B in FY22.
• PHC has initiated FY24 guidance and guided for FY24 revenue of ¥355.5B (down 0.3% YoY). The company is expected to turn profitable in FY24, with net profit of ¥15.6B.

• Unity’s 1Q23 top line was in line with our estimate, and  bottom line was USD 34mn, vs. our est./cons. of USD 4/(3)mn, due to headcount reductions.
• We expect it to outperform in coming quarters because: 1) Create solutions are reducing low margin businesses with low churn rate, 
• 2) Growth solutions continue to gain share driven by integrated Mediation platform, 3) announced AI products with accumulated R&D further diversify Unity toolsets.

• In 2022, Heineken delivered strong profit growth despite the challenging market environment, driven by volume recovery post pandemic, premiumization, pricing, and cost savings
• Heineken keeps working on improving and building its business for the long-term as it invests behind its brands
• We believe Heineken’s new, more balanced approach to driving shareholder value is likely to yield a period of accelerated organic and margin growth that deserves a higher-than-peer valuation

SenSen Networks (SNS) reported its ninth consecutive quarter of year-on-year record cash receipts in Q323, with growth across all key verticals and no customer churn. The company has also introduced further measures to achieve cash flow positivity and profitability from Q423, focusing on upselling to existing customers and introducing a salary sacrifice scheme for senior staff. We moderate our revenue growth forecasts to reflect these measures but upgrade our profitability and cash forecasts as a result. The short to medium term is likely to see greater focus on the smart cities segment, where the company has established a promising international market presence and where it has considerable scope to expand its engagements in its existing customer base. This positions SenSen well to scale more profitably in the mid-term.