China Archives | Page 23 of 153 | Smartkarma

• Budweiser Brewing APAC (1876 HK) has seen investors run for the hills over the last year. The halving of the stock price could mean deletion from passive portfolios.
• Other Hong Kong listed brewers, China Resources Beer Holdings (291 HK) and Tsingtao Brewery Co Ltd H (168 HK) have been beaten down too and have underperformed their Asian peers.
• The deletion from passive portfolios could provide a buying opportunity in Budweiser Brewing APAC (1876 HK) at the end of February (or earlier if the stock drops due to positioning).

• Back on the 1st November, Nikolai Levitskii, Russian iron-ore play IRC (1029 HK)‘s chairman and largest shareholder, acquired 4.72% of shares out, lifting his stake above 30%, triggering an MGO.
• The Offer is conditional on Levitskii holding more than 50% of shares out. His intention is to maintain IRC’s listing. At the first close, he held 35.77% (5.16% had tendered). 
• The current spread is 9.2%. MIC, with 16.67% of shares out, has yet to tender. Nor do I expect them to. Plus IRC is on the OFAC sanction list. Avoid.

• Huawei Technologies Co. Ltd. is facing trouble in meeting delivery commitments for the first electric vehicle (EV) it has co-developed with auto partner Chery Automobile Co. Ltd., a possible sign of supply chain challenges for the model.
• Some people who placed orders for the Luxeed S7, which is the first electric sedan marketed under Huawei’s Smart Selection business model, recently complained online that they could not receive their cars within the promised timeframe.
• In an effort to mollify the customers, Luxeed announced Monday on social media that it will provide people who placed orders for the Luxeed S7 between Nov. 28 and Jan. 15 with varying cash compensation capped at 10,000 yuan ($1,403), based on their wait time.

• (I didn’t want to send it out right away, because I wanted to proofread my post before sending it, and unfortunately DADA is already up 10% since writing 🙁 )
• Recently Dada Nexus (DADA) , a Chinese last mile delivery service and on demand retail platform reported that about 500mn RMB ($70mn US) of revenue and costs were overstated for the first 3 reported quarters of 2023.
• This news came right after 2 JD executives had taken over management of the company in December last year.

• Weiqiao Textile Co (2698 HK)’s offer pre-condition is satisfied. Prudence has increased its shareholding to 3.39% of the outstanding shares (9.79% of H Shares), marginally short of a blocking stake.  
• The HK$3.50 offer has been declared final, which rules out a bump. Therefore, Prudence’s strategy could be to play the gross spread or to block the deal.
• The Shandong Luoxin Pharmaceutical (8058 HK) precedent supports the gross spread play view. However, unlike the precedent, Prudence is marginally short of a blocking stake in Weiqiao Textile.  

• Mixue Group is looking to raise about US$1bn in its upcoming Hong Kong IPO. 
• MIXUE Group (MIXUE) is a freshly-made drinks company providing affordable products to consumers, including freshly-made fruit drinks, tea, ice cream and coffee, typically priced at around one USD per item.
• In this note, we talk about the positive aspects of the deal.

• HSBC holds 19% of BoCom and still carries it with a value of USD23.3bn despite the stock market valuation putting it closer to USD8.1bn on YE22 figures.
• The bank cites its Value In Use testing as the justifiable reason for this gap, and this testing will include major assumptions like discount rates and long term growth rates.
• Goodwill and other intangible charges were USD10.6bn in FY08, USD3.4bn in FY16, and USD7.4bn in FY19 for HSBC.

• Back on the 4th December, Weiqiao Textile Co (2698 HK) announced a pre-conditional privatisation at HK$3.50 per H-share, a chunky 104.68% premium to last close and around a six-year high
• Pre-Conditions – regulatory approval from NDRC, MoC and SAFE – have now been fulfilled. The Composite Doc is expected to be dispatched on or before the 24 January. 
• This Offer is a Merger by Absorption incorporating a Scheme-like vote. There is no tendering condition. Prudence Investment Management, which has now built a 9.79% stake, will be supportive.

• In 4Q23, we expect Luckin Coffee revenue to increase 93% YoY to RMB7.1bn, and expect GPM/OPM to decline (5.8)/(1.3) ppt YoY to 19.0%/8.2%, respectively.
• We cut 4Q23 operating income by 12%. In 2024, we raised our revenue estimate by 5% due to the speed up of new store opening schedule.
• Furthermore, as price competition eased, we expect Luckin to offer less low-priced drinks, thus driving up OPM in 2024.

• Negative China sentiment from where Perfect Medical Health (1830 HK) derives about 15-20% of its revenue is causing the company’s share price performance to remain lackluster. 
• Stock trades on a 10% dividend yield with 15% of the market capitalization in cash, despite the outlook for HK, where it derives >75% of its revenue, is slightly better.
• With a 10-year average ROE of the business >40% and a 10.8x PE for FY24e, this stock is a dividend gem worth exploring. 

• PICC P&C’s Q3 underwriting profitability deteriorated due to typhoon/catastrophe-related losses in both motor and non-motor business.
• Samsung Life’s new business growth momentum continued in Q3’23; new business CSM margin slightly improved QoQ.
• Prudential disclosed limited details in its Q3 results but we can see the growth trend of new business volume and profits continuing in the quarter.

• Mixue Group is looking to raise about US$1bn in its upcoming Hong Kong IPO.
• MIXUE Group (MIXUE) is a freshly-made drinks company providing affordable products to consumers, including freshly-made fruit drinks, tea, ice cream and coffee, typically priced at around one USD per item.
• In this note, we talk about the not-so-positive aspects of the deal.

• Guming generates revenue mainly from the sales of goods/equipment to its franchisees (or ToB business). So, Guming’s future growth depends significantly on its ability to operate and expand store network.
• China’s freshly-made beverage market is highly competitive. Guming is unlikely to catch up with MIXUE, but Guming will be overtaken by the rest players if it fails to compete effectively.
• Due to Guming’s business model, investors’re hard to see the real picture of Guming solely based on its revenue/profits. Guming’s valuation should be higher than Nayuki but lower than MIXUE.

• The review cutoff date for the March rebalance of the HSIII was 29 December. The changes will be announced on 16 February and become effective after the close 1 March.
• We see a high probability of Zx Inc replacing Flowing Cloud Technology (6610 HK) in the index. There is a lower probability of 4Paradigm (6682 HK) replacing CMGE Tech (302 HK). 
• Capping will result in passives buying Meituan (3690 HK) and selling Tencent (700 HK), Kuaishou Technology (1024 HK), JD.com (9618 HK) and Alibaba Group Holding (9988 HK). 

• China Unicom Hong Kong (762 HK) remains inexpensive with respect to parent China United Network A (600050 CH) – its hybrid domestic A-share twin – and to peers.
• Preceding my comments on Unicom, are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• The Shanghai Containerised Freight Index has popped by 25% in the first two weeks of 2024 due to the Red Sea crisis. Orient Overseas International (316 HK) is a beneficiary.
• There are already signs of bottoming out of realised freight rate and load factor in 4Q23. The spike in freight rate means that consensus forecasts are too bearish. 
• OOIL’s net cash of US$5.6bn equals 58% of its market capitalisation, making its 0.7x P/B and 8% yield attractive. There is also a possibility for a higher dividend payout. 

• In this note, we will look at the Asia Pacific IPO pipeline for 2024, following up with US ADRs, after having looked at HK, India, Japan and Korea earlier.
• This list has been compiled on a best effort basis from tracking the company filings and through various other sources
• The deals you see in this note are only a part of our full IPO pipeline tracker. Feel free to drop us a message for additional information on these IPOs.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Lippo Malls Indonesia Retail Trust

• On the 6 November 2023, Zhejiang Expressway Co H (576 HK) announced its rights offering on both its H-Shares and its A-Shares, previously mooted on 23 May.
• The rights were discussed by Travis Lundy in Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting. He liked the stock.  That was a good call. 
• The current implied stub – net of Expressway’s 40.3% look-through stake in Zheshang Securities (601878 CH) – is back to pre-Covid levels.  I’d be looking to unwind the stub here. 

• STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
• In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the March 2024 index rebal event.
• I currently expect three changes for the STAR 50 index in March 2024.

• The New and Better (5mos old) A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND flows were net negative (ETFs negative, high-div SOEs positive) and NORTHBOUND flows a small net sell. AH premia rose slightly on average. Especially at narrow premia.
• STILL time to go long Hs vs As for the new year. 52wk wide discounts were just four weeks ago. Wide A/H premia in renewables space look vulnerable.

• The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
• The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
• In this insight, we take a look at the names leading the race to become ADDs and DELs in the June 2024 index rebal event.

• We expect PDD to report the highest growth in topline for 4Q23 over last three years. In particular, we believe its bottom line will beat by wide margin.
• But easy days are gone for PDD’s domestic e-commerce business and high base will kick in from 1Q24, resulting in tough comps, notable deceleration and potentially short-term share price volatility.
• We see 20% upside to current PDD valuation by assigning 20xPE to our US$12 billion adjusted net profit estimate for 2024.

• Due to centralized procurement and anti-corruption campaign in 23H2, negative YoY revenue growth in 2023 seems to be inevitable. We are not optimistic about Weigao’s performance turnaround in 2024.
• After new policy strictly prohibiting borrowing to purchase medical equipment in public hospitals was released, the investment logic of medical device sector changes, which would negatively affect Weigao’s outlook.
• Weigao feels like “living off its past gains”.Current valuation is reasonable not undervalued. There’s no need to rush to long this stock when downward trend in share price hasn’t reversed.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Vedanta Resources

• Irc Ltd (1029 HK) notes that the offeror (Nikolai Levitskii) and acceptances reached 35.77% at the first closing date, materially short of the 50% minimum acceptance condition. 
• The offeror has extended the closing date by 39 days (30 business days) to 20 February, the last day the offer can become or be declared unconditional. 
• The rise in iron ore prices and a light offer pose challenges. The risk/reward profile is unfavourable as the upside (5.4% spread) outweighs the downside (20.5% to the undistributed price).

• SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
• In this insight, we take a look at our expectations for potential index changes for SSE 50 and SSE 180 during the June 2024 index rebal event.
• I continue to expect 5 changes for SSE 50 and 18 changes for SSE 180 but some of the names have changed since my last insight.

• Tencent will allow Douyin to broadcast the game Honor of Kings after a four-year ban.
• Dada’s stock plunged after the company released its suspicious auditing result.
• Alibaba’s mobile office app, Dingding, has accumulated 120,000 paying users.

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net SELL RMB 2.4bn of A-shares on decent average activity. 
• Renewables and Kweichow Moutai (600519 CH) were the big net sells on the week.

• We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
• Our top picks: Perfect Medical Health (1830 HK), Water Oasis (1161 HK), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and The Keepers Holdings (KEEPR PM).
• We recently added Plover Bay Technologies (1523 HK) to our list of companies under coverage. We believe there are some excellent near-term catalysts in the name. 

• SOUTHBOUND flows showing momentum tendencies this past week on a single-stock basis, still. 
• SOUTHBOUND saw HK$6.8bn of net OUT-flows in the week to 12 Jan 2024. Total flows were HK$118bn.
• SOUTHBOUND saw large net selling of ETFs (unwinding Week 1) and large net buying of high-div SOEs like CNOOC, China Mobile/Telecom/Unicom, and coal names.

• WuXi Bio’s optimism about new orders failed to generated expected surge in its stock price. Many investors raised great doubts about the credibility and professionalism in communication of WuXi Bio.
• It’s easy/cost-effective for WuXi Bio to “adjust” order number. However, it’s more difficult to inflate revenue/cash flow. We have to wait for future financial results to know the real situation.
• XBI is essentially “a bond”.Recent surge of XBI is driven by the expectations of Fed’s rate cut + US soft landing, rather than virtual improvement of external environment.Much remains unclear.  

• The review period for the next rebalance of a global index kicks off this week and that is where a lot of eyes will be focused.
• There were big inflows to ETFs tracking the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) while there were redemptions from the Hang Seng H Share Index ETF (2828 HK). 
• Inflows continue for iShares Emerging Markets ex China (EMXC US) while there were outflows from iShares ACWI ETF (ACWI US). 

• The entire R&D cycle involves multi-party cooperation, leveraging one’s strengths. So, it is not difficult to understand some of the choices made by domestic pharmaceutical companies (e.g. Innovent, BeiGene).
• Due to outdated technology, investment value of Sirnaomics is low, which means the likelihood of the company being acquired is also not high. We remain conservative about the outlook. 
• ImmuneOnco’s stock price has performed much better-than-expected after IPO on HKEX. However, the endgame of ImmuneOnco’s market value could be only about RMB1.5 billion, which means large potential downside ahead.

• Since my previous insight on WH Group (288 HK) in October 2023, the stock is up 17%, massively outperforming the Hang Seng Index (HSI INDEX).
• The company is still trading at 6x forward PE, compared to an average forward PE of 11x since 2016. 
• With the US business recovering as well as its potential IPO, and a stable China business, the stock remains a buy with limited downside. 

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess West China Cement’s ESG as “Adequate”, in line with its “Adequate” Environmental and Governance scores. That said, the company’s Social pillar is “Weak”. Controversies are “Immaterial” and Disclosure is “Adequate”.

• JD.com, Inc. managed to surpass the revenue and earnings expectations of Wall Street.
• The company broadened its free shipping reach in the third quarter by leveraging enhanced logistics capabilities.
• The company strategically reduced the minimum order value for free shipping services, granting JD Plus members unlimited free shipping for 1P products.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Sunny Optical Technology Group
2. Yuexiu Property
3. Vedanta Resources
4. Tata Motors Ltd
5. Adani Ports & Special Economic Zone

and more…

• PDD Holdings Inc. surpassed Wall Street’s revenue and earnings expectations, with total revenue reaching RMB 68.8 billion, marking a 94% year-on-year increase.
• In the third quarter, they responded to a growing demand for consumption upgrades by introducing impactful promotions like the Summer Carnival, Duo Duo Harvest Festival, National Brand Festival, and Duo Duo Reading Month.
• PDD also collaborated with over 100 Chinese national brands for the National Goods Festival, promoting top brands through live streaming sessions.

• NEV sales volume grew by 47% YoY in December 2023 and 36% in 2023.
• BYD’s sale volume grew by 62%, higher than the industry average, 36%, in 2023.
• All NEV stocks plunged, but we still believe BYD has an upside of 61%.

• We expect BABA to report CY4Q23 top-line, adjusted EBITA and non-GAAP net income (3.2%), (7.1%) and (3.0%) vs. consensus. 
• We estimate Taobao/Tmall GMV grew 2.4%, but was offset by lower take-rate, we expect;
• BABA’s “Return to Taobao” strategy tilts traffic to low-priced Taobao products to fight PDD for low-priced mindset.

• CSI 300 represents the 300 largest stocks by market capitalization and liquidity from the entire universe of Shanghai and Shenzhen Stock Exchanges. CSI 500 represents the next largest 500 names.
• In this insight, we take a look at the potential ADDs/DELs for the CSI 300 and CSI 500 rebalance in June 2024.
• Since my December 2023 insight, a couple of names have left the CSI 300 Expected ADDs basket and have been replaced by two other names. 

• Zhubajie Co Ltd (ZHUHKZ HK) is looking to raise at least US$100m in its upcoming Hong Kong IPO. The bookrunners on the deal are Citic Securities, and CCB International.
• Zhubajie (ZBJ) is a customized enterprise services e-commerce platform in China.
• The firm focuses on using technologies to match the service demands of enterprise clients with the skills of service providers, facilitating transactions between its ZBJ platform.

• BYD (1211 HK) overtook Tesla Motors (TSLA US) as the largest EV maker by deliveries in December 2023.
• Tesla is suspending work at its Berlin factory temporarily due to the tension in the Red Sea, while BYD’s supply chain is all in China.
• BYD is trading at deep discount to Tesla on PEG, PER, and PBR.

• We had conversations with industry consultants and business executives from China’s catering sector to understand the impact of the country’s weak economy on consumer behavior and sector outlook for 2024.
• We expect moderate pricing competition, continued rise of social media in generating online food orders and key industry players’ increased focus on smaller-size store formats.
• While we are still cautious about the sector in general, we reiterate bullish view on DPC Dash, which we believe will outperform and has potential to double in two years. 

• 3Q FY24 sales of Sa Sa International Hldgs (178 HK) have recovered to 49% of the FY19 level. Although this is slower than market expectations, the improving trend remains intact.
• Stronger Rmb, more attractions in Hong Kong, resumption of “multiple-entry permits” for Shenzhen residents, and more new stores at Sa Sa will drive the rest of this year. 
• Consensus forecasts are conservative, expecting FY24 earnings just 46% of FY19. With current share price down from HK$1.00-1.50 range during 2020, Sa Sa’s valuations are too depressed.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Back in June 2017, Toray Industries (3402 JP) acquired a 28.03% stake in Pacific Textiles (1382 HK) (@ HK$10/share). Rumours that Toray would take this stake to 50% never unfolded.
• Pacific Textiles is currently trading at HK$1.30/share, its lowest level outside of the GFC. 
• Relatively inexpensive, high digit yield and M&A angle, Pacific Textiles remains attractive. This is supported by the recent Offer for Weiqiao (2698 HK) and David Webb taking a 5% stake. 

• Xtep International (1368 HK) announced an operational update for 4Q23, with retail sales growing more than 30% for the Xtep brand (off of a low base in 4Q22).
• The overall quality of the retail sales growth is low, as the growth was mainly driven by higher discount level (around 30% compared to 25-30% in the previous quarter). 
• I still prefer Anta over Xtep at this stage, as Xtep is more of a beta play if the consumer sentiment turns around in China. 

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Shui On Land
• Sunny Optical Technology Group
• Vedanta Resources
• Yuexiu Property

• After 23H1 results were released, we have seen some positive business progress in internationalization. There has been no obvious negative news about performance. Acotec’s future prospects are still relatively optimistic.
• Contrary to solid fundamentals, Acotec’s stock price continues to decline. The sluggish stock price performance is not directly related to fundamentals, but rather to poor liquidity and unsatisfactory capital inflows.
• Stock price hasn’t bottomed yet, so investors’re not advised to rush to buy the dip.For market value management, Acotec’s management need to invest more energy/time to maximize shareholder value/investors’ returns.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Road King Infrastructure

• Based on the close of 8 January, there could be two changes for the iShares A50 China (2823 HK)/ CSOP A50 (HKD) (2822 HK) in March.
• Shaanxi Coal Industry (601225 CH) and China Everbright Bank Co A (601818 CH) could replace Bank Of Ningbo Co Ltd A (002142 CH) and Aier Eye Hospital Group (300015 CH). 
• The impact of passive trading will be higher on the inclusions compared to the deletions. Then there are cash and carry positions that will be rebalanced, adding to flow.

• In this note, we will take a look at the Asia Pacific IPO pipeline for 2024, starting with Hong Kong.
• This list has been compiled on a best effort basis from tracking the company filings and through various other sources.
• The deals you see in this note are only a part of our full IPO pipeline tracker. Feel free to drop us a message for additional information on these IPOs.

• Shougang Fushan Resources (639 HK) energy, a pure play on high coking coal prices, now trades at 5.7x FY24 PE (1.5x EV-EBITDA), assuming 2,200 RMB/ton prices (vs spot 2500). 
• The company has ~7.5 bn HKD of net cash (on H12023), representing 50% of the market cap despite conducting a recent buyback of 5% and paying all its outstanding dividends/taxes. 
• With an 80% payout, we can also expect a dividend yield of 14% for FY24 if prices average 2200 RMB/ton.  

• A new draft measure suggested Shenzhen is planning to accelerate its shantytown renovation and offer more Affordable Houses to meet demand of low-income groups, mimicking Singapore’s HDB flat policy.
• As China’s property market gradually heading to the Singapore model, we expect the existing home market to enlarge and new home market to shrink.
• We expect Beike existing home business and renovation business to benefit, while new home business hurts. We maintained the stock as BUY rating and TP at US$24.5/ADS.

• The upcoming Chinese New Year travel rush is expected to see air passenger volume reach 80m, a 9.8% increase vs. 2019. Tongcheng Travel Holdings (780 HK) is a key beneficiary.
• In addition to air ticket booking, Tongcheng can gain from demand for related services and products. The focus on lower-tier cities will make it better satisfy their demand. 
• Its FY24F PER of 15.2x is lower than sector average of 16.4x, yet 3-year EPS CAGR of 30.7% is higher. Its underperformance against Trip.com (TCOM US) can be reversed.

• The business model of MIXUE is S2B2C. The expansive and highly efficient supply chain is the bedrock of MIXUE’s industry leading performance and scale, setting it apart from its peers.
• MIXUE has more flexibility to diversify its business to explore new growth points and is also more resilient to risks/industry changes, which determines sustainability and growth ceiling of future development.
• As competition for freshly-made tea drinks industry intensifies, capital has become “impatient”. As an industry leader, now is the best time for an IPO. MIXUE’s valuation could reach US$10 billion.

• Guming Holdings (GUM HK) is looking to raise US$300m in its upcoming Hong Kong IPO. The bookrunners on the deal are Goldman Sachs, and UBS.
• Guming Holdings (Guming) is a maker of freshly-made beverages in China.
• As per CIC, its “Good me” brand is China’s largest mid-priced freshly-made tea store brand in terms of both GMV in 2023 and store count as of Dec 2023.