China Archives | Page 37 of 154 | Smartkarma

• ENM Holdings (128 HK)‘s scheme document is out, with the vote scheduled for 26 September. The IFA considers Chime Corporation’s HK$0.58 per share offer fair and reasonable.
• The spread of 7.4% reflects vote risk – cash required for the proposal is lower than the net cash, and the offer price is below the IFA’s SoTP valuation (HK$0.658). 
• Shareholder approval of the scheme is aided by no shareholder holding a blocking stake, a low AGM minority participation rate and no visible retail opposition to the offer. 

• China Mengniu Dairy Co (2319 HK) is a good pick for those seeking value in the China consumer sector. 
• The company currently trades at 15x 2024E PE, compared to over 20x forward PE in the last 5 years, as the industry growth stagnated. 
• We can still expect above 10% net profit growth over the next three years, with the company looking to return more cash to shareholders. 

• Despite worsening doubtful, loss loans, the bank opted to lower impairment costs in 2Q23 YoY
• There is almost no profit growth without the bank’s provision cost decline, in 1H23 and 2Q23
• Loans more than doubled since FY19, but against this LLR/loans continues to decline

Seazen’s H1/23 results were in line with expectations, with sustained weakness in contracted sales and revenue, along with weaker margins. The group generated CNY 4.7 bn of investment property income in H1/23 (+10% y-o-y), with a gross margin of 70% (H1/22: 72%). We note positively the growing recurring revenue. The annual gross profit of c. CNY 7 bn now covers interest expense of c. CNY 6.3 bn.

Seazen’s liquidity will be tested by homebuyers’ growing concerns over private developers’ ability to complete properties. This has been exacerbated by lenders’ reluctance to roll over debt. In this regard, we note that the regulatory authorities committed to improve funding access for private firms in late August 2023.

We revise our trade recommendation to “Hold” on the FUTLAN 6 24 and “Not Recommended” on the remaining FUTLAN/FTLNHD notes, from “Hold”.

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. Country Garden Holdings Co
2. Yankuang Energy Group
3. Health And Happiness (H&H)
4. Xiaomi Corp
5. Anton Oilfield

and more…

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. Country Garden Holdings Co
2. Yankuang Energy Group
3. Health And Happiness (H&H)
4. Xiaomi Corp
5. Anton Oilfield

and more…

• Guangzhou R&F Properties Co. Ltd. has 48.1 billion yuan ($6.6 billion) of debt due within a year with less than 10 billion yuan on hand as of the end of June, the southern China property developer disclosed.
• Even though R&F extended some debt last year, its first-half financial report showed that it is still mired in a liquidity crisis. R&F Properties delayed payment of 46.7 billion yuan of domestic and offshore bonds in 2022 for three to four years.
• The developer reported a net first-half loss of 5.1 billion yuan, 26% narrower than a year ago.

Country Garden’s H1/23 results were weak, as expected, and we believe there is a high chance that the company will default. Country Garden also warned in the interim results report about uncertainties associated with its ability to continue as a going concern.

Consistent weakness in contracted sales and deteriorating profitability (both rooted in Country Garden’s significant exposure to lower-tier cities) will likely lead to further liquidity pressure for the developer going forward. We do not foresee a near-term turnaround in profitability, given weak home-buyer sentiment in China and the fact that a majority (>80%) of Country Garden’s land bank is in lower-tier cities. In H1/23, the company recorded a gross loss of CNY 24.3 bn (H1/22: CNY 17.2 bn gross profit) and CNY 45.4 bn in core net loss attributable to owners (FYE 2022: CNY 4.91 bn core net profit).

We believe default risk remains high, even if Country Garden manages to extend the payment deadline for the CNY 3.9 bn (USD 535 mn onshore bonds). The company reported CNY 258 bn of interest-bearing debt as at end-June 2023, of which 42% (CNY 109 bn) will become payable within 12 months. This compared to CNY 101 bn in cash and equivalents, as well as CNY 29.5 bn in restricted cash reported at end-June. External funding access appears very limited, especially considering the deteriorating value of assets that could be used as collateral.

In the event of a default, we believe offshore bondholders will have very limited access to property assets on account of structural and effective subordination. All of the company’s offshore USD notes are trading at distressed levels, pricing at only c. 7-12. We maintain our “Not Recommended” view on the COGARD notes.

China Jinmao’s H1/23 results were in line with projections, with the company reporting robust contracted sales and cash collections despite the industry downturn. The gross margin narrowed to 14% (H1/22: 22%), albeit this was in line with industry trends. We expect the gross margin to remain weak, as Jinmao has to clear existing inventory (with higher land costs) in the subdued market.

We expect Jinmao’s debt to remain largely stable going forward, as the company will likely control land spending to shore up its balance sheet. Positively, the land bank has remained sufficiently large and should provide for 4-5 years of development. We expect Jinmao to continue reducing its offshore borrowings, and to redeem the perpetual securities.

Overall, Jinmao’s credit profile is underpinned by its SOE status, which supports the company’s access to financing. Moreover, the CHJMAO bonds are supported by the presence of cross-acceleration clauses with parent Sinochem Holdings’ offshore notes in the event of default. We move our recommendation to “Buy” from “Hold” on the CHJMAO notes, with a preference for the 2024 and 2025 notes (both yielding close to 15%).

• Huawei Technologies Co. Ltd. launched a new flagship smartphone on Tuesday, in a discreet fashion and ahead of schedule, said to be powered by a self-developed chip that can rival the speed of 5G handsets, as the tech giant tries to shrug off the impact of U.S. sanctions and capitalize on robust quarterly sales growth in China.
• The company began offering the Mate 60 Pro at 6,999 yuan ($962) in its stores and online around noon, without prior advertisement other than an open letter that cited the early launch as a celebration of its Mate series reaching 100 million units in cumulative shipments.
• The company gave no detail about what kind of system-on-a-chip (SoC) the smartphone uses and whether the handset is compatible with 5G wireless networks.

• Alibaba Group Holding Limited managed to exceed expectations in terms of revenue and earnings.
• Their team’s efforts to create a thriving ecosystem and realize technology-driven innovation methods also show promising results.
• The overall sales growth for the Alibaba International Digital Commerce Group was 41%, and the retail division had revenue growth of 60% year over year.

• The electric-vehicle unit of defaulted property developer China Evergrande Group reported that in the first half of 2023 it delivered 760 cars and its net loss narrowed by almost half from a year earlier to 6.87 billion yuan ($942 million).
• China Evergrande New Energy Vehicle Group Ltd.’s revenue jumped more than fivefold to 155 million yuan, mainly from mass production and delivery of its flagship model, the Hengchi 5, starting last October.
• The electric-car company has been plagued by production delays and setbacks since touting its first Hengchi model as early as 2019 and pledging to rival Tesla within three to five years.

• Users are enthusiastic about the return of 5G Huawei smartphones, and thus we expect sales volume of Huawei devices to improve. 
• If the combined share of Huawei+ Honor can reach 30/32% we estimate Xiaomi’s current 12.5% share of the China smartphone market could decline 0.8/1.3ppts, respectively.
• We maintain Xiaomi’s SELL and HK$ 8.2 TP, implying 26x FY23 PE. The increase in CY23 EPS reflects lowered OPEX, improved gross margin due to the impact of IC oversupply.

• DTx industry is still in the early stages of development. The establishment of a matching operation/service system is a very difficult task. There is a long distance from mature commercialization. 
• BrainAurora’s sales scale is small because its products haven’t received widespread recognition from medical system in China. Internationalization is challenging because it requires cross-border transfer of personal or scientific data.
• BrainAurora’s business prospects is still unclear.As the attitude of capital market towards DTx has become more rational, investors have begun to doubt if this field could really bring good return.

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.

• Country Garden Holdings Co

• STAR CM Holdings (6698 HK), a variety program intellectual property creator and operator, was listed last December and promptly gained 475% by early August. All good so far.
• Shares cratered on the 18 August (-23.4%) and are currently 76% adrift from its recent high. The reason? A viral clip from late pop diva Coco Lee discussing unfair treatment.
• The music competition show, in which Coco appeared, pushed back on any impropriety; however, its broadcaster has temporarily suspended the program. This is no easy fix.

• PDD reported blowout 2Q results with bottom line beating consensus by 40% thanks to stronger domestic marketplaces business, narrower losses incurred by TEMU and higher other income.
• 2Q results cleared much of our concern around PDD’s bottom line growth and we now see 2Q as the low point of earnings growth in FY23.
• We believe the company will report $9 billion net profit for FY23 and expect rounds of earnings revision by the street will further lift share price. US $120 price target.

Hopson’s H1/23 results were strong as expected, and will likely outperform those of many other POE developers. The top line grew 14% y-o-y to HKD 15.1 bn. Gross profit surged 75% to HKD 5.4 bn, with the gross margin rising by 12 ppts to 36%.

The company also managed to cut net debt by HKD 5 bn. We expect Hopson’s contracted sales and cash collection to be supported in the next 1-2 years by its high-quality land bank and CNY 47 bn of saleable resources. In addition, we believe the company faces low near-term repayment risk, given the limited ST bond maturities.

Our Credit Bias on Hopson is “Stable”. That said, we believe the bond price could be volatile amid the weak market sentiment and poor technicals. We maintain our “Hold” recommendation on the HPDLF curve.

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.

• Fosun International

• Weak results at Ping An Insurance across many divisions, with banking most important
• Life and Health negative insurance revenue delta, not offset by insurance cost delta
• Net asset growth is now at 5% YoY, from 9% YoY last year, from ~29% avg for years

• Keep Inc (3650 HK) , the largest online fitness platform in China, announced interim results for the six months ended Jun-23. The overall revenue growth is slowing down. 
• The company completed its Hong Kong IPO of ~10.8M shares at HK$28.92 (bottom of the range) and raised ~HK$192M (~$25M) of net proceeds. CICC led the offering.
• Keep appears well capitalized to outperform despite China’s temporary slowdown in fitness activities. I remain cautious on Keep stock after a downsized IPO, but I like the long-term fitness story. 

• Greentown China (3900 HK) is a high quality China property developer that is unfairly suppressed given the extreme pessimism of the sector. 
• Even though the overall sales of China property industry will likely continue to decline, the market is large enough that some developers could stand to gain massive market share. 
• The company trades at 2.5x 2024E PE, and 71% discount to NAV, with expected growth in net profit in 2023 and 2024. 

• Malo Medical Management (MMM HK) (MMM) is looking to raise around US$100m (estimated) in its upcoming Hong Kong IPO. The deal will be run by Haitong.
• MMM is a dental service provider in China. It ranked ninth among all private dental service providers and second among all premium dental service providers, as per F&S.
• MMM provides dental services to patients through a widespread network of Malo Clinic-branded specialty dental clinics. As of Apr 2023, it owned 29 dental clinics in 13 cities in China.

• PDD reported CY2Q23 top-line and non-GAAP net profit 28% and 58% vs. our est., and 21% and 44% vs. cons., respectively. 
• We raised our 2H23 forecasts for PDD because: 1) GMV growth hasn’t been significantly impacted by the current competitive landscape; 2) take rate could maintain a high level due to 
• Continuous optimization of ad products; and 3) new businesses such as Temu and Kuaituantuan (快团团) have fair growth. We maintain BUY and raise our TP to US$ 107.

• Shareholders of Prosus NV (PRX NA) and Naspers (NPN SJ) approved AGM agenda items late last week to enable the two Capitalisation Issues and Naspers’ Share Consolidation to move forward.
• What Will Happen: Prosus will issue new N shares to its shareholders and Naspers will reject them. Naspers will issue new shares to its shareholders, and Prosus will reject them.
• Naspers will own ~42.9% of Prosus, Prosus will own 0.02% of Naspers. Sales of Tencent shares will continue. Share Buybacks too. But the ouroboros will have spit out its tail. 

• The Hang Seng announces changes along with prospective flows 2wks before the actual change. Capping flows are calculated off the close three days before implementation. That was today.
• There have been some minor movements in the rankings. Nothing major. There is still just over US$1bn to trade, one-way.
• Enclosed are totals for each of the three major indices (Hang Seng, HSCEI, and HS Tech) and then netted flows. The biggest is US$470mm of BABA to sell. Spreadsheet attached.

• The September rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituent weights at 8%. This will lead to large flows.
• The largest passive inflows will be on East Buy (1797 HK), JD.com (9618 HK), Ping An (2318 HK), Sinopharm (1099 HK), BYD (1211 HK), Lenovo (992 HK) and Trip.com (9961).
• The largest passive outflows will be on Alibaba (9988 HK), Li Auto (2015 HK), Meituan (3690 HK), AAC Technologies (2018 HK), Kuaishou (1024 HK), COGARD (2007) and CG Services (6098).

• PDD’s revenue increased by 66% YoY to RMB52 bn, significantly higher than the market consensus RMB43 bn.
• The operating margin declined to 24% in 2Q23 from 28% in 2Q22 due to aggressive expansion outside China.
• We believe the stock still has an upside of 47% for year end 2023. Buy.

• Shougang Fushan Resources (639 HK) shareholders approved the partial offer to acquire a maximum of 125.0 million shares (2.47% of outstanding shares) at HK$2.40 per share and the whitewash waiver.
• The partial offer is now unconditional and will close on 12 September. Considering the irrevocables not to tender, a 100% minority participation rate implies a minimum proration of 2.98%.
• If the partial offer’s acceptance rate mirrors today’s general meeting minorities participation rate of 63.6%, it would imply a minimum proration of 4.69%. 

• Chongqing Hongjiu Fruit (6689 HK) was listed on 5th Sep 2022, where it raised around US$71m in its Hong Kong IPO. Its one-year lockup will expire on 4th Sep 2023. 
• Chongqing Hongjiu Fruit (CHJF) is a multi-brand fresh fruit distributor in China with an end-to-end supply chain. As per CIC, it was the largest fruit distributor by revenue in 2022. 
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• HSI reversal was overdue, but the bounce looks weak: so far it did not even reach Q1 resistance on week 1 and on week 2 (current).
• Resistance level to watch where the current bounce could end is 18874, or any price around that area at Close, at the end of this week. High probability SHORT.
• If some unexpected catalyst pushes the index to rally, look for resistance at 19459 on week 3, we think this won’t happen but a tail is always possible.

• Wuliangye Yibin Co Ltd A (000858 CH), the second largest Chinese liquor company in China, trades at one of the lowest PE multiples in the space. 
• Kweichow Moutai (600519 CH), the largest Chinese liquor company trades at 26x 2024 expected earnings, and most other listed Chinese liquor names trade above 20x 2024 expected earnings.
• Upon closer look, Wuliangye is actually a classic case of value trap – slow growth with no change or slowly deteriorating PE multiples. 

• Solid Q2 results from ZTO, with deep unit cost reductions offseting weak pricing
• But ultimately, Q2/H1 results are merely in-line with guidance — not better, nor worse
• In this environment, it’s difficult to see what will move ZTO out of recent trading range

• Poor 1H23 result at Shenzhen International (152 HK) should have been anticipated, and we believe there is good room for sharp earnings improvement in 2H23.
• Completion of logistics projects, more asset value realisation (through REIT and private equity funds), contribution from Yicheng Qiwanli and lower finance costs should underpin outlook.
• SZI is an asset play with significant upside and this is reflected in the undemanding 0.42x P/B. Against its historical average of 0.67x, such a level is almost -2SD below. 

• Nearly US$20bn has flowed into mainland China listed ETFs since 18 July and could be driven by the National Team supporting the market.
• Most of the inflows have been focused on large cap indices including CSI 300, STAR50, CSI 500, SSE50, ChiNext and other sectoral and thematic ETFs.
• The largest impact has been on the SSE STAR50 (STAR50 INDEX) constituents, but that has not stopped the slide in the stocks.

• The China Conch Venture Holdings (586 HK)/ Anhui Conch Cement (600585 CH) ratio, and the implied stub, are now at all-time lows.
• Preceding my comments on China Conch/Anhui 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%.

• New results detail from CMB shows divergence with credit quality and actual credit costs
• The bank saw its credit costs decline 25% YoY despite higher Loss and Doubtful Loans YoY
• Property development NPLs surged from 4.1% to 5.5% at 1H23 HoH, to RMB19.6bn in total

• Tuhu Car (2007986D HK) is looking to raise up to US$300m in its upcoming Hong Kong IPO. 
• Tuhu is an integrated online and offline platform for automotive services in China.
• We have looked at the firm’s past performance in earlier notes. In this note, we discuss the PHIP updates.

• SF Holding’s HK listing document provides added details of current international revenue 
• Two recent moves show SF’s intent to raise international sales (and reduce China exposure)
• As SF Holding courts a global investor base, its comps will become the global express names

Greentown China has released H1/23 results that were in line with expectations. Contracted sales rose 16% y-o-y, driven by higher ASP (+19%), but offset to a degree by less GFA sold (-1%). The company added CNY 57 bn saleable resources with total GFA of 2.57 mn sqm. Revenue fell 12% to CNY 57 bn, primarily due to a CNY 7.9 bn slide in revenue from property development. Gross profit also decreased 12% to CNY 9.92 bn, with a largely stable margin (16% vs. 16.5% in H1/22).

We believe Greentown will continue its strategy of clearing inventories and delivering homes through H2/23. The company’s ability to deleverage will be impacted by the scale of its land acquisitions. In this regard, Greentown could expend up to 40% of its sales proceeds on acquisitions. That said, the level may be tempered by any further deterioration in the residential housing market.

• In 23H1, Tigermed’s net profit attributable to shareholders has changed from a negative growth trend in 2022. However, net profit growth brought by its main CRO business was not impressive.
• With the reform of domestic new drug approval policies, domestic CRO demand would decrease. Since Tigermed mainly provides early-stage CRO services, it’s more susceptible to negative changes of financing environment.
• Tigermed’s performance growth would slow down in 2023. Although valuation is in the bottom range, we recommend investors to take profits in time for any rebound in the stock price.

Yuexiu Property’s (YXP) H1/23 results were largely in line with expectations. Overall revenue climbed 2.6% y-o-y to CNY 32.1 bn, driven by strong growth in property management, rental income and real estate agency & decoration services. However, sales from property development remained stagnant at CNY 29.8 bn (H1/22: CNY 29.8 bn). The company encountered ongoing margin pressure, largely due to falling profits and margins for the property development business, which we believe is in line with the overall industry trend.

We note positively YXP’s CNY 221 bn in unrecognised sales, which could have positive implications for steady revenue growth in the near to medium term. The company appears to have resilient access to capital markets. Liquidity was boosted as at end-June 2023, by a c. 39% y-o-y increase in cash to CNY 30.3 bn. The debt structure improved, with exposure to ST debt narrowing to 12% of total debt.

The 2023 notes are trading near par (yielding 7-8%). The YUEXIU 2.8 26 are quoted at c. 90.6 (yielding 6.9-7.2%), while the 2031 notes are trading at c. 80 (yielding c. 7.5%). We view the pricing as fair, and maintain our “Hold” recommendation on the YUEXIU curve given the current weak market technicals.

• As expected, the index committee has used a 6-month minimum listing history and that results in two changes to the SSE STAR50 (STAR50 INDEX) in September.
• Piotech (688072 CH) and Hwatsing Technology (688120 CH) will replace Suzhou Nanomicro Technology (688690 CH) and Zhuhai CosMX Battery (688772 CH) in the index.
• One-Way turnover is estimated at 2.83% and will result in a one-way trade of CNY 3,562m. There does not appear to be a lot of pre-positioning on the stocks.

• We like the 17.7% core earnings growth for CIMC Enric Holdings (3899 HK) as this has demonstrated its operating strengths under a challenging environment in 1H23. 
• With orders on hand of Rmb20.6bn (+18.8% YoY), we see forward earnings well-covered. Also, management has turned even more positive on earnings and margin outlook in 2H23. 
• The hydrogen energy business maintains solid momentum with order backlog surging 116.9%. The spin-off of CIMC Safeway Technologies on the ChiNext Board is a near-term catalyst.

• Playmates Toys (869 HK) reported strong 1H23 results on the back of initial demand for TMNT toys. Revenues were up 30% and operating profits increased 3x.
• Management remains optimistic for 2H23 on the back of continued excitement for TMNT movie and follow-up series on Paramount+.
• Playmates Toys trades at 5x FY23 P/E and >1x P/E on an ex-cash basis. The company also declared another 2c interim dividend.

• The 1H23 result of Sinotrans (598 HK) is unexciting as recurring profit contracted 9.8%. The decline has also accelerated to 13.5% in 2Q23, from just 4.6% in 1Q23. 
• Weak export (-14.5% YoY in Jul) and poor airfreight price (-45% YoY in Jul) did not bode well for profitability. The flattening of DHL-Sinotrans’ contribution also limits earnings upside.
• Valuations are inexpensive at 5.3x PER and 9% yield for FY23, but growth outlook is not encouraging. We think it is a good time to take money off the table.

• NetEase’s 2Q rev. miss cons. by (3.08%) and non-GAAP net income beat cons by 50.6%.
• We anticipate that former legacies will continue to be under pressure. However, the 3Q23 is expected to show strong performance with new titles like “Justice Mobile” and “Racing Master.”
• We have raised our annual revenue expectations for “Justice Mobile” and maintain an optimistic view of NetEase’s upcoming pipeline. We increased to TP US$ 105, implying 17x PE in 2023

• Meituan reported CY2Q23 rev./non-IFRS net income in-line/70% vs. cons., and in-line/28% vs. our estimate. Increased spending on in-store competition was offset by abundant rider supply that lowered food delivery cost. 
• We raise our 3Q net margin est. by 3ppts as (1) the in-store counterattack against Douyin has been a success, (2) CGB spending to counter Duoduo Maicai has remained restrained.
• Initial results of the in-store counterattack showed positive results, while FD margin continues to benefit from ample riders. We maintain Meituan’s BUY rating and HK$ 165 TP.

• 1H23 results missed our expectation because stronger-than-expected revenue was outweighed by surge in operating costs as company took from its parent the overall operation of Phase I and II.
• We expect slow recovery in duty-free sales and elevated cost base will continue pressuring its bottom line in 2H23 and see possibility to return to profitability by 1H24.
• While recent share price correction has priced in the weak outlook somehow, we can’t rule out further volatility post results. We are now neutral on the stock.

• Compared to depressed traffic from last year, outbound travel in July was up dramatically; strong M/M growth versus June suggests the outbound recovery still has legs 
• Does China’s relaxation of group travel to Japan and Korea matter? We offer context and conclude the change is helpful, but not a “game-changer” for overall travel demand
• We also review July domestic traffic and preview Trip.com’s Q2 results (out Sept 4th)

• The market is clearly satisfied with WuXi Bio’s interim results. Growth of both non-COVID revenue and new projects were beyond expectations. This makes us look forward to 2023 full-year result.
• There’s a significant strength gap between WuXi Bio and Lonza/Samsung Biologics in undertaking commercial-stage orders, which puts WuXi Bio at a disadvantage in competition,making it more vulnerable to financing environment.
• It’s not impossible to restore the high growth before COVID,but WuXi Bio needs to meet two conditions.Instead of betting on a V-shaped reversal, it’s wiser to take profits in time.

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.

• Anton Oilfield
• Meituan
• Vedanta Resources

• This week it is changed from H/A Discount to A/H Premium, by popular demand. Some Northbound data is added. We kept the unicorn.
• Last week saw a win/loss ratio of 21:13. Average recommended pair on the week earned 0.9% if Sunday recos executed Monday close, 1.35% if executed Monday VWAP. 
• 6 Unwinds and 3 new trades recommended this week. As always, feedback desired to make this even better.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – ARM Holdings (1822695D US), Integral Corporation (5842 JP) and S.F. Holding (002352 CH) IPOs.
• Event-Driven developments – Boustead Plantations (BPLANT MK), UMW Holdings (UMWH MK), Eoflow (294090 KS), Golden Eagle Retail (3308 HK), Costa Group Holdings (CGC AU), Metro Pacific Investments Co (MPI PM). 

• Anti-Corruption campaign has affected healthcare companies’ IPO. It’s crucial for companies to explain the compliance of selling expenses in IPO approval process. Investors need to be aware of potential risks.
• Roche posts interim TIGIT OS data after “inadvertent disclosure”, which seems to give investors a glimmer of hope. But for now, we remain cautious about TIGIT based on our analysis.
• We updated our views on Neusoft Xikang. We still hold a conservative view towards whether Xikang can successfully IPO this time, mainly due to some negative factors and gloomy outlook.

• Meituan (3690 HK) reported 2Q2023 results yesterday which beat consensus estimates and the company’s profitability has further strengthened during the quarter.
• However, there has been clear signs of a slowdown in the company’s core local commerce biz with increased promotions/incentive, decline in revenue per on-demand delivery transaction and fall in OPM.
• Meituan has flagged that macroeconomic headwinds and adverse weather conditions could slowdown core local commerce biz in the current quarter which should drag down earnings.

• Pop Mart International Group L (9992 HK) presents an interesting story of a Chinese domestic brand going overseas, and potentially being successful overseas (at least in the short-term). 
• A recent case of a Chinese brand achieving success overseas is Miniso (MNSO US), and shareholders of Miniso have been richly rewarded. 
• Pop Mart trades at a PE of 24x based on estimated 2024 earnings, with around 30% expected net profit growth in 2024E.   

AAC Technologies’ results were weak as expected, with the top line and gross margin both lower. Overall revenue fell 2% y-o-y to CNY 9.22 bn for H1/23. Gross profit declined 27.2% to CNY 1.3 bn, with the gross margin down 4.8 ppts to 14.1%. This was largely due to market competition for the optics and acoustics business, as well as changes in the product mix. Despite the muted sales performance, the company deleveraged further and achieved strong FCF, driven by increased CFO and reduced capex. Liquidity appears to be sound, with 4.4x LTM Cash/ST Debt. Management guided for the optical lens gross margin to be positive in Q4.

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. Softbank Group
2. China Hongqiao
3. China Jinmao Holdings
4. Geely Auto
5. First Pacific Co

and more…

• Wuxi Biologics (2269 HK) recorded 8% YoY revenue growth to RMB8.5B in 1H23. Strong momentum continued in the base business, with the non-COVID revenue achieving a 60% YoY growth.  
• Ramping up of new manufacturing facilities, maintenance shutdown of existing facilities, slowdown in funding environment in China, and increasing expenses have negatively impacted the profitability.
• Total number of integrated projects reached a new record of 621 with 46 integrated projects added to the pipeline. As of June 30, backlog increased 9% YoY to $20.1B.

• Total revenue grew by 33% YoY, which is the highest growth rate in the past seven quarters.
• The company achieved a higher operating profit in 2Q23 after turned the profit positive in 1Q23.
• The stock price has risen by 20% since our last buy rating, but we believe there will be still 38% upside for yearend 2024.

• Over the last decade, VIPShop proved it is the undisputed leader in China’s online discount retail business with the longest streak of profitability and impressive ROE among China internet names.
• Investors are misplaced to look to the stock for growth. Rather, it is cash cow in mature business with deep moat and run by disciplined management who cares about shareholders.
• Trading at 4.5x our FY23 earnings excluding net cash, it valuation is attractive even compared to depressed sector comps. Expect 20% CAGR of return by 2025 driven by intrinsic value.

• IQ reported 2Q23 revenue and non-GAAP net income 0.2%/28.5% vs cons.
• We cut our projections for 3Q23’s membership services revenue, but increased estimations for online ads services revenue, and raised margin forecasts for 2023.  
• We maintain our US$ 6.25 TP, implying 16.2X PE in 2023.

Road King’s H1/23 results were mixed in our view. The company reported robust top-line growth, albeit gross profit plunged due to lower ASP of properties delivered. In addition, cash dividends from toll roads declined materially, owing to the non-renewal of the Tangjin expressway concession upon expiry in April.

Positively, Road King’s net debt continued to decrease, as it repaid borrowings using cash collection from property deliveries. The company could sustain its sales momentum in H2/23, as it is poised to launch the So Kwun Wat project (its sole remaining undeveloped project in Hong Kong) for sale.

We believe Road King will remain current on its obligations for the next 12 months. That said, the company’s medium-term prospects appear dim. Moreover, the small and dwindling land bank might suffice for only another two years of development. In the meantime, the company is likely to continue repurchasing offshore bonds.

We move our LARA to “High Risk”. We maintain our “Hold” recommendation on the ROADKG 2024 notes, but move to “Not Recommended” on the remaining notes.

• Regulators cleared state-backed bank card giant China UnionPay, the world’s largest provider of debit cards, to more than triple its registered capital to almost 10 billion yuan ($1.37 billion).
• Such a capital increase usually is intended to improve a payment institution’s risk control system and ensure the safety and stability of the business, a senior analyst in the payment industry said.
• People at UnionPay told Caixin that the capital increase was a distribution of unrealized shareholder equity and was a normal financial adjustment with no impact on its shareholding structure.

• Alibaba (ADR) (BABA US)‘s New Retail strategy stumbled, prompting the company to revert to its e-commerce origins with a renewed emphasis on social commerce.
• Creating a social media platform could be relatively simple, yet turning it into a prosperous venture amid established social media giants could be challenging.
• Branching out from social media to e-commerce might be straightforward, but Alibaba Group Holding (9988 HK)‘s unprecedented reverse path could present unique challenges.

• Golden Eagle Retail (3308 HK)‘s scheme document is out, with the court meeting scheduled for 15 September. The IFA considers the HK$6.88 per share offer fair and reasonable. 
• The key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). The shareholder with a blocking stake has provided an irrevocable.
• This is a done deal which help by the material derating of peers. At the current price of HK$6.75 and for the 17 October payment, the gross/annualised spread is 1.9%/13.4%.

• S.F. Holding (002352 CH), the largest Asian integrated logistics service provider, has filed for an H Share listing to raise US$2-3 billion, according to press reports.   
• SF is the largest integrated logistics service player in China and Asia, and the fourth largest player globally, in terms of revenue in 2022, according to Frost & Sullivan.
• The key elements of the investment case rest on the primary business’ improving fundamentals, margin trajectory, cash generation, modest leverage and undemanding PEG multiples.

• Anta Sports Products (2020 HK) reported a set of resilient earnings in 1H23, with net profit up 32% yoy.
• Management reconfirmed 2023 guidance for Fila and Anta at double-digit retail sales growth, and increased 2023 guidance for other brands to 40% yoy compared to 30% before. 
• Anta’s sales growth has been the most resilient in previous industry down-turns in China.  China macro worries should not be overly read through to Anta’s future results.

• Kuaishou Technology (1024 HK) reported 2Q2023 results yesterday which beat consensus estimates. The company reported an OPM of 4.7% with net profits for the first time.
• The company’s domestic business continues to see improvement in operating profits while losses of the overseas business have reduced significantly over the last few quarters.
• Though livestreaming growth has decelerated, the company’s online marketing and e-commerce businesses continue to expand driving Kuaishou’s earnings.

H&H International’s H1/23 results were stronger than expected. The company managed to deliver y-o-y growth of 17% in total revenue to CNY 7 bn, driven by an optimised product mix with strong growth (above 40%) in nutrition supplements across all product categories. As a result, revenue from nutrition supplements further expanded to account for 60.1% of total revenue (H1/22: 49%). The top-line increase was boosted by double-digit expansion across all regional markets, in Mainland China (H1/23: +15.4%), Australia & New Zealand (ANZ; +19.4%), North America (+20.9%) and other territories (+13.7%).

Problems in baby nutrition & care (BNC) persisted, with revenue down 2% y-o-y in H1/23. IMF sales dropped 10% in Mainland China and fell 55% in ANZ, in line with our expectations. We expect adult nutrition & care (ANC) and pet nutrition & care (PNC) to continue being H&H’s key growth segments, while BNC should remain challenging.

That said, we believe H&H faces very limited short-term repayment risk, with 1.4x LTM Cash/ST Debt as at end-June 2023. The company had CNY 2.1 bn in cash, compared to c. USD 210 mn in repayment needs over the next 12 months. Liquidity could also be supported by enhanced working capital efficiency, which would lead to stronger operating cash flow.

Our Credit Bias on H&H is “Stable”, given the company’s solid business fundamentals, strong market positions and moderate financial profile. The BTSDF notes are trading at c. 94.5, yielding 10-16%. We view the notes as fairly priced, and maintain our “Hold” recommendation.

Sunny Optical has released H1/23 numbers that were worse than expected in our view, with revenues and earnings below street estimates. Revenues declined 15.9% y-o-y to CNY 14.3 bn. Meanwhile, gross profit dropped 39.5% to CNY 2.1 bn, with a margin of 14.9%. Net profit plunged 68% to CNY 437 mn. A detailed cash-flow statement was not provided. Positively, the financial risk profile and liquidity remain healthy, supported by a large net cash position. Gross Debt/EBITDA rose to 3.9x, which is too high for a Baa1 credit in our view. We note that this has crossed Moody’s 2.0x negative rating trigger, which should cause downgrade pressure to build up.

• Baidu reported 2Q23 revenue/non-GAAP net income 2.3%/38.1% vs cons., Baidu core’s online marketing revenues and other revenues grew 7.1%/13.0% YoY, respectively. 
• We expect that Baidu’s ads growth will continue into 2H23, supported by recovery of key advertisers. 
• We slightly increase FY23 EPS estimates and maintain our TP of US$162, which implies 17.8X PE.

The H1/23 results of China Oil and Gas (COG) were broadly in line with our expectations. The credit profile remains satisfactory, supported by a decrease in borrowings. We view positively management’s goal of reducing long-term debt.

Overall, the operating environment was favourable as expected. That said, there was a dip in residential sales vis-a-vis H1/22, given unusually high sales in 2022 due to COVID lockdowns. According to the company, volume growth was 15% y-o-y in January and February 2023.

COG is keen to reduce financing costs and extend its maturity profile by refinancing the USD 290 mn syndicated loan that falls due on December 31st. The company is in discussions with banks and is planning to launch a new syndicated loan to take out the USD 290 mn. The new syndicated loan is likely to be priced at a similar level as the existing facility.

• C2Q23 revenue (1.9%)/2.6% vs. our estimate/consensus, its non-GAAP NI is 18.5%/18.3% higher than estimate/consensus. 1) GPM improvement from revenue mix ; 2) less than expected OPEX from IP licensing fee. 
• We think Miniso’s strategy to open more flagship stores is in-line with its brand upgrade strategy for seeking price premium beyond value-for-money, which bodes well for its long-term brand value. 
• We maintain Buy rating and maintain TP at US$26. We raise 2024 EPADS by 6.4% to project lower OPEX with efficiency improvement.