In today’s briefing:
- 10-Year Treasury Yield Testing 40-Year Resistance; Upgrading Health Care to Overweight
- Venus MedTech (2500 HK): Overcrowded Market, Margin Pressure, Expanding Loss
- Jinxin Fertility Co Ltd (1951.HK) – The Outlook Is Not Optimistic Even with Policy Support
10-Year Treasury Yield Testing 40-Year Resistance; Upgrading Health Care to Overweight
- We have discussed our expectations for rising rates for quite some time, but the 10-year yield is now testing 40-year downtrend resistance which comes in at 2.80-2.82%.
- If there was ever a time for interest rates to move lower, this is where it needs to happen — and it would be fitting, considering extremely bearish bond sentiment.
- On the other hand, if the 10-year Treasury is above 2.82% we see a secular reversal where rising rates would be the new normal
Venus MedTech (2500 HK): Overcrowded Market, Margin Pressure, Expanding Loss
- Venus MedTech (2500 HK) is facing competition in China TAVR market and its market share has deteriorated to 70% in 2021 from 79.3% in 2018.
- Due to declining ASP and low pricing power, the company’s gross profit margin has declined to 78% in 2021 from 86% in 2018.
- During 2021, the company’s loss expanded 103% y/y to RMB372 million, mainly due to elevated selling and distribution expenses and R&D costs.
Jinxin Fertility Co Ltd (1951.HK) – The Outlook Is Not Optimistic Even with Policy Support
- IVF penetration rate in China is not high and the rate of improvement is very slow. With public hospitals accounting for over 90% market share, Jinxin’s growth space is limited.
- Jinxin has extended its business scope to support the entire fertility and pregnancy lifecycle. But it could drag down the overall net profit margin,resulting in lower-than-expected performance in the end.
- The breakthrough point is internationalization. If COVID-19 is under control and Jinxin continues to expand overseas markets successfully, it could change its valuation logic and open up upward potential.
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