China Archives | Page 31 of 154 | Smartkarma

• WuXi XDC Cayman Inc (1877628D HK), a leading contract research, development and manufacturing organization (CRDMO), is pre-marketing an HKEx IPO to raise US$500 million, according to press reports.   
• WuXi XDC ranked No. 2 globally and No. 1 in China among CRDMO for antibody-drug conjugates and other bioconjugates in terms of revenue in 2022, according to Frost & Sullivan.
• The bull case rests on large addressable markets, market share gains, fast-paced revenue growth, strong revenue visibility, a solid balance sheet and ambitious capacity expansion plans.

• WuXi XDC Cayman Inc (1877628D HK) is looking to raise around US$500m in its upcoming Hong Kong IPO.
• WuXi XDC Cayman (WXDC) is a CRDMO focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
• In our previous notes we looked at the company’s past performance, peer comparison, and shared our thoughts on valuations. In this note, we discuss WXDC’s PHIP updates.

• After a spike higher in fund ownership in 2021, active Asia Ex-Japan funds are beginning to close out positions.
• Funds including T.Rowe Price, LO Funds and Nikko AM have closed out exposure this year.
• JD.com remains a very well owned stock among institutional investors, at a time when performance is anything but stellar so far this year.

• We believe Mr. Su’s resignation as chairman is not a concern, because Mr. Cheng, the CEO, has been operating the company for two years.
• We believe the 3Q23 YoY growth will be lower, as 2Q23 had a lower comparison base.
• We believe the operating margin can be negative in 3Q23 as Q3 is always a weak season, but operating profit will break even for 2023.

• For the month of October 2023, 7 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$4bn.
• The average premium for the new deals announced (or first discussed) in October was 65%. The average YTD is 37% (85 deals).
• This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

• The A-share subsidiaries of AviChina Industry & Technology (2357 HK) have mostly posted solid 3Q23 results – aggregate earnings growth has accelerated to 50.2%, from 26.8% in 1Q23.
• Their 9M23 result reached 64% of FY23 consensus forecast earnings for AviChina, vs. just 61% a year ago. This indicates the market is too conservative and suggests room for upgrade.
• Valuations are cheap at 8.7x and 7.0x PERs for FY23 and FY24. Its market capitalisation equals just 46% of the total attributable market capitalisation of these subsidiaries.

• We’ve seen increasing global cooperation for ADC pipelines. However, licensing deals alone cannot be used as the only basis for judgment. We still need to wait for solid clinical evidence.
• ADCs are far less “general and popularized” than PD-1. If compare ADC with GLP-1s, the difference is more obvious.How big the real market is for ADC is a question mark.
• WuXi XDC’s share price could perform well after IPO due to positive sentiments towards ADC, but whether its long-term valuation would be higher than peers remains to be seen.  

• Midea Group Co Ltd A (000333 CH) has officially filed for Hong Kong listing last week. 
• A common pushback against owning the stock is the perception of strong correlation to China property, which is not true in terms of business fundamentals.
• The stock is currently trading at 10x 2024E PE compared to an average of 13x over the last 10 years. 

• Midea Group Co Ltd A (000333 CH), one of the world’s largest home appliance producers, aims to raise up to US$3bn in its H-share listing.
• Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
• We have covered the company and deal background in our previous note. In this note, we talk about the updates from the recent filing.

• For certain companies now seeking IPOs, X-border volumes may serve as demand proxy
• In 2023, Chinese X-border volume growth has accelerated, up +55% Y/Y through September
• In developing X-border express market, lower ASPs are actually a good thing, in our view

• MSCI China Funds are starting to engage with New Oriental Education & Technology after a big exodus in 2021 following China’s Tech Crackdown.
• Since the lows of 2022, New Oriental Education has been one of the key beneficiaries of active fund rotation.
• Previous holders such as HSBC, Mirae and BlackRock have bought back in after closing out in 2021, but there is still a long way to go to reach previous highs.

• The New and Better (10 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• Last week the portfolio bounced back, erasing the previous week’s losses. Southbound continues to see net inflows and this week all H/A Pair sectors saw Hs outperform except Energy.
• High-Div SOEs continue to be weak. Banks, Pharma, Industrials, and Utilities spreads continue to be Very Volatile. Quiddity Favourite Great Wall Motor (2333 HK) up 7% after Q3 results Friday.

• Country Garden should not be a surprise. The bond price at 5 cents is based on much uncertainty.
• We list a few caveats why the bonds at 5 cents are not investible.
• The potential wind-up order by the Hong Kong court will be a big test of the rule of law in China.

• Travelsky Technology Ltd H (696 HK) share price was unjustly sold off due to flows rather than operational performance.
• The key business is processing flights for domestic tourism, with a lesser correlation to geopolitical issues.
• Due to the strong earnings growth, PER is adjusted from 60x to 25x. 

• September outbound tourism metrics plummeted, in some cases to levels seen in Q223
• Domestic air travel demand also fell vs August; normal seasonal patterns are dominating
• As recovery fizzles, travel shares languish, and we see few reasons for optimism, near-term

• Mindray’s Q3 revenue growth slowed significantly, dragging down the overall revenue growth. This was related to China’s anti-corruption campaign, the impact of which is expected to linger for some time.
• Our 2023 forecast is revenue up 15-18% YoY. Anti-corruption campaign would lead to declining demand and growth ceiling of domestic medical equipment market, thus negatively affecting Mindray’s future performance growth.
• Investors may need to prepare in advance for Mindray’s future revenue growth to fall to 15%.Based on this, PE TTM of around 30 is reasonable valuation for Mindray, not undervalued.

• Qyuns Therapeutics, a China-based clinical-stage biotechnology company, plans to raise up to US$ 100m via a Hong Kong listing.
• In this note, we examine the company’s core products, namely QX002N, an IL-17A antibody, and QX005N, an IL-4Rα antibody. We also look at the company’s management and pre-IPO investors.
• We are of mixed views for its two core products. We also think the management and pre-IPO investors are of mediocre quality.

• Onewo (2602 HK) has announced the full conversion of 1.05bn Domestic Shares and Unlisted Foreign Shares to H-shares. The increased market cap will help in HSCI inclusion.
• Onewo (2602 HK) should be added to the HSCI in March and will be added to Southbound Stock Connect soon after index inclusion.
• Onewo (2602 HK) has drastically underperformed its peers since listing and the HSCI inclusion could mark a turning point for the stock.

• Cainiao Smart Logistics (1437124D HK), a global leader in e-commerce logistics, has filed for a HKEx IPO to raise at least US$1 billion at a US$15-20 billion valuation.
• In Cainiao Smart Logistics IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The bear case rests on declining global cross-border market share, China logistics decelerating growth, high related-party transactions, and FCF burn. 

• Lalatech charges drivers more commissions but less membership fees to raise the general fees.
• Drivers went on strike to protest against the income squeeze, but they did not  achieve their target.
• We believe Lalatech is the dominator of the low-end truck-hiring market.

• CIMC Enric Holdings (3899 HK) has a solid 3Q23 with excellent new order pick-up, surging by 52.8% YoY on the back of strengths in clean energy and liquid food segments.
• Hydrogen energy revenue is on target to reach Rmb700m in FY23. Meanwhile, management revealed that there is a slight gross margin expansion so far this year.
• With order backlog rising 27.6% YoY to Rmb22.2bn at end-9M23, earnings outlook is well protected. Its net cash position is another credit, making its premium multiples justified.

• JD is in fact competing with a broadcaster on Alibaba’s app, but not Alibaba itself.
• Trip.com’s domestic orders during National Holidays were double last year.
• New Oriental’s revenue increased strongly with new learning centers in 1Q24.

• Aier’s 23Q3 profit growth exceeded expectations. Considering the low base in 22Q4, Aier’s 23Q4 performance could show an obvious rebound. Then, the 2023 full-year results would be more certain.
• Aier has a considerable amount of “off-balance-sheet profits” that can be incorporated into statements in the future. So, although Aier’s growth rate has decreased, it wouldn’t collapse in short term.
• More hidden problems would be exposed in the process of transferring off-balance sheet profits to the on-balance sheet. All the repurchased shares should be cancelled to reduce Aier’s registered capital.

• This is the somewhat brand-spanking-new Quiddity HK Connect SOUTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and Mainland Connect NORTHBOUND Monitor.
• Last week, China Mobile (941), SMIC (981) and CNOOC (883) all saw total SOUTHBOUND turnover top 75% of value traded on a gross basis, indicating huge participation. 
• Meituan was again the top SOUTHBOUND inflow, now net inflow every day for more than a month. Total Net Inflows at HK$6.9bn now 14 weeks straight in the positive column.

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 Vanke
• Gajah Tunggal
• Reliance Industries
• Xiaomi Corp
• Yankuang Energy Group

• The results of the first VBP of TCM formula granules in China were announced. 200 varieties of TCM formula granules have been included, with an average price reduction of 50.77%.
• According to the recently released Statistical Bulletin on the Development of Health Care in 2022, we have listed some key points worth investors’ attention.
• Livzon’s 23Q3 performance was below expectations, which was more related to external factors such as anti-corruption campaign, VBP. However, Chairman’s share buyback proposal indicates possibility of a future reversal.

• On the 17 September, specialty prescription drug manufacturer Lansen Pharmaceutical Holdings Co, Ltd. (503 HK), a perennial takeover target, finally announced an Offer.
• Wu Zhen Tao, NED and Chairman of Lansen, made an Offer for shares not indirectly held, of HK$1.80/share, by way of a Scheme, a 26.76% premium to last close.
• Composite Doc is now out. Court Meeting is the 27th November. Expected last day of trading is the 28 Nov. 28 December payment. IFA says fair and reasonable. Looks done.

• The increasing dominance of retailers (off/online) in the US consumer sector measured by market cap over last three decades tellingly illustrates the long term potential of Alibaba in China.
• While we believe consensus underestimates bottom line for 2QFY24, investors will likely focus on the outlook for 2024, with growth of Taobao/Tmall group remaining key share price driver.
• Investors pulling out of Alibaba due to geopolitical risks remind me of how ESG drove investments away from oil & gas years ago and eventually led to the latter’s outperformance.  

• Stellantis, a merger between France’s PSA with Fiat Chrysler Automobiles NV (FCAM BQ), is buying a 17% stake (14.53% fully diluted) in Zhejiang Leapmotor Technologie (9863 HK). 
• Leapmotor will issue 194mn H shares at HK$43.8/share, a 19% premium to last close, in a HK$8.51bn transaction. Stellantis will also hold a 51% stake in newly formed JV. 
• Stellantis is paying a chunky 3.64x market cap-trailing-revenue; but ~2.25x forward revs, which compares to the average for key peers of 1.9x.

• Shares of Tingyi Holding are oversold. It has high dividend yield and attractive valuations. Its core instant noodles and beverage businesses are turning around this year. 
• The consensus expects DPS of HKD 0.62 for Tingyi in 2023 which would suggest a dividend yield of 6.1%. Tingyi Holding’s dividend yield averaged 5% annually from 2018 to 2022.
• Tingyi’s “Master Kong” instant noodle is one of the best known brands in China. The company is also one of the largest producers and distributors of beverages in China. 

• 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 are Sun Hung Kai Properties (16 HK) and Golden Solar New Energy Technology Holdings (1121 HK).

• Vinda International (3331 HK) announced 3Q23 results, with net profit up 37% yoy as margins started to recover. 
• Reported sales growth picked up speed, growing at 8% yoy (vs. 4% growth in 1H23), and 12% at constant exchange rates (vs. 10% growth in 1H23). 
• More importantly, gross margin recovered quarter-on-quarter from a 0.2ppt decline in 2Q23 to a 2.3ppt increase in 3Q23.

• J&T priced its IPO at a fixed price of HK$12.00 per share to raise the gross proceeds of the offering of US$500 million. The shares will start trading tomorrow.
• We previously discussed the IPO in J&T Global Express IPO: The Bull Case, J&T Global Express IPO: The Bear Case and J&T Global Express IPO: Valuation Insights.
• The market sentiment on the sector continues to weaken. The de-rating of peers lowers our SoTP valuation to HK$10.01 per share, 16.5% below the IPO price.  

• Li Ning (2331 HK) is trading down 18% today due to a bad 3Q23 operational date. 
• Retail sales grew by only mid-single-digit yoy, while same-store-sales recorded a mid-single-digit decline yoy. 
• Given the operational update, FY23 earnings should be revised down, to likely flat or low-single-digit growth.

• Cirrus Aircraft (0153126D US) is looking to raise up to US$300m in its upcoming HK IPO. 
• Cirrus Aircraft designs, develops, manufactures, and sells premium aircrafts. Its two aircraft product lines, the SR2X Series and the Vision Jet, are currently certified and validated in over 60 countries.
• CA has managed to grow its profitability steadily over the track record period. However, the firm is subjected to heightened regulatory risks as US and China tensions rise.

• There were only 14 new listing on the Main Board of the HKEX (388 HK) in the third quarter. Half of the listings were in the last week of September.
• Of those stocks, only Tuhu Car (9690 HK) and Keep (3650 HK) have a chance of being added to the HSCI in December and then into Southbound Stock Connect.
• Keep Inc (3650 HK) could be added to Stock Connect in early December while Tuhu Car (9690 HK) will have to wait till April for inclusion to the link.

• L’Occitane (973 HK) reported 2QFY24 operational update last night.  Sales grew 17% yoy on reported currency, and up 25% yoy on constant currency. 
• The bright spot of the release is the growth of Sol de Janeiro, the Brazilian-inspired premium body care brand, which grew 202% yoy in constant currency in the quarter.
• Sol de Janeiro has the highest EBIT margin among the 3 major brands of the company, at 24.6% in FY23, suggesting highly profitable growth.

• J&T Global Express (1519 HK), a global logistics service provider, raised around US$500m in its Hong Kong IPO.
• As per Frost & Sullivan (F&S), the firm is the leading express delivery business in Southeast Asia, with a 22.5% market share as per 2022 parcel volume.
• We have looked at the company’s past performance and valuations in our previous notes. In this note, we talk about the trading dynamics.

• WuXi XDC Cayman Inc (1877628D HK) is looking to raise around US$500m in its upcoming Hong Kong IPO.
• WuXi XDC Cayman (WXDC) is a CRDMO focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
• In our previous notes we looked at the company’s past performance and peer comparison. In this note, we discuss our thoughts on valuation.

• The Hang Seng Index closed last week down at 17172.13 (CC=-1), on Wednesday was trading below the Q3 WEEKLY support, very OVERSOLD from a price perspective.
• When this pattern is encountered, usually the index bounces no later than CC=-3, i.e. after this week or the week after the end of next week.
• The next support area to go LONG is 16534 and the index got quite close to it intraday, at the start of this week: the low was 16879.

• Oriental Watch (398 HK) went ex-dividend on the 4th of October. The stock gapped down more than what it paid out and now trades at 6x trailing PE.  
• Cash at 1.1 bn HKD is greater than 50% of market capitalization, with a high trailing dividend yield of 16.2% and a rich history of paying chunky dividends. 
• We monitor the sales environment for HK/China, which shows a reasonably good pick-up in HK but lackluster for China.

• The early-stage clinical data of Hansoh’s B7-H4 ADC showed good potential, thus attracting GSK’s attention. This would allow GSK to re-enhance the layout of ADC pipelines after its previous setbacks.
• However, if future clinical data fail to meet expectation, GSK could return the product to Hansoh. After all, US$85 million upfront is more likely to test the waters for GSK.
• Hansoh is already one step ahead of Hengrui in terms of internationalization. This short-term catalyst would no doubt help lift share prices, but the logic behind the rebound is shaky.

• Malaysian conglomerate YTL Corp Bhd (YTL MK) is coming up “cheap” versus YTL Power International (YTLP MK). And Richard Li chips away at PCCW Ltd (8 HK).
• Preceding my comments on YTL and PCCW 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%.

• Pop Mart International Group L (9992 HK) announced at noon today a business update on 3Q23.
• Overall sales in 3Q23 grew 35-40% yoy, with domestic China sales up 25-30% yoy and international sales up 120-125% yoy. 
• Thesis intact, as the 3Q23 update showed that the international business continued to grow rapidly at 120-125% yoy growth.

• Hansoh Pharmaceutical Group (3692 HK) entered into a license agreement with GlaxoSmithKline PLC (GSK LN) for a B7-H4 targeted antibody-drug conjugate candidate, HS-20089, targeted toward gynecological cancers.  
• Hansoh will receive an upfront payment of $85M and be eligible to receive milestone payments of up to $1.485B subject to achievement of relevant milestone events with respect to HS-20089.
• Currently, HS-20089 is in phase 1 clinical trial in China. GSK plans to begin phase 1 trial of HS-20089 outside of China in 2024.

• WuXi XDC Cayman Inc (1877628D HK) is looking to raise around US$500m in its upcoming Hong Kong IPO.
• WuXi XDC Cayman (WXDC) is a CRDMO focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
• In our previous note we looked at the company’s past performance, in this note we will undertake a peer comparison.

• Angelalign’s internationalization strategy requires significant ongoing marketing spending. Lower-tier market expansion in China requires Angelalign to continuously reduce product prices to cope with the low-price strategies of other domestic competitors.
• Angelalign is in a period of business transformation. High SG&A expenses help increase market share, but may not necessarily result in improvement in profit margin. Angelalign actually lacks core competitiveness.
• We remain conservative on Angelalign’s outlook at this stage. It’s difficult for Angelalign to make significant improvements in financial performance or reversal of fundamentals in the short term. 

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess First Pacific’s ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Adequate”.

• The Somewhat-Brand-Spanking New (10 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• We used to do it. We brought it back better, with lots of cool interactive tables, and charts, heat maps, and comparative data. And 50 Trade Recommendations.
• The last 10wks (since the start of the new Tracker and Portfolio 11 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%, +0.12%, -0.29%, -0.71%, -68%.

• Apple fired five employees of China App Store for corruption.
• Yonghui follows Alibaba’s Freshippo outlets to open discounted stores this year.
• JD.com sued 44 companies and 3 persons for abusing JD’s trademark.

• This is the somewhat brand-spanking-new Quiddity HK Connect SOUTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and Mainland Connect NORTHBOUND Monitor.
• The data on liquid names is presented for 5 days and four weeks and anything seen can be ranked in tables or selected and charted (names, sectors, outperformance, etc).
• We like the nifty interactive tables+charts (please play with them!) and we welcome feedback. This 5-day week saw HKD 3.9bn+ of net buying. That makes 13 weeks of net inflows.

• The recent pullback in the share price of Xinhua Winshare (811 HK) is overdone, and it is now on attractive 4.5x PER, 6.7% yield, and 0.46x P/B. 
• It has minimal exposure to economic slowdown and global geopolitical tension. There is solid revenue growth and margin expansion in 1H23, and demand is totally domestic and resilient.
• Net cash amounted to 109% of its share price and this has not yet included Rmb2.2bn of equity investment on hand. Still, it is expected to generate ROE of 12%.

• This is the somewhat-brand-spanking-new Quiddity Mainland Connect NORTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor.
• The performance/spread/flow data on liquid names is presented for 5 days and 4 weeks and anything seen can be ranked in tables or selected/charted (names, sectors, outperformance, etc).
• Please play with nifty interactive tables+charts. We welcome feedback. This 5-day week saw RMB 24bn+ of net selling. Back to Bigly Selling!

• We examine the value proposition of Sitoy Group Holdings (1023 HK) trading at 4x PE with a 12.5 % dividend yield ( assuming a sustainable 50% payout ratio ).
• The company has 400 mn HKD net cash and real estate worth 690 mn HKD on its balance sheet. This compares favorably with its 840 mn HKD market cap. 
• The major drawback of investing in the company is its track record, which shows a steadily declining revenue trend and a fluctuating ROCE (currently 11%). 

• Three potentially large e-comm logistics IPOs are now in-process in Hong Kong
• We compare the three ‘by the numbers’, then examine their strengths and weaknesses
• We conclude by providing a matrix that may help investors decide where to allocate time

• Dongfeng Motor Group Co. Ltd. will acquire automotive assets from its joint venture (JV) with Stellantis NV, as part of the carmaker’s strategy to consolidate its manufacturing resources amid weak car sales in China.
• Dongfeng Peugeot Citroën Automobile Co. Ltd. (DPCA) will sell assets including certain land use rights, buildings, and structures in Wuhan and Xiangyang in Hubei province to Dongfeng Motor in a 1.71 billion yuan ($234 million) deal, the latter said in a filing to the Hong Kong Stock Exchange Thursday.
• The assets have been used by DPCA mainly to produce its existing Peugeot, Citroën and Fukang models, the filing said, and the JV will continue making the cars under a 10-year leasing agreement.

• Topsports International Holdings (6110 HK) announced first half FY24 (fiscal year ending February) results last week, with net profit up 17% yoy.
• The company trades at a 7% dividend yield, backed by strong free cash flow.
• The stock is not only a yield play, but also a call option on the recovery of Nike and Adidas’ retail performance in China.

• In this insight we first consider which comparables are the most appropriate for CaiNiao
• We then discuss which valuation multiples make sense, plus some potential pitfalls 
• We believe CaiNiao and their bankers could justify a valuation up to 310 bn CNY

• 3Q23 is expected to achieve over 40% YoY growth. 2023 overall performance would be better than previous guidance- Revenue up 40+% YoY and adjusted net profit up about 45% YoY.
• With abundant cash flow, Gushengtang has increased dividend payouts and share buyback, indicating that the current stock price is undervalued and has not yet reflected its high growth expectations/healthy fundamentals.
• Gushengtang has cross-regional expansion capability. The “sustainability” + “high growth” of performance are worth noting. Depressed sentiment/complex external environment provide a good buying opportunity. Rebound in stock price is expected.

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.

• Hopson Development

• In this month’s Tracker, we focus on a new price war among the ‘sort & transport’ names
• Q3 ASPs at these express companies fell by -12% Y/Y, and volume growth softened
• We believe margins are under increasing pressure in China’s mainstream express segment