China Archives | Page 25 of 153 | Smartkarma

• Ex-China e-commerce conducted by Chinese e-commerce platform will rise from 2022 GMV of US$ 61bn to US$ 297bn in 2025, with Pinduoduo, Alibaba, SHEIN and TikTok leading the charge.
• These companies, however, are incubating their own last mile partners. The political uncertainty of Chinese e-commerce overseas is hindering development of the industry;
• We see J&T as the main beneficiary of Chinese e-commerce overseas, which must eventually undergo an infrastructure upgrade…

• Swire Pacific (19 HK)‘s NAV discount has narrowed, and implied stub widened, after announcing its latest buyback. Separately, Swire Properties (1972 HK) flagged a HK$4.5bn writedown on its investment property.
• Preceding my comments on Swire 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 data in this insight is collated from the “shareholding disclosure” link on the HKEx website
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
• The key stocks mentioned in this regular insight is Li Ning (2331 HK) and Meitu Inc (1357 HK).

• Nike (NKE US) reported 2QFY24 results last week with a guidance cut, as the company cut FY24 full-year sales guidance to around +1%, compared to +mid-single-digit in the previous guidance. 
• Shenzhou Intl Group Holdings (2313 HK) saw its stock drop by 8% the following day, given that Nike is Shenzhou’s most important customer, making up 30% of Shenzhou’s sales. 
• Nike’s inventory is down another 14% yoy, and down high-single-digit compared to the previous quarter 1QFY24. 

• Sinopharm’s 23Q1-Q3 results were below expectations. The main reason for weak performance was due to the anti-corruption campaign, which led to profound and rapid changes in fundamentals and policy end.
• In Q4, the impact of anti-corruption would weaken and traditional distribution business would recover.So, 23Q4 performance should be better than Q3, but 23H2 performance would still be worse than 23H1.
• We lowered our forecast for 2023 – Revenue and net profit could achieve single-digit growth. Due to the high base in 23H1, growth in 24H1 could still be under pressure. 

• Air China (H) (753 HK) is proposing a new share placement to raise Rmb6bn and HK$2bn. EPS dilution is manageable at 6% so we view the proposal positively.  
• The new equity will enhance book value by 11.5% and lower its gearing by 103pp to 399.8%. The full subscription by the parent is also a vote of confidence. 
• Recent share price weakness is due to the overall weakness in the Chinese equity market, but both macro and operating environments are improving. Selldown is unjustified.

• The HSI INDEX closed last week down (CC=-1) at 16340.41, it is now down 5 months in a row (CC=-5), very OVERSOLD.
• If this week the index keeps going down, it may find support soon and bounce next week. The alternative scenario is a longer correction, 2 weeks.
• Support for a LONG trade, possibly pushed by a MONTHLY reversal,  should be found between 16200 and 15950: this is a highly speculative setup given the stubborn downtrend.

• Concord’s financial performance seems improving on the surface,but a closer look reveals that the sudden explosive revenue increase in 2021 was mainly due to an acquisition, with potential risks behind.
• We’ve doubts about Concord’s endogenous growth capability. If Concord’s hospitals cannot make a profit, then any further expansion is just a beautiful story and cannot bring expected returns to investors. 
• Concord conducted a total of four rounds of financing, with a valuation of approximately RMB7.2 billion. However, based on our analysis, its valuation could be lower than peers.

• The Irc Ltd (1029 HK) IFA opines that a mandatory conditional offer from Nikolai Levitskii (Chairman and 30.61% shareholder) at HK$0.118 per share is fair and reasonable. 
• The offer is open, with the first closing date of 12 January 2024. The offer is conditional on the offeror and concert parties representing more than 50% of voting rights. 
• While the offer is light, satisfying the minimum acceptance condition is possible. The risk/reward profile is favourable as the upside (25.5% spread) outweighs the downside (5.3% to the undistributed price). 

• China announced game approval for the December batch. The number of games approved has increased compared to recent months.
• The pace of China game approval appears to be accelerating, to the same level as pre-tightening.
• Netease scored two approvals while Tencent scored one. Netease finished the year with the most games approved.

• We compile a report card for dividend-yielding mid-caps that filter out on favorable characteristics of having net cash, decent ROEs, growth, etc. 
• It’s been a disappointing year in share price performance owing to the negativity surrounding China and soft business performance in some cases, but there have been some bright spots.
• We help provide a comprehensive list of our updates on some names and an outlook for 2024. It’s our last insight for 2023, so happy new year everyone!

• “Pent-Up demand”? No signs of it anywhere in outbound or domestic metrics
• Sluggish outbound demand, capacity trajectories continued to lag in November
• YTD share performance weak, mirrors disappointing recovery in travel activity

• In the Chinese pharmaceutical industry, stock selection strategies can be divided into “defensive” and “offensive”. We need to combine the judgment of the cycle to choose a stock picking strategy.
• Domestic innovative pharmaceutical companies have the opportunity to create a high gross-margin incremental market of over RMB1 trillion through successful internationalization, but we pointed out the logical flaw behind.
• We analyzed the key points of Hangzhou Tigermed Consulting (3347 HK). It seems insiders don’t have firm confidence in the prospects, so why should investors rush to buy the bottom?

• 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 and NORTHBOUND flows were both sells, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 100+bp. Liquidation by overseas investors feels finished.
• STILL time to go long Hs vs As for the new year at 52wk wide discounts.

• Tencent and NetEase’s stock prices plunged after the release of the new law about online game.
• China Passenger Car Association expects NEV will grow by 37% for 2023.
• NIO got US2.2 billion investment from CYVN Holdings based in Abu Dahbi.

• H1 FY24 (May-Oct 2023) was off to a sluggish start for the company, with a 4.7%/35% decline in revenue/adjusted NPAT. 
• The company cited soft demand, loss of business days due to inclement weather, one-offs in relocation or warehouses to efficient locations, and increased staff costs for poor profits.
• Post the correction, the stock trades at a trailing PE of 11x and dividend yield of 8%, but we will have to wait further out as business conditions are worse. 

• SOUTHBOUND flows showing reversion tendencies still. Hs up vs As only slightly. Liquid Hs were down vs As. 
• SOUTHBOUND saw HK$144bn of net INflows on the week to 22 Dec, which was HK$4bn of Tencent net sales and net buying of a bunch of ETFs.
• Some banks and energy names were top net inflows as a percentage of ADV. This week was heavy for SOUTHBOUND, quiet for foreigners, next week may be quiet for both.

• 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 2.2bn of A-shares on sharply lighter activity. Quieter all week.
• Looking at the change in the weekly position charts over the last year is striking (easiest in the Sectors table to start). Still.

• China has tightened restrictions on online games again driving significant falls in names such as Tencent and NetEase. 
• While the move may surprise some given prior moves to restart approvals in our view the overall trend of regulation is not especially surprising. 
• In particular, the tightened regulations appear to target the most important drivers of mobile gaming profitability and today’s large drops may actually be underreactions.

• In the latest wave of management changes, Eddie Wu, Jack Ma’s trusted associate has staged a comeback, securing pivotal roles.
• We believe this is not a mere coincidence. Jack Ma seems to be orchestrating moves from behind the scenes, with Eddie Wu strategically positioned to represent his influence.
• The Chinese government’s reaction to Jack Ma’s increased involvement may impact Alibaba Group Holding (9988 HK)‘s price performance in the short term.

• This is our 5th annual edition of the IPOs Pipeline Worldwide (Top 100 Companies) report.
• After weak global IPO markets in 2022 and 2023, the near term trend for global IPOs continues to remain lackluster.
• For those investors that closely monitor the global IPO opportunities, this is a good reference insight to check out the largest potential IPOs that could get completed next year.

• Plover Bay Technologies (1523 HK) is another exciting play from the stable of net cash (12% of market cap) and high dividend yield (8% FY22) companies.  
• The company develops networking technologies that enable supercharged connectivity. Users can build always-on networks anywhere by combining fixed, mobile, and satellite connectivity. Its major brands are Peplink and Pepwave.
• Plover Bay is a high net margin (25%) and high ROE (>50%) business that has 9-10% CAGR revenue growth (trading at 11x PE) with catalysts up ahead. 

• Gree Electric Appliances (000651 CH) announced a profit alert for FY22 yesterday.  Net profit is expected to increase 10.2% – 19.6% yoy for the whole year.
• The resilient result of Gree should alleviate concerns of the market that Midea is too correlated with China’s new home sales. 
• The stock is trading at 10x 2024E earnings compared to an average of 13x over the last 10 years, with earnings likely growing at a high-single-digit pace.

• UBTech Robotics (9880 HK) is looking to raise about US$168m in its upcoming HK IPO, after downsizing from an earlier reported float of up to US$700m.
• UBTech Robotics is engaged in artificial intelligence (AI)-empowered robotics in China, dedicated to the innovation of humanoid robots and development and sales of smart service robotic solutions.
• In our previous note, we looked at the company’s performance and its PHIP updates. In this note, we share our quick thoughts on valuation.

• The 20% retreat in the share price of Cosco Shipping Energy Transportation (1138 HK) from the peak has well reflected the plunge in 3Q23 VLCC rates and 10% earnings downgrade.
• 4Q23 VLCC rates have rebounded 78.4% QoQ. Re-routing due to recent Houthi attacks on commercial ships at the Red Sea has reduced effective supply and is positive to rates.
• Heightened energy security needs will drive demand. The medium-term supply pressure is mild as the VLCC orderbook equals just 2% of the existing fleet, fueling ROE for FY23-25F. 

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. Meituan
2. Lippo Malls Indonesia Retail Trust
3. SK Hynix
4. China Jinmao Holdings
5. Geely Auto

and more…

• The review period for the March rebalance ends 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
• We expect the index committee to continue using a 6-month minimum listing history resulting in four changes to the index.
• One way turnover is estimated at 3.3% resulting in a one-way trade of CNY 4,717m. The impact on the deletions will be much larger than that on the inclusions.

• We view both Weixin Video Account (WVA) and Douyin China as secondary assets to their respective parents, which in our view, may lead to them forming…(TBC)
• However, rising competition in the short-play (短剧) market may put the two businesses in more direct confrontation, which may delay or diminish the chance for two to work together;
• We view Tencent as the likely winner in the continuing evolution of short video as it considers various options to maximize the value of WVA traffic.

• Local news reported an unnamed expert suggesting ByteDance might be buying Eleme for US$7bn, leading to share of Meituan to fall;
• While we believe (1) buying a food delivery business to complement Douyin’s in-store business makes some sense and…
• (2) ByteDance has been aggressive in pushing the boundary of its businesses, an entry into domestic food delivery is a daunting challenge that yields very little benefits for ByteDance;

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.

• China South City

• Amid demand by consumers for cost effective items, we expect that demand for discounted apparel will sustain into 2024…
• We expect high levels of apparel sales continued in December, as VIPS reported double-digit GMV growth for various types of winter related apparel items during 12/12…
• China’s cost-conscious spending environment favors VIPS, in our view. We maintain BUY and raise TP to US$ 18.1, implying 7x FY24 non-GAAP P/E.